June 9, 2016

Rabobank: US return to poultry markets triggers fierce competition

The return of the US in many poultry markets has shaken up global trade streams resulting in intensive competition as other exporters defend their market share through price concessions, the Rabobank said in its second-quarter report on global poultry.

Due to the faster-than-expected return of the US in many international markets, after avian influenza-related trade restrictions, Brazil and the EU have aggressively defended market share via price concessions, with prices for poultry reduced by up to 20% in the case of Brazil and up to 13% in the EU, the agri-lender's report said.

"This is affecting margins for companies highly exposed to trade, in countries like Brazil, Argentina, Thailand and Japan", Animal Protein Senior Analyst Nan-Dirk Mulder said, adding that this situation is like to continue, with expected supply shortages in Asia and Mexico offsetting some of the negative impacts of price concessions.

Some relief will also come from better seasonal demand in the second and third quarters, rising Asian and Mexican imports (due to local supply shortages), and recent forex changes, the report said.

The Rabobank's latest quarterly report on global poultry said the decrease in the prices of US breast meat by 20-25% was indicative of increased competition. Overall, poultry prices are below 10% last year, it said.

Meanwhile, good margins are being made by industries in many balanced markets, such as in Indonesia, India and South Africa. China has also made positive margins, thanks to a 20% supply reduction of white broilers due to breeding stock trade restrictions.

Besides the US poultry industry, Mexico and the EU are also doing well. Key for these markets will to be to keep market balance, as deteriorating global market conditions can rapidly impact local market conditions, the report said.