July 8, 2020

 

Rabobank: Better outlook for poultry industry expected in second half of 2020

 

 

The global poultry industry could see an improved outlook in the second half of 2020 as it recovers from the impact caused by the COVID-19 pandemic, according to the recent Rabobank Poultry Quarterly report.

 

As COVID-19 containment measurements scale back, poultry demand is expected to be stronger in the second half due to demand in foodservice. An economic downturn will be the largest market driver for the period, making global markets more volatile and price driven, the Rabobank report stated. These conditions could benefit poultry, as it is the least costly meat protein, which has a short and flexible production cycle.

 

According to the report, poultry prices will see some recovery after historic lows in the first half, with traded poultry prices dropping between 5% and 25%. Breast meat should benefit from the reopening of foodservice. However, the difficulty of trade would persist. Dark meat will likely do better. Supply in some markets will be tight, due to reduced parent stock.

 

"Volatility could be exacerbated by ongoing challenges to balance supply and demand and by exchange rate instability. On the other hand, the bearish feed price outlook will provide producers some relief on the cost side of their businesses," said Nan-Dirk Mulder, senior analyst (animal protein), in a press release.

 

For the US market, there was no noticeable change in its breeding flock through April, but placements were down 14 million in May. As a result of those lower placements, the number of broilers being slaughtered in the coming months should be reduced. This reduction is expected to be partially offset by gradual increases in weights.

 

For the year, Rabobank expects 1% production growth, and poultry consumption should benefit as consumers seek lower-cost proteins.

 

Poultry prices in Europe have dropped by 15% on average since March, with the larger drops occurring in countries like Poland and the Netherlands, which have a heavy focus on exports.

 

The outlook for the European poultry industry is improving, as placements dropped significantly since late April. The impact is now being seen with some improvement in prices.

 

As lockdown restrictions are gradually being eased, demand for poultry products is expected to recover. In the second half of the year, Rabobank expects conditions to be very price driven. Potential COVID-19 cases could create additional volatility.

 

Prices for poultry have fallen in South Africa by about 10% due to COVID-19-related lockdowns, which came at a time of high supply. The near disappearance of foodservice demand led to an even larger oversupply and lower breast meat prices, Rabobank reported.

 

The easing of lockdown measures should help demand recovery, while imports will be pressured by ongoing weakness of South Africa's currency, the rand.

 

The outlook for the Japanese poultry industry is expected to be challenging in the second half with a predicted economic recession that will make the market more price-driven. Lower feed prices will be a positive.

 

High levels of poultry in cold storage will challenge the position of major exporters during the second half of the year.

 

- WATTAgNet