After a short period of volatility, protein demand from China and new trade agreements are modifying the outlook for the months to come.
The global market for poultry is looking much better than it did a few months ago, according to Nan-Dirk Mulder, a senior animal protein analyst at Rabobank. After a few quarters dominated by uncertainty regarding trade and disease restrictions, the outlook is starting to look much promising. "The outlook is changing, Rabobank is gradually becoming more optimistic that the market has reached a turning point, with global price levels starting to trend up – especially since global trade conditions have started to improve and have reached a record-high level in Q4 2019. Together with more supply discipline, this has led to improved market conditions", commented Mulder on the latest Rabobank analysis of the sector.
Production was at an exceptionally high level in many markets, including the US, the EU, and Thailand. Meanwhile, demand dropped because of a general market slowdown and constraints on access to international markets following trade restrictions. This resulted in a period of falling poultry prices between Q2 and Q4 2018, shows the document.
Nevertheless, demand is expected to grow further, as China is looking to cover a protein shortage generated by the ASF crisis in the country with other animal proteins. A 10% to 20% reduction in Chinese pork production is expected to occur in the country this year, which gives a chance for both local producers and for global players, such as Russia and Ukraine who are already strengthening their positions in this changing global trade landscape.
Still, challenges in terms of market volatility are going to be present, with a potential US-Chinese trade agreement that re-opens US chicken exports might shake up trade.
"Trade will also be impacted by the ongoing EU-Brazil and Saudi-Brazil trade restrictions, which are impacting breast meat and whole bird prices. Other issues – such as rumors about safeguards being imposed by Mexico on US chicken, or by South Africa on Brazilian chicken – are also wild cards for the outlook", believes the analyst.