Poultry sector must show more discipline in supply- Rabobank
Poultry sector must show more discipline in supply, according to the latest analysis from Rabobank. Key concerns are the ongoing oversupply situations in many global markets, like the EU, US and South Africa. Actually, only disease-affected China and Mexico, and Brazil (due to the combination of supply reduction and improved export demand) are performing relatively well. Other markets are suffering from oversupply. Therefore, more disciplined supply should be the key to returning to profitability for the global poultry industry in 2H 2019. Notable positives are the expected ASF-related strength in pork prices, and the limited feed price upside risks, given the relatively good feed grain supply position expected in Europe and Latin America. This should compensate for more troubled supply in North America.
Some market upside is expected to come from rising prices and demand substitution, given the impact of ASF on global pork markets,” according to Nan-Dirk Mulder, senior animal protein analyst. “However, upside for the global poultry industry will be limited in the short term.”
China buys relatively small volumes in global markets – mainly consisting of special dark meat cuts like feet, legs and wings. Breast meat is not a preferred product in China, and although demand for locally-produced breast meat may increase, there will be no interest in global traded breast meat as the price difference is too big, according to the analysis.
Countries with access to ASF-affected China and Vietnam will see some better prices for dark meat, but weak global demand for breast meat remains the key concern for global companies, as for many industries this is the profit maker. In addition to the direct trade impact, there will be indirect price support for poultry industries in countries where the pork sector has good access to China, like the EU and Brazil.
The main focus for global companies should be on restoring fundamentals through more disciplined supply growth in the coming months.
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