Recent quarterly report of Rabobank states that excessive supply expansion has outstripped continued strong fundamentalsrobust demand, ongoing low feed prices and relatively high competitive protein pricesin recent months, after multiple quarters of balanced supply/demand. This has pressured producer profitability in most regions of the world. Markets in China and Thailand will also likely be impacted by avian influenza (AI)-related import restrictions on breeding stock by the US in 2H 2016, also potentially affecting global poultry markets.
Looking ahead to 2016, key fundamentals suggest a good year ahead for the industry, but whether the industry can really benefit from these positive fundamentals highly depends on supply rebalancing to new market circumstances and on further developments surrounding AI. The threat of AI remains a real ‘wild card’ which has the potential to impact supply, trade and consumer demand. Well-balanced markets will better protect the industry for a potential negative impact of AI outbreaks (like trade restrictions), and they provide the industry with more pricing power to achieve better margins.
Key fundamentals for the global poultry outlook for next year are positive. Feed prices are expected to remain low, while competitive protein prices for pork will be relatively high. This provides chicken with a potentially significant price advantage, especially with a weaker macroeconomic outlook. Under these conditions, demand for chicken is usually strong, as consumers tend to trade down to cheaper proteins. After a relatively long bullish market situation, many global markets have entered a period of oversupply at the end of 2015 and this needs to be solved in the next months in order to make the industry profitable again.
Dealing with an ongoing threat of avian influenza will be a major challenge in 2016, and it will require further investments in biosecurity, improved industry structures and business models. Joint approaches between industry and governments are particularly important in this regard.
Global poultry markets: Avian Influenza outbreak to hit regional markets
Chicken prices are expected to slide as the industry reduces supplies to rebalance the market. Overall, 2016 outlook looks challenging with AI concerns in the winter months.
The domestic market continues to be strong but export growth is lower than expected. The general outlook is positive but supply growth needs to be balanced.
Prices are down after a supply expansion in Eastern Europe. The third quarter noted a weak export performance despite the weak euro. The outlook is moderately positive although concerns exist about AI following recent H5N1 case in France.
Record low prices in the third quarter due to oversupply. On-going low DOC prices are expected until at least early 2016. The market has been negatively affected by the economic downturn. Although the outlook for the first half of 2016 is challenging a recovery is possible in the second half of the year as the impact of the breeding stock import ban will affect supply.
An improved performance is experienced due to lower feed costs and price support from high bovine meet and pork supply. The sector will be influenced by the prolongation of the export ban. The consolidation process is expected to continue.
Rest of the world
South Africa is facing a rising oversupply of poultry with rising imports. Thailand is expected to resolve its oversupply situation in the second half of 2016 and for Indonesia it is thought that the supply control mechanism will pay off in 2016.