Positive Global Outlook Threatened by Bird Flu in China30 May 2013
GLOBAL - A new report from Rabobank finds that the positive outlook for the global poultry industry is highly dependent on the continuation of several trends.
These include a balance in local supply and demand, falling feed costs and ongoing high prices for competitive meats, such as pork and beef.
Key wildcards for the rest of the year will be global trade developments (which were very weak in Q1 2013) and the impact of avian influenza virus H7N9 (bird flu) on the Chinese poultry industry.
Rabobank analyst Nan-Dirk Mulder said: "Conditions for the global poultry industry have improved thanks to a further slowdown in feed price growth which is helping to boost margins.
"Whilst we expect this trend to continue, a positive outlook will depend very much on how well the industry can balance its markets and on whether the bird flu outbreak in parts of China can be contained.
"If it were to spread further across the Asian region, we can expect an impact on poultry markets globally."
The Chinese poultry industry has been suffering ever since the official announcement of H7N9 in March, which has so far resulted in 130 human cases and claimed the lives of 36 people as of 20 May.
As a consequence of falling demand, prices collapsed and farmers have commenced a large scale slaughtering of birds with no replenishment to broods as they adopted a wait-and-see attitude. Local governments in affected areas have extended help to the sector to limit the impact on the industry, this assistance come in the form of purchasing programs or compensation offered to poultry merchants in return for slaughtering their stocks.
Whilst consumers remain wary, the initial panic appears to be waning as the pace of growth of new infections has slowed. Still, in just 6 weeks after the first case was confirmed, China's poultry industry has suffered losses amounting to RMB 40 billion (USD 6.5 billion).
The Chinese government has reacted to concerns about the negative industry impact of the outbreak - namely future supply concerns - by implementing a new RMB 600 million breeding programme aimed at preventing shortages when markets recover.
This support programme has lead to some price recovery recently, but prices remain low.
The US and Brazil are performing better than in the first quarter, with a relatively healthy supply and demand situation limiting the impact of a weak international trade situation.
The EU remains the weakest performing industry, as it is still challenged by relatively high feed prices combined with abundant supply.
In Asia, the Thai industry has greatly improved a consequence of large oversupply and is benefiting from strong demand for poultry products in the EU and Japan.ThePoultrySite News Desk