GLOBAL - The positive outlook for the year ahead is tempered by the need to respond to the challenges posed by avian influenza, analysts at Rabobank have said in their latest Quarterly Report for poultry.
Excessive supply expansion has outstripped continued strong fundamentals - robust demand, ongoing low feed prices and relatively high competitive protein prices - in recent months, after multiple quarters of balanced supply/demand.
This has pressured producer profitability in most regions of the world, the report said.
Markets in China and Thailand will also likely be impacted by avian influenza-related import restrictions on breeding stock from the US in the second half of 2016, also potentially affecting global poultry markets.
Looking ahead to 2016, Rabobank said 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 avian flu. The threat of avian flu 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 avian flu 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 beef and pork will be relatively high. This provides chicken with a potentially significant price advantage, especially with a weaker macroeconomic outlook, Rabobank's report said.
Under these conditions, demand for chicken is usually strong, as consumers tend to trade down to cheaper proteins.
The extent to which the global poultry industry will benefit from these positive fundamentals very much depends on balancing supply and demand.
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.
You can view the full report by clicking here.