Source: Susan Kelly, MEATINGPLACE, 9/21/18


A historic drop in poultry exports from Brazil is shaking up trade in the commodity worldwide, while the African swine fever outbreaks in China could weigh on global poultry prices indirectly, Rabobank reports in its latest quarterly outlook on the industry.

On average, global poultry prices fell between 5 percent and 10 percent in the second quarter, compared to the first, Rabobank said. Outbreaks of African swine fever in China could result in increased pork supply in the market through the end of the year due to pig herd liquidation, pushing all meat prices lower.

"This could reverse in 2019, with Chinese consumers turning from pork to poultry, pushing up local prices. These challenges can paint a somewhat pessimistic picture, while in reality, poultry industry performance is still good in most parts of the world," the Rabobank analysts wrote.

In the United States, chicken prices are weakening and margins are expected to remain soft amid growing protein supplies, but the industry is still profitable. Rising exports to Cuba, Vietnam and Taiwan are helping, Rabobank said.

Elsewhere, local poultry industries in Asia, Africa and Europe are enjoying profitable margins due to balanced supply and demand, the bank said.

United States
U.S. boneless breast prices are down 33 percent year over year as limited retail feature activity and weaker foodservice demand have dampened values, the report said. Leg quarter prices are down 19 percent year over year, reflecting growing supply and the uncertainty in international markets.

Stronger export shipments to Cuba (up 60 percent from a year ago), Taiwan (up 48 percent) and Vietnam (up 24 percent) offset a 16 percent drop in exports to Canada and 14 decline in exports to Hong Kong. Resolution of the NAFTA negotiations should support exports to Mexico and Canada later this year, Rabobank said.

In recent weeks, seasonal weakness in chicken demand and larger supplies have weighed on prices. Improving feed costs due to a larger-than-expected soybean crop and abundant corn supplies are helping to reduce input costs, but rising labor, energy and freight costs are dampening broiler margins and are unlikely to improve in the year ahead, the bank said.

Brazil
Brazil, the world’s leading chicken exporter, saw a 20 percent drop in export volume in the second quarter from the first due to global restrictions. Exports to Saudi Arabia fell sharply because of changing halal standards, while volume to the European Union shrank due to the removal of Brazilian plants from the EU-approved export list.

Possibly an even larger problem has been the country’s truckers’ strike, which led to bird losses and restricted access to ports, the report said. Oversupply of poultry is continuing in Brazil in the second half, with sluggish domestic demand and rising local feed costs contributing further pressure, Rabobank said.

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