Source: Bob Moser, MEATINGPLACE, 4/3/14

Optimistic conditions for global poultry trade may turn sour in the second quarter due to recent grain price increases caused by unrest in Ukraine, and weather-related worries from a pending El Niño, according to a recent Rabobank report on the international poultry market's first quarter.

Increases in the prices of feed have been 10 percent to 15 percent higher in the first quarter than previously expected, while outbreaks of avian influenza in China and a weakened economy throughout Asia are expected to drive down margins in the second quarter, said Nan-Dirk Mulder, analyst with Rabobank.

“The effect on companies hinges on their regional market balance and longer term forward-hedging,” Mulder wrote. “A slowdown in global trade volumes and lower product prices, especially for leg quarters, will affect companies in international trade and lead to shifts in global trade streams. Brazil is likely to be affected the most, while Thailand is likely to benefit due to its recent return in the Japanese raw chicken market.”

Further shifts in trade channels are expected in the second quarter. This should include pending anti-dumping duties on European Union poultry trade in South Africa, a new free trade agreement that grants Ukraine temporary access to the EU market through quotas, and a potential return of United States exports to China.

All of these developments, which should occur amidst weak global trade conditions for poultry, could result in a large impact on global trade for the sector, according to Rabobank.

For the U.S., tightened supplies of domestic beef and pork projected for this year indicate another profitable year for the country's poultry industry.

In Brazil, despite greater local demand and the expectation of a strong grain harvest, a challenging export market will be Brazilian poultry's key to growth in 2014, projects Mulder. Brazilian poultry exports for 2013 totaled 3.89 million tons, a drop of 0.7 percent compared to 2012. The country remains the world's largest poultry exporter by volume.

In China, the poultry industry has suffered major losses after being hit by an outbreak of avian influenza twice within the last year. The disease has left consumers concerned about the relative safety of poultry meat.
In Asia, industry performance in India is recovering from an oversupply, while market conditions in Japan are positive for sales in Q2. The opening of Japan to raw chicken from Thailand continues to affect supply agreements.

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