The global poultry market has experienced ups and downs due to the Covid-19 pandemic and the changes caused by African swine fever (ASF) and Avian influenza on protein trade, according to the latest analysis from Rabobank. The main challenge for global producers in such volatile markets is balancing supply and demand, and with 2020 coming to an end, experience shows how difficult it has been. Prices for all types of cuts have been under pressure.

The main change was experienced in the Food Service channel, which in normal times demands between 20% and 50% of sales in most markets and is currently significantly decreasing its volumes. Wholesale markets were also in high demand in previous years. The difficult situation of international poultry trade has led exporters to redirect their exporting volumes that almost disappeared in ASF affected Asian markets, China and the Philippines. Exporters from countries allowed to enter China (Brazil, the United States, and Russia) have considerably increased export volumes, resulting in record volumes of Chinese imports this year. The US and Russia are benefiting from their new access to the Chinese market and have taken a significant market share from Brazil.

Potential new waves of Covid-19 will add to the ups and downs of the market, and the impact of a deep economic crisis will make markets more price-driven. A slight increase in global poultry production is expected next year (0.8% year-on-year), mainly as a result of its expansion in China and Vietnam, where ASF has reduced pork availability, and also the expansion in the US. Meanwhile, the rest of the world will operate in a reduced production environment.

The differences in expected growth of poultry production are higher than ever, ranging from a 15% growth in China to 5% in Vietnam, in contrast to -8% in Thailand and more than -10% in India. China has been a high growth market, while traditional import markets such as the European Union and Japan have shrunk significantly.

Many issues affect trade, and the opening of China to US and Russian exporters is a major disruptive factor. Recent (voluntary) restrictions in China’s trade illustrate the risk of high dependency. Also, Avian influenza poses another ongoing risk for the industry. After appearing in Vietnam, it is still affecting Poland and Ukraine. There are new cases in Australia, and with the arrival of winter to the Northern Hemisphere, the risk for exporters in this region is also increasing.

From eating out to eating at home

Companies that focus on retail channels tend to perform better because consumers have shifted from eating out to eating at home. This change also had a major impact on the global poultry trade, as the Food Service channel and wholesale markets tend to rely more on global supply for fresh products than retail markets.

The Rabobank report predicts that the market will remain under pressure until early 2021. One of the main uncertainties is how Covid-19 will behave during this period and whether new waves of cases will put more pressure on governments to restrict the movement of people. The Food Service is not expected to fully recover from the Covid-19 lockdowns, and the impact of the deep economic crisis will unfold with more price-driven purchases among consumers. This could push consumers to switch from more expensive meats to more standard poultry products. More expensive cuts and concepts could also come under pressure.

ASF still has a huge impact on the Asian pork industry

Chinese poultry prices, unlike pork and beef, have been falling to relatively low levels. Total import volumes from January to July 2020 reached higher levels than the entire year in 2019. Poultry prices fell dramatically during the same period, with prices for chicken wings and feet falling 15 to 20% below early 2020 levels, while current prices for live broilers are among the lowest in years.