The strongest factor affecting this improvement is an expected further reduction in grain and oilseed prices, which should relieve some cost pressure for poultry players, Rabobank stated. What’s more, poultry prices will see price support from continuing high prices of beef (poultry's primary substitute); pork prices are also expected to remain high.
"The global industry is benefiting from improved global market conditions, although significant regional differences exist," said Nan-Dirk Mulder, Rabobank analyst. "Companies operating in markets with a well-balanced supply/demand situation, such as the United States, are expected to benefit from these positive developments. However, the likes of Russia and South Africa are still suffering from oversupply, driven by structural changes in market conditions."
Meanwhile, global trade volumes continue to be negatively impacted by the continuing economic slowdown in key emerging economies, currency depreciation in Japan, as well as volatile demand in China and Hong Kong. Due to these factors, Rabobank experts believe global trade-volume growth will remain relatively flat for the rest of 2013. Rabobank also anticipates a temporary shift in trade streams away from Asia and towards the Middle East and Africa.
While Rabobank expects conditions in the US to remain positive, the rapid recovery of Mexican domestic production coupled with its decision to allow Brazil access to its markets will be of mild concern to US exporters. The EU is expected to continue its margin recovery and will face additional price support from pork production reductions later this year. Asian markets, including China and Thailand, are expected to continue recovery. However, in case of China, it will depend on that country’s ability to limit further H7N9 avian influenza (AI) outbreaks.
"In this environment, we expect industry consolidation to continue," Mulder said. "Many producers are currently in better shape than in recent years and further consolidation could help local industries to better balance local markets. Consolidation could take the form of regional cross-border consolidation, as has proved successful in Europe, or global consolidation, for example, between companies from low-cost grain surplus countries in the Americas and companies from grain deficient countries, such as China."
