Chicken farmer

Global chicken demand will outweigh supply

Chicken processing margins have improved this year and will remain strong through the rest of the year because demand will outstrip supply.

The most widely consumed protein, chicken, suggests the poultry sector is best positioned to deal with inflation at whatever level. In fact, as demand for chicken domestically and globally increases, the biggest issue might be one that other sectors would like to have, tight supplies.

Despite cost pressures and operational challenges, the global poultry market is bullish, with high demand and tight supply, Rabobank noted in its third quarter 2022 report.

Related story: Will further consolidation lead to higher poultry prices?

Chicken producers biggest challenge is bird flu, energy & feed costs

The industry`s biggest challenge is operational, with high feed and energy prices due to inflation, labor availability and avian influenza, wrote Nan-Dirk Mulder, senior analyst of animal protein at Rabobank.

Rabobank pointed to the significant impact of AI on the global poultry industry. Europe experienced one of the toughest breeding seasons ever, with 53 million birds culled. A highly pathogenic avian flu hit the United States in his February, killing him 38 million birds in the preceding months.

Outbreaks have also occurred in Japan, the Philippines, Mexico and Russia. Supply will be tight as a result of this challenging environment, Mulder said.

Related story: Meat inflation’s breaking records

Smaller producers downsizing due to lack of working capital

Small and medium-sized manufacturers are downsizing in response to higher working capital requirements and risks. New investment projects are delayed in the face of rising investment costs, rising steel prices, rising interest rates, high logistics costs and labor shortages.

Still, demand for chicken meat remains high as many consumers opt for lower-priced chicken instead of beef products, Mulder said. Slowing economic growth and declining consumer confidence, linked in part to Russia’s invasion of Ukraine, will result in more consumers switching to chicken, Mulder added.

Rabobank does not expect global production growth to exceed 0.5% to 1%. Mulder’s comment referred to global demand, but could also apply to the US market.

Poultry processing margins have improved significantly this year and should remain strong for the rest of the year as demand outstrips supply. He produced 20.443 billion pounds of poultry in the year ended 30 June, up just 1.1% from the same period last year. Chicken slaughter rates he increased by 1.5%, indicating that slightly underweight poultry were being processed.

Conversely, prices for most poultry products surged sharply year-on-year, at least in the last week of June. Broiler prices in 12 cities increased by 54.5%. Tohoku chicken breast prices rose 63.8%. Prices in the Northeast Leg Quarter rose 35.5%.

Related story: Beef prices expected to rise for years to come

Chicken is still the most affordable protein

As rising protein prices began to affect consumers in the first half of the year, it was clear that chicken had a price advantage over the other two major proteins. The average retail price of chicken in May was $2.42 per pound, according to USDA data. This was an 18.6% increase from May 2021, but still half the price of pork ($4.89 per pound) and just over a third of the average price of fresh beef ($7.37 per pound).

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Source: Supermarketperimeter

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