European Union and, especially, South African chicken producers
are missing out on "somewhat improving" conditions in the world poultry
industry thanks to a lack of discipline over output, which is undermining pricing
The outlook for poultry producers in most countries "may
improve" thanks to the pullback in feed costs and the elevated prices of competitor
meats such as beef and poultry, Rabobank said, viewing outlooks in the former
Soviet Union as particularly rosy.
The "positive" outlook for Russian producers reflects their
priority in state agricultural support programmes, besides the "favourable
market positioning" of chicken compared with rival meats.
In Ukraine, besides "ongoing high margins and a good local
supply situation", producers faced a boost from the start of exports to the European
Union, expected in the current quarter.
However, Rabobank, a major agricultural lender, was less
upbeat over the EU itself, where "performance worsened throughout 2012", and
producer need "to reconsider production levels in the next few months" to regain
"The EU poultry industry has been hit by a year of further increasing
feed prices, and its inability to pass these higher prices to customers," with
broiler prices falling in the last three months of 2012, by 2% quarter on
quarter, compared with recoveries in some other markets, such as the US.
Indeed, producers in many eastern European countries, such
as Poland and Romania, besides the Netherlands, were growing output at a time
when pressure from the animal rights movement has dented demand in Germany,
whose own poultry groups have been forced to seek new markets.
France and the UK have been top targets, seeing "imports
significantly increasing" in recent months, a "trend expected to continue"
although the weak pound may be putting some drag on shipments to Britain.
And the bank was even more downbeat on prospects for South
Africa's industry, which "keeps operating under very challenging market
While feed prices have risen by nearly 20% over the past year,
prices of frozen broiler chickens have risen by only 2%, undermined by weak
economic conditions, and competition from rising imports from Europe and Latin
While prices of fresh chicken have done better, this segment
has contracted to a niche market, accounting for only 5.5% of sales last year,
from 20% in 2008.
"South Africa's historically-high domestic supply levels and
imports, together with more price-sensitive local customers, have become a
major difficulty for the industry to turn in positive profits," Rabobank said,
noting weaker profits at domestic companies such as Astral Foods and Rainbow
Example to follow
Brazil's market offered a better example of how to manage
the poultry sector conditions, with producers slowing output by 3% last year to
"As a result, domestic prices for whole fresh poultry began to
bounce back in the second quarter, and ended up averaging values 7% higher year
"Margins for poultry companies in Brazil seem to be hovering
at levels well above the beginning of 2012."