Jan 23

Poultry is the fastest-growing protein worldwide, positioning it to soon become the world's most widely consumed meat. In its annual "Global Animal Protein Outlook" report, Rabobank predicts overall 2019 global production of poultry, pork and beef will grow by roughly 1 million tons, which is "well below the five-year average," according to the report. However the poultry sector is expected to see strong growth in key markets.

Southern and all Southeast Asia: Eastern Europe, e.g., Poland, Hungary and Romania; and Latin America, e.g., Columbia, Peru, Chile and Central America (With the exception of Brazil) will lead global poultry production and supply increases, says Nan-Dirk Mulder, Rabobank's senior global animal protein analyst.

The demand for poultry and eggs will likely result in higher poultry feed volumes; however, five looming macro issues may influence 2019 production.

Uncertainty in international trade

Global trade uncertainty in 2018 sparked instability in commodity markets; however, these lingering geopolitical issues and unsettled trade disputes will continue to influence poultry and feed production into the year ahead.

During the first half of 2019, Mulder predicts international poultry markets will be extremely volatile and competitive.

He says trade tensions will increasingly impact poultry exports and feed costs, e.g., current trade negotiations between China and the United States. 

"If China provides U.S. agriculture with more access to Chinese markets, the U.S. may return as an exporter of poultry to China - shaking up global trade and challenging Brazil," Mukler says.

David Kelly, Diamond V's poultry marketing manager, agrees: "Global protein markets intersect, so what happens in the pork and beef trades impacts poultry trade. If the U.S.-China trade war continues - or even escalates - then we can expect knock-on effects for the poultry industry well beyond the U.S. or China."

In addition the removal of the Chinese 25 percent soybean levy on U.S. soybeans could create new volatility in global grain markets. 

In the wake of uncertainty, poultry producers are focusing on the aspects of the business they have the power to influence.

"There are many challenges facing the poultry industry, both controllable and uncontrollable," says Doug Ramsey, Tyson Group president, poultry. "We cannot control the rain or the trade deals in our global economy, but we can control our service, taking care of our customers and the animals entrusted to us, the quality of our ingredients and our operations."

The China effect

China will be the market to watch in 2019, as animal protein stocks will be in short supply. 

African swing fever (ASF) outbreaks have reduced Chinese pork production, as small farmers are liquidating their stocks. In addition, the country's low domestic poultry breeding stocks have increased poultry prices, Mulder says. 

"In 2018, November prices for broilers and day-old chicks (DOC) in China have increased by 50 percent and more than 300 percent, respectively, over November 2017 prices," he explains. 

Mulder says the real impact of ASF will likely be felt in the second half of 2019 when supplies become very short, further impacting all protein prices.

"It will be difficult for the pork and poultry industry to grow," he says.

Poultry imports are expected to rise significantly in 2019.

Antibiotic reductions

Global reductions in antibiotic usage and the efforts to limit antibioitic resistance will continue to be a hot topic in poultry production.

In the United States, for example, the Food & Drug Administration (FDA) has noted a dip in antibiotic sales for livestock and poultry, attributing reductions to the implementation of Guidance #209 and #213, reports Rafael Rivera, manager of food safety and production programs, U.S. Poultry & Egg Association.

"Whether this will be a trend that will continue downward or will stabilize remains to be seen," Rivera says. "Reducing the use of antibiotics has certainly come at a cost, and it is important to measure such activity and what impact, if any, such reduction has had on antibiotic resistance." 

Feed manufacturers, veterinarians and growers will continue to seek out suitable feed additive alternatives and implement improved biosecurity measures on the farm level. 

"Formulating and manufacturing needs for ABF poultry production under weak economic conditions" is the greatest challenge poultry feed manufacturers and their nutritionists can face," Kelly says. "It's on thing to adjust for 'no antibiotics ever' when margins are strong and demand is booming. It's quite another while facing the foreseeable economic conditions of 2019."

For this reason, production supervisors, nutritionists, veterinarians and contract growers are going o have to "up their game" to remain profitable while maintaining flock health.

"They're good now, but they're going to get even better at biosecurity, feed management and farm management," adds Kevin Sheehan, Diamond V's directory of food safety, business development. 

To reduce the use of antibiotics poultry producers are increasingly focused on gut health management strategies. 

An effective program combines "biosecurity, health measurements and nutritional management to enhance gut development while maximizing feed utilization and building [the animal's] natural defenses to support growth and performances," explains Kayla Price, Canadian poultry technical manager at Alltech.

Disease threats

"The persistent threat of disease and its impact on local and export markets [and] global trade flows" will continue to plague the world's poultry producers, says Derek Schoonbaert, regional commercial director for Cargill in Asia.

Enhanced biosecurity measures should control risks to domestic supplies and export relationships.

"Avian influenza and other disease can disrupt the country's production and can have ramifications such as embargoes from our trading partners," Rivera says. "Biosecurity is the most straightforward and economically feasible process to prevent diseases in poultry production areas. Efforts by the industry to protect farms are ongoing."

Consumer demands

Global poultry and feed production is increasingly being shaped by consumer demands and preferences. Three consumer-related trends should receive special attention in 2019.

  • Transparency and food/feed safety
    Transparency around tracking food from farm-to-table will be one of the trends to have the greatest impact on poultry in 2019, says Jennifer Bentz, senior vice president of Tyson R&D, innovation and insights. Developing transparency technologies, such as blockchain, provides management strategies that will strengthen food and feed safety and ingredient traceability. Such efforts can al be leverage increasingly as a tool for building consumer trust moving forward. 
  • Adoption of new poultry production systems
    Consumer preferences are already having a big impact on poultry production technology, especially in favor of antibiotic-free and non-confinement production systems for layer, broiler and turkey production, Kelly says. "Cage-free, free-range broilers, etc., have immediate consumer appeal but require costly long-term investment," Kelly notes. Another example is slow-growing broilers. According to Rivera, initiatives such as the Global Animal Partnership (GAP) standards, which is sponsored by an animal rights group, try to get consumers to demand a slow-growth production program, thereby pressuring producers into adopt its standards. However, these are not supported by science, and they restrict production. "[Slow-growth standards] have not garnered as much attention among consumers as animal rights activists had hoped, but that effort will continue," Rivera says.
  • Social concerns
    In mature markets, animal welfare and sustainability will remain a high priority, increasing "demands on animal nutrition with more standards, further antibiotic reductions, use of novel feed additives and new labeling requirements," Mulder says.

Positive outlook for 2019

Overall, industry analysts are bullish on 2019 poultry production - with many countries forecast to experience upwards of 3 percent growth. Consequently, poultry feed producers can expect to produce higher volumes despite high raw material costs and quality variability challenges in some regions.

"We anticipate very dynamic market conditions in 2019," says Robert Alber, AlzChem's vice president of animal nutrition. "Poultry feed producers may be challenged to find good cost positions and quality raw materials; however nutritional efficiency will be a must to satisfy growing poultry market demands."

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