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Poultry export, production growth on tap for 2020

Asia-Pacific regions recovering from ASF expected to shift production from pork to poultry or aquaculture.

Export growth will be the main driver behind continued strong growth in poultry production in 2020, especially in light of the global animal protein supply shortage due to African swine fever (ASF), Rabobank’s "2020 Global Animal Protein Outlook" showed.

The U.S. broiler industry is on pace for another record year of production, Rabobank said, as new capacity becomes fully operational and productivity challenges are overcome.

Rabobank said plentiful supplies are expected to weigh on markets for much of 2020, as record supplies of beef and pork will make any price improvement difficult. However, strong export demand – particularly to Asia, given ASF-driven shortfalls – will support dark meat values, as should normalized trade with Mexico.

“A recovery in Mexican broiler production, following the 2019 outbreak of avian influenza, will boost Mexican production but should have limited impact on total volumes available,” the report noted.

Poultry production in Brazil is also expected to rise 2% year over year on improved exports and a bump in domestic consumption, Rabobank reported.

Brazil’s economic outlook has improved, which will result in higher consumer purchasing power and an uptick in the domestic consumption of pork and poultry. The Central Bank of Brazil expects gross domestic product to grow 1.8% in 2020. Rabobank relayed that the latest supermarket sales data showed a sales improvement of 3.4% year over year for the first half of 2019 -- the strongest increase in the last five years -- providing support for the positive outlook.

Rabobank forecasts Brazil's poultry exports to continue at the pace of 2019, adding that China has surpassed Saudi Arabia as the largest importer now. Sales to Japan, which improved in 2019, should also remain high, although below 2017 levels.

Regarding the European Union, the report said weaker performance slowed down production expansion in a “challenging” 2019. Not a lot of upside is expected in 2020, Rabobank added.

One of the key issues is ongoing production growth in the region, which is projected to be 2.5% higher in 2019 and was 4.8% higher in 2018.

“This situation is mainly caused by ongoing growth in Eastern Europe, along with recent expansion in Spain. Increased local supply, together with recovering imports from Brazil, has challenged the market situation, especially for breast meat," Rabobank said.

For 2020, the EU’s biggest challenge will lie in rebalancing markets, the report suggested.

“Strong demand for dark meat products on international markets does not compensate for the ongoing weak demand for breast meat," it said. "Therefore, the EU industry will need a more disciplined approach to supply growth in 2020, with production growth below 2%.”

Poultry production will increase the most rapidly in China as it responds to strong demand due to ASF. However, imports are also expected to grow.

“Poultry production has grown rapidly in 2019, including white-feathered birds, yellow-feathered birds, spent layers, hybrid birds and water fowls, which have all seen their output increase faster than in recent years," Rabobank reported. 

Rabobank pointed out that China’s breeding stock inventory of white-feathered birds has improved greatly due to the steady growth of imports in 2018 and 2019. As such, white-feathered bird production may see even stronger growth in 2020 and 2021, the report suggested, adding, "We expect total poultry production to grow by more than 10% year over year in 2020.”

Even with the expected production growth, Rabobank reported that poultry imports increased by a whopping 51% during the first nine months of 2019.

“We expect this momentum to continue into 2020, driven by ongoing strong demand, as the gap in total Chinese animal protein supply may grow wider in 2020," it said. 

The Asian-Pacific regions affected by ASF this year will likely shift household farm production from pork toward poultry and aquaculture, according to the Rabobank outlook.

“Large-scale corporate farmers are also expected to increase investments to expand capacity through large, biosecure farms and also to increase vertical integration to ensure food safety and strengthen their supply chains,” it said. 

While Malaysia and Indonesia are also at risk of ASF, Rabobank said its potential impact would be less pronounced in these countries than in Vietnam or the Philippines, given pork’s small share of protein consumption. In Thailand, current overcapacity in pork should slow any demand shift into poultry, although higher broiler costs could erode export margins, the report suggested.

Higher pork prices in Vietnam, the Philippines and other parts of Southeast Asia, Rabobank noted, will gradually shift consumption to more affordable proteins.

“Demand has not meaningfully shifted toward poultry and seafood in Vietnam in 2019, but we expect to see this pick up in 2020 – along with higher pork prices," it said. 

The same will happen in other countries, such as the Philippines and Thailand, the bank added.

“Investments in additional poultry farms and aquaculture capacity may be needed in the following years as demand builds," it said. 

In 2020, Association of Southeast Asian Nations poultry production is forecasted to expand by 4.0% to reach 9.69 million metric tons, which is a 3.8% increase from 2019.

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