Global poultry prices are taking off in Q2, according to Rabobank’s quarterly poultry report.

This bullishness is driven by relative price support from high beef and pork prices alongside demand recovery and a more balanced supply and demand situation in most regions of the world.

The report also points to falling international feed prices, based on a good crop outlook for wheat in Europe and Australia, and for soy beans in the USA.

“Under improved global market conditions, led by the North American region, a slight increase in global chicken prices is expected,” says Rabobank analyst Nan-Dirk Mulder. “We see an increasingly balanced market, where supply discipline is more the order of the day and improving margins will be the likely result.

“However, markets remain volatile and any change in fundamentals, especially from the supply and feed side, will impact global prices. Suppliers should look to keep production growth disciplined.”

The report then takes a detailed look at each region.

UK AND EUROPE

The drop in UK production towards the end of 2013 and early 2014 is now well documented. But this is considered a “blip” by the latest Rabobank report, which notes that the “buy British” trend triggered by the “horsemeat in beef” scandal last year is continuing apace and helping the white meat sector in particular.

France has experienced a similar drop in production, of around 4%, and this is seen as a longer-term trend. In July 2013, Brussels removed the last of its export refunds, which supported the price of poultry sent outside the trade bloc. This pulled the rug from underneath a market for French poultry sold to the Middle East. South American producers are now seen to be meeting the shortfall and Rabobank suggests France will need to find new outlets in Africa and Asia to make good the loss.

Production in Holland and Germany has also dropped, which Rabobank attributes to seasonality more than anything else.

Imports of poultrymeat as a whole to the EU have dropped 5% in the first months of this year, compared with 2013. Balancing this somewhat, are chick placings across the Continent, which are expected to increase, but not significantly.

Overall, Rabobank says this scenario of lower output, coupled with less imported poultry, should support strong poultry prices. High prices for beef and pork are also positive. It adds that keeping markets in balance will be key, as will the influence of feed prices globally. Latest EU figures put self-sufficiency at 103%-104%, and Rabobank predicts no major change to this in the medium term.

UKRAINE, RUSSIA AND SOUTH AMERICA

Outside the EU, Ukraine continues to be seen as a threat to global grain market prices, but poultrymeat is also affected. Currently, both the unrest in the region and a drive to improve the country’s self-sufficiency in agricultural products are restricting shipments to Europe.

But the latest EU Commission agricultural briefing notes that the Ukrainian currency is devaluating, which could make exports more competitive. One side note worth mention is that the chief executive of Ukraine’s largest poultry processor, MHP, has been appointed “deputy first head of the presidential administration”, in the country’s new government.

In Russia, a similar picture emerges, minus the civil unrest. Rabobank says the current market is suffering from oversupply, but the longer-term strategy is to improve self-sufficiency. The government is incentivising companies which set up primary poultry production in the country, funding which Cobb recently took advantage of by investing in a new hatchery. Though this will not affect primary broiler markets in the EU, the trend has the potential to impact breeder sales closer to home.

SOUTH AFRICA AND THAILAND

The South African poultry market is in a period of “normalisation”, following “a long period of oversupply with rising imports”. Those imports were largely dark meat shipped from Europe – South Africa being its largest market for this product. But this trade has been put on hold by anti-dumping tariffs introduced against poultrymeat. The UK will now have to pay 58%, Germany and the Netherlands 91%, until the conclusion of an investigation around January 2015, at the earliest.

The tariffs, or “safeguards”, as Rabobank refers to them, will affect dark meat prices “until new markets can be found”.

Finally, the report notes that Thailand has to date failed to take full advantage of reopened markets to the EU, following the lifting of restrictions put in place by bird flu outbreaks. A consequence of this has been lower broiler prices and a drop in margins across the country’s industry.