Outlook 2016: Cost control crucial to poultry profits

Low cereal prices look set to continue until at least harvest 2016, providing some comfort on the cost side of the poultry producer’s ledger.

At the same time, the big four supermarkets are looking to their whole supply chains to reduce prices, says Richard King, Andersons head of business research.

“These retailers are looking to fight back against the discounters, but traditional supermarkets are not as lean so it is not always easy to replicate the discounters’ cost structures.

See also: Poultry farmers most optimistic in British agriculture

Farmers Weekly says…

Philip Clarke, editor, Poultry World

  • Avian influenza will continue to threaten all parts of the egg and poultry sector, as the presence of highly pathogenic strains escalates in wild bird populations.
  • The Food Standards Agency will continue to demand tighter controls across the supply chain to contain campylobacter.
  • Egg markets will come under real pressure at some point in the year as the expanding flock reaches peak production.
  • The Pig & Poultry Fair returns to Stoneleigh on 10 and 11 May, with a particular emphasis on innovation.

“Prices have been sliding over the past few months, and 2016 is unlikely to see any let up in this pressure.”

The fact that consumers are focusing on breastmeat is not helping – the industry is facing increasing problems securing worthwhile markets for dark meat, he adds.

Conditions in the egg sector have been brighter up to now, says Mr King. Retailer pressure is in evidence, but strong demand for eggs has helped maintain historically high market values.

“The big question is whether this will continue through next year. Chick placing statistics indicate extra production over the coming months, which could weaken prices.”

Technical innovation and increased efficiency in the sector will be key if both broiler and egg producers are to cope with lower prices.

“Interest rates are likely to rise only slowly during 2016 and will remain at historically low levels. It is still a good time to invest – a recent NFU shed survey shows the average age of broiler sheds in 2014 was 27 years.”

There is still scope to reduce energy costs, even with recent/proposed support changes, he adds. “It looks like the Renewable Heat Incentive will continue, which is good news.”

Although there is no guarantee that cereal prices have hit bottom, given their low level they may be more likely to rise than fall over the medium term. “Taking a proportion of forward cover on feed makes sense,” says Mr King.

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