Poultrymeat prices to remain firm despite Russian ban

The poultry sector is well-placed to brush off the recent Russian ban on food imports from certain parts of the western world, with firm prices set to continue globally.

Strong fundamentals will promote further margin improvements in almost all regions of the world, says analyst Rabobank in its latest quarterly report .While competing meat prices – especially beef and pork – are increasing, the worldwide supply of chicken is relatively tight and provides a strong base for margin improvement, especially as grain prices are expected to see further declines in 2015.

“The global outlook for the poultry industry is bullish for the remainder of 2014,” says Rabobank analyst Nan-Dirk Mulder. “We expect strong fundamentals to keep white meat prices high, while dark meat prices may come under some pressure.”

Along with the Russian import bans, the other big event in the second half of 2014 is the recently introduced restriction on global poultry trade by South Africa, which has imposed certain import tariffs.

See more: Rabobank’s second quarter analysis of the poultry market

The big winners of this will be Brazil, together with the local industries of Russia and South Africa, where margins will rise significantly. Exporters in the USA and EU will have to compete to find alternative markets, though this is expected to have only a limited impact on the market.

Looking at developments in specific regions, Rabobank explains that US chicken prices have continued to climb, driven by higher breast meat values, which peaked during the 4 July holiday.

“Well balanced market conditions with measured supply growth mean we expect chicken production to increase 3% in 2015.”

The outlook for the EU is also bullish, with the chicken market continuing to remain relatively strong, driven by high demand and limited supply.

In Brazil, the domestic market is being affected by a squeeze on consumer spending power, but exports are benefiting from new market opportunities.

And in China, poultry markets are showing signs of recovery as concerns about avian influenza fade and industry initiatives to reduce production capacity take effect. “With poultry and pork prices being strongly correlated, a bullish outlook on pork prices will give poultry strong support in the coming months,” says Rabobank.