Across the world, the poultry industry is forecast to come under increasing pressure, according to the latest ‘Poultry Quarterly’ report from Rabobank. The main reason, according to authors David Nelson, Nan-Dirk Mulder and Ethan Hendricks, is the escalation in cereal and oilseed costs. In most regions, producers are unable to pass on their higher costs to consumers.

The outlook for the rest of this year remains challenging, the authors say, as feed costs are expected to remain high.

The US industry is maintaining tight control on supply, says Rabobank, citing the fact that hatchings of pullet chicks were three per cent lower in May 2012 than in the same month last year. This market discipline is paying off for producers there, while margins are falling for companies in other countries.

Also on the positive side, the poultry industry is benefiting from continuing high beef and pork prices.

Despite the usual decline in the global trade of poultry meat in the first quarter, Rabobank has kept its earlier global trade growth projection at four per cent.

Two factors are identified in the report as likely to impact global trade in the short term. The first is the move in Mexico to set import quotas for US poultry meat – a significant move as 16 per cent of US exports go to its southern neighbour. The second is the resumption of raw meat exports from Thailand to the EU from this month, following a ban since avian flu first hit the country. Rabobank forecasts increasing competition between Thailand and Brazil for the EU market and a fall in prices as a result. Japan may follow shortly in ending its ban on imports of raw Thai poultry, according to Rabobank. Thai expansion may be held back by rising costs, however, as the country is a net feed importer.

Brazilian exports are also coming under pressure as the US and EU are currently expanding their share of global export market.

According to the report, recent outbreaks of highly pathogenic bird flu in China and Mexico are having some signficant effects on local markets but any impacts on global trade are expected to be only short-term.

Finally, on mergers and acquisitions in the industry, Rabobank forecasts a slowing in the pace of industry consolidation. In the second quarter of this year, Doux of France, JBS in Brazil, Cagle’s in the US and a JV between Cherkizovo of Russia and a Spanish partner were all the news. Production is expected to start later this year or early 2013 from several large greenfield projects in Russia, Ukraine and China.