The deadly cases of avian influenza in the United States are affecting the market and demand for poultry around the world.
According to a quarterly report released Monday by Rabobank, total trade volume for poultry fell 13 percent in 2015’s first quarter compared with the same period a year ago, thanks to three key factors:
- Trade restrictions on poultry products due to avian influenza.
- Exchange-rate volatility and the stronger U.S. dollar.
- Softening economic conditions.
This has been particularly damaging to American poultry producers, who have lost tens of millions of birds since December due to the virus. As more and more cases have been reported, the price tag of the virus has spiraled upwards into the billions of dollars, depending on the sector. Countries have banned exports of U.S. poultry products from specific counties as well as the country as a whole. On Monday, U.S. Agriculture Secretary Tom Vilsack said the government could end up spending as much as $500 million to deal with the outbreak.
The scenario is dampening demand for poultry globally and U.S. poultry products in particular. “Brazil and Thailand are the winners of the current situation and have been the only major exporters who reported higher export volumes in Q1, compared to the same period last year,” the Rabobank report said. “The U.S. is the big loser, as exports have been dropping by more than 10 percent over the first quarter, compared to the same period last year. “
Rabobank forecasts more of the same for American poultry producers in the months ahead,
“Poultry industry fundamentals are facing meaningful headwinds with stronger than expected feed prices due to a strong U.S. dollar, increased competition from falling pork prices and restrictions on trade,” said Nan-Dirk Mulder, a Rabobank animal protein analyst. “Prices for whole chicken, leg quarters and chicken feet are declining further, while breast meat prices remain relatively strong.”
Still, the report noted that profits so far have remained strong, at least for the big companies.
“U.S. poultry producer profit margins averaged 14% in Q1 2015, as indicated by results from Tyson and Pilgrim," the report said. “This is the highest margin we have on record for Q1 2015. In the midst of a 4.6% increase in U.S. poultry production in Q1, white meat demand expanded measurably, with prices up 5% to 8% over prior-year levels.”