North American, Latin American producers in unique position to profit
Driven by increased consumer demand and fortuitous circumstances, global poultry producers are set to see continued growth in 2020.
As China and Southeast Asia reel from the effects of African swine fever (ASF), Nan-Dirk Mulder, Rabobank senior analyst – animal protein, believes it’s the time to open the doors and work with the governments to enter these markets because “this is the moment that [companies] can really benefit from this quite unique situation.”
“If you if you have the ambition to supply the Asian market, this is the moment to do that,” he said at an APC Industry Insights event on the eve of the 2020 edition of the International Production and Processing Expo (IPPE).
Mulder advises North American and Latin American poultry producers seize on trade and investment opportunities in China. For example, the restoration of U.S.-Chinese trade relations and the lift of the U.S. poultry ban represent a potential of $2 billion in poultry export opportunities annually.
ASF impacts Asia protein demand
Historically, the annual trajectory for global animal protein consumption has grown by around 10 million tons or more across all species; however, in 2019, for the first time ever, animal protein consumption volumes trended into the negative, Mulder said.
ASF virus is to blame, spreading though China and Southeast Asia, which are traditionally pork-loving countries that account for upwards of 50% of global pork consumption and trade, and decimating herds.
Despite restocking efforts, Mulder predicts Chinese production will drop an additional 15% in 2020, compounding 2018-19’s 25% reduction.
Meanwhile, Vietnamese (-10%) and Philippine (-10% to -15%) pork production will also be down in 2020 due to the virus.
“There’s no other protein that can replace pork in Asia because it’s such a big industry,” Mulder says.
Chicken production, for example, is less than 30% of the total protein production in China, so even “if you double the production, you still cannot replace the drops you have in a pork production,” he said.
Opportunity for chicken
In 2019, Chinese chicken production grew by 15% and will rise an extra 15% to 20% in 2020.
“This is incredible growth, like nothing we’ve seen before in China,” he says.
Chicken production in Thailand (4%), Vietnam (12%) and the Philippines (7%) also saw significant growth in 2019.
“Some of the large integrators have built additional capacity, but also pig farmers who need another form of income are putting up chicken houses, introducing newcomers into this industry,” he said.
Mulder believes the recovery will move in different stages.
“In the next two years, I think we go to small scale rebuilding. Between 2022 and 2025, hog production will increase. Past 2025, or a post-ASF era, modern pig farming will emerge, and production will slow, he said.
Decreases in compound feed production due to ASF have not exactly mirrored drops in swine production, Mulder says, because “modern farming uses modern compound feeds” and balanced by an increase in poultry production.
Projections point to an 8% rebound in total Chinese compound feed production in 2020, after a 40% reduction in 2019 swine feed production.