2022 Poultry Outlook: 7 macro trends apt to affect feed

Global poultry industry stakeholders look ahead, brace for challenges Global poultry industry stakeholders continue to weather many of the same issues in 2022 as they did the year prior; however, the outlook for continued growth for the sector is positive. “In general, I expect a good year for global poultry in 2022, with strong demand and big supply challenges,” says Nan-Dirk Mulder, Rabobank’s senior global specialist animal protein. “This will mean on average higher prices and, in my view, improving performance in many markets worldwide.” While the overall tone for the global poultry industry is optimistic, the effects of the COVID-19 pandemic continue to challenge the market, producers and allied industries. In the “2022 Poultry Outlook” report, many of the main pandemic-generated pain points persist but, in total, seven macro trends emerge to influence the sector’s productivity and profitability in the year ahead. Elevated ingredient, feed costs Poultry feed costs will remain volatile as prices for basic ingredients remain high and availability limited, decreasing profitability for producers. “Prices for corn, soybeans, wheat and feed additives are expected to stay high and volatile, driven by ongoing strong demand; low stock levels for all commodities; pressured supply due to high fertilizer and ag chemical prices; and ongoing government intervention in crop markets due to food security and food price inflation reducing measures,” Mulder reports. He suggests feed producers focus on optimizing the procurement of feed ingredient and enhancing feed formulations. Eric Gingerich, DVM, Diamond V technical services specialist – poultry (layers), predicts a bump in reformulations due to tight ingredient supplies and high feed additive prices but warns “frequent changes in feed formulation, ingredient makeup or temporarily deficient feed formulas can have a negative impact on animal and intestinal health.” “Nutritionists must be ready to redefine feeding strategies according to the marketplace,” notes Marcelo Silva, Aviagen’s head of global nutrition services. “It will be crucial to fully understand the biological responses to the most important and impacting constraints in the least-cost formulation process, e.g. energy and balanced protein.” “The future relies on balance. Thus, all efforts must be done to optimize margins over feed costs and keep performance traits at competitive levels while advancing bird health,” he says. Many of 2022's challenges for poultry and poultry feed producers point back to the lingering effects of the COVID-19 pandemic. (Chaser223 | BigStock.com) Supply chain remains disrupted Global supply chains continue to struggle, and conditions remain nearly as taxed as they did at the start of the pandemic. “For nearly two years now, we’ve experienced a wide array of disruptions in the supply chain which have impacted feed manufacturers, producers, retailers and consumers alike,” says Marilynn Finklin, DVM, technical services manager, Kemin Animal Nutrition and Health – North America. “It’s likely that we may see these impacts stretch through the entirety of 2022 — or even beyond — and they are not unique to our industry; this pain is being felt in nearly every sector.” In Finklin’s opinion, supply chain disruptions will be the greatest obstacle for the poultry industry in the short- and mid-term: “A wide array of issues in terms of raw material availability, transportation for inputs and finished product, and rising costs are associated with these challenges. Nutritionists will certainly feel these pressures in terms of reformulations from an ingredient availability and a cost burden perspective.” According to Brian Earnest, CoBank’s lead protein industry analyst, adequate access to additives and micro ingredients will remain a challenge. “Inefficiencies associated with shipping delays are likely to persist in 2022,” he says. “This means feed managers will either not have adequate ingredients on hand from time to time, or they will over order, further burdening broader industry supplies.” Labor shortages persist Difficulty filling positions with qualified workers is nothing new to agrifood production; however, COVID exacerbated the situation in poultry production, processing and feed manufacturing. According to the U.S. Bureau of Labor Statistics, for example, poultry processing hourly wages have gone up 22% since February 2020, but the hourly, non-supervisory employee headcount is still down 6%. “If the poultry industry is to regain its growth trajectory and fully leverage the protein value advantage of broiler and turkey meat, the challenges of staffing must be overcome,” says Joe Meszaros, senior economist - poultry, IHS Markit. “These challenges include providing both market-competitive wages and benefits, and creating a work environment conducive to associate confidence in their personal safety in the workplace.” Richard Obermeyer, Aviagen North America’s director of feed production, agrees, urging the poultry and feed industries to provide a better working environment to help retain existing employees and to remain competitive in a shrinking labor pool. “We need an adequate labor force to operate the feed facility and delivery fleet,” Obermeyer says. “There has been a disruption of ingredients, parts and supplies to feed facilities, and everything involved in feed manufacturing has been hit hard by inflation. To combat these challenges, feed manufacturers are going to have to move toward facility designs and automation that effectively reduce the labor force required to operate.” Broiler breeder stocks are not set to stabilize until 2023. (chayakorn76 | BigStock.com) Inflation and food security concerns Throughout all sectors of the global economy, cost-push inflation has been driven by increasing labor costs, supply chain disruption and high input prices. While poultry protein demand has been remarkably strong, production costs continue to rise and will increasingly be passed on to the consumer. “Prices for food products, agri-commodities and poultry are moving to high levels and this is leading to food security and food price inflation concerns among governments,” Mulder says, noting recent restrictions on global trade to secure affordable local food in several major markets and may lead to the implementation of long-term food security strategies. The high food prices could also negatively impact poultry consumption in low-income countries where consumers might shift back to cheaper protein sources, he says. Mulder believes cost inflation will increasingly drive poultry producers to focus on procurement, yields and efficiency in the value chain to reduce feed and labor costs this year. Breeder stock challenges linger Beyond demand and labor concerns, broiler meat shortages can be attributed to breeder stock issues, such as decreased egg hatchability. In 2021, the broiler-type hatching egg layer flock was 6% larger than pre-pandemic levels yet output was about 1% lower, Earnest reports. Tyson, one of the world’s largest chicken producers and owner of poultry breeder Cobb-Vantress, reported in mid-2021 that its new rooster breed was responsible for the decreased hatchability of fertilized eggs. Reports suggest the company will not see a full rebound until 2023. “Productivity for broiler-egg-type layer flock operations must address the eroded hatchability situation, which has fallen nearly three points since last year,” Meszaros says. “With breed genetics-attributed issues — which have supposedly been addressed — have yet to be reflected in USDA (U.S. Department of Agriculture) national flock performance numbers, the layer flock headcount must expand to ready the industry for anticipated growth.” Earnest warns that as the hatchability issue improves and supply grows, the supply chain maybe become overburdened with a surplus of day-old chicks in 2022. Border closings, flight cancellations and limited trade routes have hindered broiler breeders’ ability to transport breeding stock, also impacting global supplies, notes Marc de Beer, president of Aviagen North America. “As an industry, our best defense is to band together,” says de Beer. “We must work with government and industry associations to facilitate trade and keep the supply chain open.” He suggests poultry producers and leadership petition local agricultural ministries and governments to take measures to facilitate trade and transportation and leverage the voice of international organizations “to use their influence to keep major trade routes open,” despite the COVID restrictions that may be in place. Poultry disease threats As always, poultry diseases, such as Newcastle disease and avian influenza, continue to threaten flocks. Most recently, high pathogenic avian influenza (HPAI) outbreaks in Europe and Asia have put additional pressure on production. “Our best defenses to secure bird health and keep the supply chain open during times of disease outbreak are rigorous biosecurity, compartmentalization — which is a way to facilitate the export of chicks and eggs from a group of approved farms, known as 'compartments,' during a disease outbreak within a country or region — and local and regional supply bases distributed around the globe,” de Beer says. ‘Sustainability and welfare go hand in hand’ As consumers push for enhanced transparency and sustainability throughout the food chain, up- and downstream poultry industry stakeholders will be required “to create meaningful change in this space,” Finklin says. Consumers today have come to expect their food and drink to come from sustainable ingredients, produced by companies that share their values, says Fernando Moreira, Wisium commercial development director for poultry. “Sustainability and welfare actually go hand in hand,” says de Beer. “Healthy birds raised with high welfare standards result in quality, healthy chicken meat for consumers, contributing to social sustainability. Healthy birds are also more biologically efficient, which is good for the environment and the economic sustainability of producers. They are more resistant to disease, their livability is strong, and they perform better.” Though these claims and requirements make it more difficult for the sector to operate, it provides opportunities for specialized players to use them for product differentiation and added market share.

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