CoBank’s lead protein analyst Brian Earnest provides his take on what poultry producers and feed manufacturers can expect in 2022.
After several years of navigating market uncertainty and volatility, poultry and feed producers are wondering what may lie ahead in 2022.
CoBank‘s lead protein analyst Brian Earnest joins the Chat to offer his insights into the trends that may impact this industry over the next 12 months.
Transcription of Feed Strategy Chat with Brian Earnest, lead protein analyst, CoBank
Jackie Roembke, editor in chief, WATT Feed Brands/Feed Strategy: Hi, everyone. Welcome to Feed Strategy Chat. I’m your host, Jackie Roembke, editor in chief of WATT Feed Brands and Feed Strategy magazine.
This edition of Feed Strategy Chat is brought to you by WATT Global Media and FeedStrategy.com. FeedStrategy.com is your source for the latest news and leading-edge analysis of the global animal feed industry.
Today we are joined on Zoom by Brian Earnest, CoBank’s lead protein analyst. He’s here to provide his thoughts on the trends shaping broiler production and the poultry feed industry in 2022.
Hi Brian, how are you?
Brian Earnest, CoBank’s lead protein analyst: Doing great, Jackie. How are you?
Roembke: I’m doing well. Thank you very much. Thanks for taking the time and we’ll get right into it. In your opinion, what will be the main macro trends impacting broiler markets this year?
Earnest: Well, you know, we’ve got quite a tailwind coming in to 2022. With 2021, you think about really strong protein demand overall for the broiler markets. We really had a plethora of changes coming off of 2020, and as we continue to the new year, thinking about things like really tight inventories, something we haven’t had in years past. Strong positive clearance and really some of the key metrics that are working towards that. Looking at good retail disappearance, and the foodservice side is keeping up pretty well, as well.
I think from the demand-side structure, the export environment has been very positive for broiler producers through 2021 — and that’s expected to continue into 2022. I think the export environment will continue to be favorable. Some of that, the the port congestion on the West Coast has been widely cited, but in terms of broader meat movement, through those East Coast ports, it’s actually been been pretty positive.
You’ve got new destinations like China that we’ve seen in the last two years, have really boosted the overall cut-out valuation by adding value to things like paws, it didn’t necessarily have a strong market environment or market position prior to China reopening their markets to U.S. poultry.
Those sorts of things are expected to continue into 2022. And really put put the the industry as a whole in a positive position as we move into the new year. Maybe not quite as strong as what we had in 2021, in terms of the market environment.
When you look at the protein mix as a whole, we’re talking about inflation. The consumer is having to add dollars into their mix into 2022 — they had a little bit of boost of extra spending in 2021 — and I think when we look at the whole mix, it has the opportunity to boost the presence of chicken if folks start thinking about where their dollar is being spent and maybe not spending as much money on beef, which really took strong presence in 2021.
Feed Strategy Conference | “2022 economic outlook for global poultry production,” presented by Brian Earnest: https://bit.ly/3G4ReK3
Roembke: Very good. And what can feed manufacturers anticipate in terms of commodity prices?
Earnest: We’re seeing a stronger corn and soybean price environment, so the top two components for poultry producers. It was was a stronger environment in 2021, export presence for us was stronger for the top export commodities. So that in itself presents a potential challenge for feed use. But when we look at the mix of commodity proteins, there’s an expectation there’s probably going to be fewer cattle to feed in 2022 than what we had in 2021 — we’re on a downward cycle here moving forward for the cattle industry. Hogs are down a little bit as well, and we’re looking for a moderate increase in broiler production.
Overall, when you look at where the demand-side structure is, it doesn’t change all that much in our opinion from 2021. So, you know, there’s that.
From the demand side, we’re hearing the initial crop situation in Brazil may not necessarily be favorable there from a weather standpoint. So there’s a bit had a concern with overall global availability on some of the chief crops — that adds into a little bit of concern as we move throughout the year.
I think some of the the main components that we typically don’t have to think about — your micro ingredients, nutrients and that sort of thing — very tight supplies there. Not necessarily just high prices, but just the availability is not there. And that as the procurement base, it realizes that there’s tighter supplies, typically stocks up a little bit more if they can.
So we’re kind of kicking the can down the road in terms of availability of some of these things — and I think that probably gets taken care of in 2022 or 2023. But for the most part, an expectation of tight availability on some of those things that prior to 2020, we weren’t really thinking about in terms of the feed side of it.
Roembke: Thank you, and what short-term challenges or opportunities should broiler and/or feed producers keep an eye on?
Earnest: Well, I think transportation is going to be one of those challenges that really hits all sides of the business — that’s going to be a struggle that’ll be difficult to overcome. Beyond that, we’re seeing out of the current administration, more interest in the livestock side of the business that has the potential to change how the how the business or how the industry looks at production. There’s potential that that changes down the road.
But I think kind of keeping involved in where a company sits in terms of things like sustainability, and looking at that as a hot topic, and where there’s opportunity there — either to tout what, you know, what folks are already doing or look for opportunities down the road of where they can better fit the needs of what’s coming across from the current administration.
Those are topics that they likely haven’t had to really think about in in recent years, but becoming more and more a part of the narrative in 2022 and beyond. When you think about things like the 30 by 2030 initiative and reducing our carbon impact. So, you know, there’s already some great practices in place in the industry and looking to expand those is something that is getting more presence.
Roembke: Excellent. Thank you so much. If you’d like to hear additional insights from Brian and will be at IPPE 2022, consider joining us at the Feed Strategy Conference, held on January 25. At the half-day conference, Brian will be presenting his “2022 economic outlook for global poultry production” talk. If you’d like more information about the event, please visit www.feedstrategy.com/feed-strategy-events.
Thank you so much, Brian, and thanks to you for tuning in.