W3 Chicken Update: Feed Shortages Impact Indonesia's Poultry Industry, While German Regulations Reshape Chick Hatchery Landscape

Indonesia Faces Feed Crunch as Tightening Supply and Geopolitical Tensions Disrupt Poultry Production

Indonesia's livestock industry is grappling with a tightening feed supply situation driven by declining domestic corn production and geopolitical delays in essential wheat imports. This combination of factors will likely impact poultry production in the near term, potentially affecting supply and pricing during the upcoming Ramadan and Eid al-Fitr festivities.

Corn production in Indonesia has been on a downward trend, dropping significantly in Nov-23 and Dec-23. Projections for Jan-24 and Feb-24 suggest a further decline, reaching a 54% decrease year-over-year (YoY) by Feb-24. This decline has pushed domestic feed corn prices up 13% week-over-week (WoW), with offers reaching USD 672.30 per metric ton (mt) delivered to Jakarta. Feed mills are turning to imported wheat as a substitute, faced with limited corn supply. However, shipments from the Black Sea, a major source of feed wheat, are facing delays due to heightened geopolitical tensions in the Red Sea. These delays are further exacerbating the raw material shortage for feed mills, forcing some to operate at reduced capacity down to 30% and prioritize specific customers.

Lower feed mill output and delayed wheat shipments are expected to constrain poultry supply in the lead-up to Ramadan and Eid al-Fitr (Mar-24 to-Apr-24), potentially leading to price increases. Some poultry integrators are reportedly reducing chicken life cycles due to feed shortages, leading to a decrease in larger chicken availability and higher chicken prices, up by 32% YoY. The grain shortage has significantly impacted feed mill inventories, with some holding only a week's worth of corn and wheat, forcing some mills to stop operations and prioritize specific customers for their compound feed, impacting demand for soybean meal as well.

The tightening feed supply situation in Indonesia will likely persist in the near term, posing challenges for the poultry industry. Continued monitoring of domestic corn production, wheat import developments, and downstream impacts on the poultry industry is crucial for assessing the situation's evolution and potential long-term effects.

German Chick Hatchery Landscape Reshapes Under Day-Old Rooster Culling Ban

Due to a culling ban, the German chick hatchery landscape is undergoing a significant transformation. Effective since January 1, 2022, the German legislation prohibiting the killing of day-old roosters has ushered in significant transformations in the poultry industry, notably affecting hatcheries. The consequences of this regulation are evident in the dwindling numbers of hatcheries in Germany, dropping from eighteen in Nov-21 to a mere six in Nov-23. While preliminary data from the German statistics agency Destatis suggests a stabilization of hatchery numbers, challenges have emerged, particularly in in-ovo sexing, impacting hatching results.

Throughout the first eleven months of 2023, the poultry industry witnessed a noteworthy 12% YoY increase in female chicks, totaling 16.56 million. Despite challenges in sexing procedures, this surge suggests adaptability within the industry. However, the dynamics were different for rooster chicks, with a 16% YoY decrease, registering approximately 8.35 million in the same period. Concurrently, chick imports observed an 11% YoY rise, reaching 3.48 million. The Netherlands played a pivotal role as a key supplier, contributing to 43% of the total imports, followed by Austria and Hungary with 24% and 19%, respectively.

Export figures also reflect the shifting landscape, with a notable 190% YoY increase, totaling 3.57 million chicks crossing borders. The Netherlands emerged as the primary destination, accounting for 69% of total exports, followed by Poland at 15%. It's noteworthy to consider that a portion of these exports might include brother cocks.

A significant metric reflecting industry practices is the proportion of rooster chicks removed from the total potential brood, which witnessed a decline to 29% in Nov-23. This contrasts sharply with the average of 65% recorded in 2022. This change in removal proportions signals adjustments in industry practices and may influence the overall structure of the poultry sector.