W45: Chicken Update
In W45 in the chicken landscape, the Food and Agriculture Organization (FAO) Meat Price Index reached 112.88 points in Oct-23, a drop of 0.6% compared to Sep-23 and nearly 3.5% below the Oct-22 level. Notably, chicken meat played a role in mitigating a more substantial decline by registering a 1.33% month-on-month (MoM) increase. Despite this improvement, chicken prices are still down by approximately 11% compared to Oct-22. The FAO attributes this market adjustment to a combination of challenges faced by several poultry-exporting countries dealing with avian influenza and a relatively robust demand driven by the increased accessibility and profitability of chicken meat.
Tridge’s data analysis indicates that the average wholesale prices of frozen whole chicken in Pernambuco, Brazil, reached USD 1.84 per kilogram (kg) on November 6, a 2.2% week-on-week (WoW) increase and a 4.55% MoM rise. Despite this recent uptick, the average price reflects a 7.55% decrease compared to the same period in 2022. Notably, frozen whole chicken prices have consistently trailed the rates of 2022 since late Mar-23 due to the ample supply of chicken meat in the Brazilian market. The recent improvement in both weekly and monthly prices is attributed to robust liquidity in the Brazilian chicken market throughout Oct-23 and into Nov-23. This heightened demand was stimulated by festivities related to the Day of Our Lady of Aparecida on October 12 and the All Souls' Day holiday on November 2. Domestic chicken prices are anticipated to strengthen in the coming months, driven by increased exports linked to heightened global demand and emerging opportunities in new markets. Despite this, the overall outlook for chicken meat prices remains bearish compared to the levels recorded in 2022, owing to optimistic production forecasts for 2023 and 2024.
The poultry industry in Brazil has effectively achieved equilibrium between supply and demand in H2-2023. Unlike the surplus witnessed between Jun-23 and Jul-23, this situation has not repeated, fostering a substantial recovery in prices across the production chain, particularly in wholesale frozen chicken. This consistent upward trend has enabled the sector to recover operating margins and restore profitability. Lower animal nutrition costs, notably below those in the same period in 2022, contribute to a more favorable scenario for the sector in much of this second semester. Export dynamics continue to be a pivotal factor, with Brazil poised to establish new records in shipments. Projections suggest exports could breach the 5 million metric tons (mmt) mark in 2023, accounting for over a third of the global trade for the product.
Continued vigilance against avian influenza is crucial, with Brazil actively conducting extensive testing and surveillance to avert any outbreak in its commercial poultry population. Currently, Brazil reports 137 cases of the disease, with 134 in wild animals and only 3 in backyard birds. Precautions are expected to intensify from Nov-23, coinciding with the migration of birds from the Northern to the Southern hemisphere, a more vulnerable period. The recent price surges have eroded chicken meat's competitiveness in the domestic market. Nevertheless, it remains the preferred protein for the lower-income segment. Despite the uptick in wholesale and retail chicken prices, this protein continues to be considerably more affordable compared to its counterparts.
Lastly, the Brazilian Animal Protein Association (ABPA) reports that Brazil’s chicken meat exports reached 401.7 thousand metric tons (mt) in Oct-23, a 2% increase compared to the same period in 2022. Despite this volume growth, export revenues from fresh and processed products totaled USD 723.5 million in Oct-23, 12% lower than in the same period in 2022. Brazil’s chicken meat exports amounted to 4.31 mmt, valued at USD 8.3 billion from Jan-23 to Oct-23, a 6.1% year-on-year (YoY) increase in volume and a 1.3% YoY rise in value. Key export destinations in 2023 include China, Saudi Arabia, South Africa, South Korea, and Mexico. The addition of new markets and increased establishments qualified for poultry meat contribute to positive expectations for future shipments. The recent reinstatement of pre-listing for the United Kingdom (UK), along with similar arrangements for Chile and Cuba, is expected to positively influence future shipments.