W48 Chicken Update: Brazil's Production Adjustments, US Egg Farms Combat Bird Flu, and China's H5N1 Outbreak

Challenges and Opportunities in the 2024 Global Animal Protein Market

The global animal protein market for the upcoming year faces a mix of challenges, including climate issues, geopolitical tensions, and health concerns. Trade barriers remain a significant obstacle for exports due to low predictability. In 2024, the chicken meat supply is expected to grow globally, with key producers like the United States (US), Brazil, China and the European Union (EU) maintaining an upward trend. Production costs are likely to decrease, favoring industry margins. Health challenges related to Avian Influenza (HPAI) persist, with ongoing efforts to develop a vaccine. Competitive dynamics are evident in international markets, posing challenges for the US and Mexico. Despite this, US chicken shipments are projected to grow by 2% in 2024. In the EU, careful supply and demand management is needed to prevent internal price pressure. China anticipates increased prices and production margins due to limited supply and rising domestic demand. Brazil's competitiveness is evident in chicken meat exports, with expectations of a 3.5% volume increase in 2024. Biosafety protocols related to HPAI will remain critical. Favorable production costs are expected to continue. Climate events, geopolitical conflicts, and elections in key countries are potential areas of concern for the coming year.

Brazil's Production Adjustment Boosts Domestic Prices and Global Export Standing

In Nov-23,Brazilian fresh chicken meat shipments reached 356,343 metric tons (mt), showing a 5% decrease month-on-month (MoM) but a 2.79% year-on-year (YoY) gain over Nov-22. Despite falling short of initial expectations, historical data indicates November typically observes lower volumes. Notably, the export volume set a record for the ninth time in 2023 surpassing 350,000 mt for the first time in the month of November. The average price remained stable, with a 0.34% gain over Oct-23 but still 14.33% lower than Nov-22. Despite the stable price, the drop in volume led to a 4.54% MoM decrease in revenue, with nearly a 12% YoY decrease. Preliminary data for the first eleven months of the year suggests an 8% volume increase, but lower average prices may limit foreign exchange revenue growth, potentially reaching zero by the end of 2023 if December follows the recent trend.

Despite the lower prices, a recent production adjustment in the Brazilian chicken farming sector has led to an increase in domestic chicken meat prices, with this trend expected to continue in the short term due to favorable demand indicators. Sustaining the production alignment is deemed crucial, particularly as consumer spending patterns shift in the first quarter of the year. The sector has benefited from recent price increases, recovering operating margins after a challenging period in May and June. Despite domestic dynamics, Brazil continues to play a significant role in global chicken meat exports, maintaining its position as a leading global supplier.

Egg Farms in the US Culls 1.3 Million Chickens in 2023 to Mitigate Virus Spread

Bird flu has led to the culling of over 1.3 million chickens on an Ohio egg farm, aiming to contain the virus's spread. Although less severe than the 2022 outbreak, 8.1 million birds have been culled in 2023, with significant losses reported in Iowa and Minnesota. Ohio, a key egg-producing state, has seen 5.1 million bird losses. Despite strict biosecurity measures, the virus continues to pose challenges for poultry farmers, and cases have been reported in various states. While bird flu has minimal human health risks, its impact on the poultry industry persists.

China Reports H5N1 Outbreak in Poultry Farm, Prompting Culling and Renewed Concerns

China has reported a new outbreak of highly pathogenic H5N1 bird flu on a farm in Qinghai province, marking the first case since 2014. While H5N1 hasn't been reported in Chinese poultry farms for years, the virus was detected in neighboring countries in 2023. The recent case resulted in the culling of 1,050 broiler chickens, highlighting the continued threat of avian influenza. Notably, cases of H7N9 reported this year occurred on layer farms or egg-producing farms with the most recent case killing more than 9,000 chickens in northeastern Liaoning province. Despite a national vaccination program, the virus has mutated, leading to concerns about its impact on both birds and humans.