☛ Want the latest procurement and supply chain news delivered straight to your inbox? Sign up for the Supply Management Daily
28 November 2012 | Adam Leach
Profit margins in the poultry industry are under pressure from high feed costs and too many chickens, according to a report.
The latest quarterly poultry report, published this week by financial services firm Rabobank, predicted profit margins for the poultry industry across the world would be squeezed. Identifying high feed costs as a particularly strong contributing factor, the report also cited oversupply, inflexible supply chains and the correlation between feed prices and retail prices as playing a role.
Rabobank analyst Nan-Dirk Mulder said: “The first quarter of 2013 is likely to be challenging, as higher feed input costs move through the flocks. Beyond that, returns will depend on industry discipline in keeping production sufficiently moderated to get prices higher and offset increasing costs. Weak global performance is urging industry players to rationalise their supply base, and non-strategic vehicles are being divested.”
The report pointed to chicken production in Thailand increasing above the rate of demand as a key contributor to the oversupply, while the US and Europe had only just started to reduce supply, further deepening the demand/supply gap. The report said despite the rise in feed costs, the pressure is likely to be absorbed in the main by farmers and producers. It explained that, particularly in developed regions, the poultry industry lacks the required power to pass on the increase to its customers.