“Those hoping that 2022 will bring calm after multiple market disruptions will likely be disappointed.”
Producers, finds Rabobank's Global Animal Protein Outlook, are mindful of challenges posed by sustainability demands but also view them as a longer-term growth driver.
The report reviews meat and seafoods markets around the world.
Animal protein supply chains face four areas of cost inflation pressures in animal feed, labor, energy and freight, noted the team.
“Global feed prices are expected to remain at elevated levels in 2022, with tight stocks and firm demand maintaining price support. Weather risks could create further stresses on global stocks, with a La Niña event a particular concern over the coming months.”
The bank believes global shipping disruptions will continue, and, as a result, freight costs will remain high. While difficult, higher freight costs will need to be accommodated in the supply chain and, to a certain extent, by the end consumer, said the team.
Labor availability in the animal protein industry was already an issue before COVID-19 related disruption, but the severity of the shortfall is now limiting production and slowing distribution in some markets, reads the report. “These inefficiencies, along with growing competition for a limited labor supply, are structurally raising costs in the labor-intensive animal protein sector.”
Rabobank sees agile business leadership as the most likely route to sustainable growth, advising firms to embrace consumer preferences for sustainability and to be prepared for a surge in demand as economies continue to reopen and adjust following COVID-19 triggered lockdowns.
Recovery of pork markets in China and North America key
In summary, the team outlined expected trends globally
- The ongoing recovery of China’s pig herd is expected to be the largest single driver of growth in global markets in 2022.
- Southeast Asia will see the second-largest growth, as both poultry and pork return to growth after challenges in 2021.
- North American poultry and pork is set to be the third-largest contributor to growth in 2022.
- Steady expansion of all species in Brazil contributes to the fourth-largest growth increment in 2022.
- Limited change is expected in Australia, New Zealand, and Europe.
The Chinese pork market’s ongoing recovery from African Swine Fever (ASF) will be a major driver of its domestic production levels, reducing its dependence on imports from Europe, Brazil and North America, said the analysts.
Despite a slight decline in production levels in the EU and UK, a broader increase in supply in the global market will push overall pork prices down globally, according to the report.
Global beef production will decline marginally, reflecting changes in herd cycles in major producing regions. The strength of demand for beef in most markets, given this tightening of supply, will keep cattle and beef prices at firm levels into 2022.
Elsewhere, Rabobank expects the poultry market to recover from a mixed year which has seen high demand stimulate growth despite outbreaks of avian influenza (AI), high feed costs and labor issues. The bank forecasts global production growth of about 2%, ranging from 1% to 5% in the major markets in 2022, as demand continues to be strong.
Demand for salmon was at record high levels in 2021 after consumers switched to at-home consumption during the pandemic, but it will be strengthened further by a recovery of the foodservice market in 2022. Despite high feed and production costs, global demand will remain strong enough for farmers to keep prices high, even though production will expand.
“With economies reopening it would be natural to conclude that trade will recover in tandem, but our research shows a mixed picture. The main feature of global trade will be the ongoing decline in China’s pork imports in 2022, which will exacerbate the over-supply situation in Europe. Beef trade should remain active and poultry trade should increase, pending resolution of temporary, biosecurity-related barriers. The boom in trade should come from shrimp and salmon, as exporters respond to demand recovery in many markets,” said Justin Sherrard, global strategist for animal protein, Rabobank.
Rabobank expects the focus on sustainability to increase further in 2022, as food retailers and foodservice chains actively position on this theme with consumers and regulators.
“Consumers are often cited as a driver behind sustainability. However, outside of niche markets, most consumers have not yet demonstrated a willingness to pay higher prices for food with ‘more sustainable’ attributes.
“Ultimately, premiums from consumers may be moot. Improved production efficiency, brand reputation, capital access, and regulatory pressure will likely provide more powerful motivation for animal protein supply chains to scale up sustainability enhancements.
“Investors are increasingly signaling the importance of sustainability.”
Multiple animal protein companies have set sustainability targets ranging from greenhouse gas (GHG) emissions reductions to animal welfare pledges, finds Rabobank’s report.
“Nearly all have Scope 3 components, meaning they address the entire supply chain, so they reach well beyond a company’s direct control. To meet such targets, alignment with, and incentives for, the whole chain will be essential.”