The global animal protein team from Rabobank recently put our heads together to identify what we think this year would look like for animal protein production and what might be some of the key drivers in the market. We estimate that the total animal protein production will grow, but not by the volumes we have seen in the past two years. Meanwhile, Australian cattle producers should experience continued firm prices, but the seasons will be the key drivers of productive capacity.
Rabobank expects global animal protein production (beef, pork, poultry and seafood) to expand by just under 1 million tonnes in 2019 – well below the five-year average growth rate of 5mt. Pork and wild-catch seafood are expected to see the largest declines in growth, although the slowing down of beef growth is also material. Poultry, on the other hand, is expected to see stronger growth than in 2018.
Brazil will increase its growth across pork, poultry and beef. The growth outlook for North America is also relatively strong driven by record levels of pork and poultry production for the US and continued growth in beef, while Canadian and Mexican beef production might see a slight decline. China will see a substantial decline in production, driven by the impacts of African swine fever.
African swine fever and global trade will be two major influencers on global protein markets next year. The sheer size of the Chinese pig population – over 700 million pigs – and the importance it plays in providing a protein source to the Chinese population mean any disruption in this market will have ripple effects across the globe.
While China is controlling the virus through slaughter, internal trade limitations and quarantines, it is predominantly a case of larger supply of pork on the market seeing pig prices fall. Although in some areas of southern China where the pig population is lower and human population higher we have seen prices rise. We expect that midway through next year there will be a reduced volume of pork in China – the quantum as yet is unknown. As a result there will be a greater reliance by China on imports of pork, and other proteins to meet this protein gap. This will create a rising tide to lift all boats and will be felt across all protein classes.
Higher production implies that global trade needs to increase, but the shift to a protectionist philosophy and US dollar strength will restrict trade. The US-China trade war has reshaped pork and seafood trade in 2018, and created volatility in feed prices. These two countries are major players in global animal protein trade, so a bilateral disagreement is going to have far wider implications.
For Australia, the overall more restrained global animal production outlook will provide some upside support on the price front. In addition, local cattle numbers will remain constrained after another year of higher female slaughter, further supporting prices. The challenge however will be the availability and cost of any cattle to rebuild herds if the season changes.
- Angus Gidley-Baird is a Rabobank senior analyst.