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Rabobank: Global poultry’s investment reality in the COVID-19 era

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Poultry investors keep adjusting under changing market conditions

UTRECHT, Netherlands — COVID-19 is disrupting the business in ways the global poultry market had never planned for, creating new areas of opportunity and risk. A process of accelerated capital investments, consolidation, and internationalization is expected in the coming years, analysts at Rabobank note.

The COVID-19 pandemic has had a big impact on the global poultry industry, with huge disruptions in global and local markets since early 2020. This has highly impacted the margins of the global industry, and, on average, there has been a downward pressure on margins, though the differences between companies are bigger than previously seen.

“We can expect further changes in markets and supply conditions in the short and long term. These big changes will require a constant fine-tuning by investors to optimize their position under changing short- and long-term market conditions. Companies that do this right will be able to outpace the industry and strengthen their individual market position,” said Nan-Dirk Mulder, senior analyst – animal protein at Rabobank.

The impact on the global poultry industry and the required investor focus will change over time. Rabobank expects this to happen in three stages, with each stage requiring a different approach by investors from both a strategic and an operational perspective.

Stage 1 (2020) – COVID-19 Disruption – is characterized by significant disruption in markets, trade, and supply chains, with bigger differences in performance between companies than ever seen before.

Stage 2 (2021) – Dual-Market Road to Recovery – presents more big impacts, to be experienced by global and regional industries this year.

“Ups and downs of the pandemic in the first half of the year will lead to ongoing impacts on channels, with peaking retail and online demand and low foodservice demand, especially during lockdowns,” Mulder said.

Conditions will start to gradually recover when Covid-19 becomes a bit more controlled in the second half of 2021 and into 2022, as vaccinations become more widely used. This all happens in a context of high and volatile feed costs.

From a demand perspective, there will be a dual-market trend defined by consumers with high spending power driving up demand for premium products at retail on one side, and by price-focused consumers who’ve been economically affected by the pandemic on the other side. According to Mulder, the key themes for investors during stage 2 will be market positioning, cost control, procurement, and supply management. Consolidation is also expected to gradually accelerate.

In stage 3 (2022) – The Aftermath – Rabobank anticipates the return of bullish investment opportunities for the global industry in a post-Covid-19 environment, wherein key investment themes will be different than before Covid-19.

  • Poultry demand will be characterized by strong, ongoing demand despite ASF recovery and alternative protein growth.
  • Distribution channels will change, with continuing, robust at-home and online sales, which will also change product mix opportunities.
  • Value chains will become more digital, smarter, and more sustainable, and food and input security will push toward more local supply and pressured trade.

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