Poultry Demand Expanding in China

Poultry Demand Expanding in China

In its latest Attache report, USDA/FAS predicted China will expand its chicken meat production by 14% in 2020.

The increase follows declines in domestic pork production, tied to the African swine fever issues the country is facing.

Relatively higher pork prices are driving the consumer away from pork to poultry products, namely chicken and duck, with chicken meat consumption forecast to increase by 15% in 2020.

What It Means for the U.S. Farmer:U.S. poultry has not had market access to China since 2014 due to avian influenza restrictions. Thus, the U.S. poultry industry is not expected to benefit directly from the boost in China’s demand. Similar with soybeans and cotton, Brazil is expected to be the leading poultry exporter to China. This could result in minor trade flow changes and a slight boost to U.S. exports to other countries, but China is expected to keep denying U.S. poultry imports.

Brazil’s CONAB Could Revise Soybean Estimates

Due to discrepancies between private sector agencies and the Brazilian food statistics agency, CONAB, revisions to the government’s balance sheets could be forthcoming.

CONAB expressed the tightness of its soybean balance sheet, suggesting that exporting 72 MMT would be difficult with its export forecast at 70 MMT and that potentially supplies could be larger.

USDA is forecasting Brazil’s exports at 77 MMT.

CONAB is forecasting Brazil’s harvest at 115 million tonnes, a private firm is at 117.6 MMT, while USDA is at 117 MMT.

What It Means for the U.S. Farmer:Given that USDA already is forecasting larger export and production totals compared with CONAB, if CONAB were to revise its numbers higher, the impact to futures could be minimal. However, it underscores uncertainty in the market and that Brazil’s soybean crop is large and difficult to measure. Regardless, most in the market, including FBN, look for Brazil to increase planted area in the coming planting season. If CONAB revises acreage higher, it could be a higher starting point for other agencies regarding planting intentions.

The risk of trading futures, hedging, and speculating can be substantial. FBN BR LLC (NFA ID: 0508695)

—Kevin McNew