Rabobank forecasts mixed outlook for European meat industry
A recent industry note published by financial services provider Rabobank warned that the European meat industry “will again experience major challenges in the year ahead”, adding that supply discipline will be a key factor to success.
In its note Rabobank said current market conditions are fragile; warning that feed prices, the economy, export markets, and exchange rates “could easily shift in 2012”, posing considerable risk to industry margins at both primary and processing levels.
It reported that generally the industry should expect to benefit from slightly improved market conditions for both poultry and pork in 2012, with an ongoing favorable market situation for the beef sector.
“Although differences exist between the sectors and between the players positions in the value chain, a stable to slightly declining trend in global grain and oilseed prices compared to Q3 2011 levels will be positive for all sectors,” said Rabobank.
Mixed outlook
The forecast suggested that at the primary level, an improved position will reduce some cost-price pressure – though it warned that average prices need to remain high to cover feed costs, which are historically high.
Whether or not the industry has enough discipline to keep supply in balance will be key, according to Rabobank.
The analysts note said that good discipline “would better prepare the industry to deal with unexpected market developments, such as cost-price increases or market changes caused the by economic situation, which could easily occur in the current fragile market situation.”
At the processing level, it suggests that increasing overcapacity in pork and beef “will sharpen the fight for raw materials.” Market position, sufficient sourcing, efficiency and client dependency will be key to success, it said.
