"Those expecting 2022 to bring calm after multiple market disruptions will likely be disappointed. While markets are expected to stabilize somewhat in 2022, many drivers of recent change will remain. The stage is set for animal protein company leaders to find and pursue opportunities in this relatively challenging market context," states the recent 'Global Animal Protein Outlook 2022' report by Rabobank Research's analyst team.
Higher input costs for animal protein supply chains, including animal feed, labor, energy and freight will be the main drivers of change, according to the Dutch agribusiness specialist bank. These will be accompanied by ongoing changes, driven by the transition to more sustainable animal proteins, biosecurity challenges and Covid-19.
Against this backdrop, animal protein prices should remain firm in 2022 (with some exceptions), supported by current supply constraints and overall strength in demand. "We expect animal protein company leaders to focus on the opportunities created by ongoing market disruptions, rather than just viewing multiple changes as business risks," says Justin Sherrard, one of the report's principals.
The overall trend for this year is continued but slow growth in production, driven by pork, poultry, and aquaculture. The report forecasts a continuation of the growth trend in these groups over the past few years, although pork will expand more slowly. Beef and fisheries are expected to contract slightly. The ongoing recovery of China's pork herd will be the largest single driver of growth in global markets in 2022.
The report analyzes the key points of the animal protein outlook in 2022 from different regional perspectives:
In North America, continued strength in demand will support production and prices. Production constraints could still mar what is shaping up to be a positive year.
In our European environment, pork production is stabilizing, and domestic consumption should increase to balance markets. Poultry should improve in all carcass openings, despite higher costs.
In turn, Rabobank expects pork production recovery to continue in China, but the path is uncertain as long as consumption is weak, and prices remain low. Beef demand will remain firm, while poultry will be pressured by the recovery in pork.
In Brazil, exports are expected to drive production growth, although domestic demand will also help. Feed costs will gradually improve, as will exchange rates.
For Southeast Asia, poultry production is expected to recover after two years of Covid-19 impacts, and pork will also recover from the impacts of African swine fever and Covid-19, but more slowly. In Australia, beef and sheep meat supplies will improve slowly. While growing export demand from New Zealand and supply shortages will be positive for its profitability.
Rabobank expects the focus on sustainability to increase further in 2022, as retail and the foodservice channel will be very active in positioning themselves on this issue with consumers and regulators. As a result, opportunities will arise for meat companies that promote more sustainable production systems.