Thursday December 19 Ag News

Rural Mainstreet Economy Healthy for December:  Farmland Price Index Lowest in 4 Years

Growth for the Rural Mainstreet economy climbed, according to the December survey of bank CEOs in a 10-state area.   

Overall:  The Rural Mainstreet Index (RMI), which ranges between 0 and 100, with 50.0 representing growth neutral, rose to 56.1 from November’s moderate 54.3.

“The overall index for the Rural Mainstreet Economy continues to indicate that the areas of the nation highly dependent on agriculture and energy continue to expand at a healthy pace. This month we asked bankers to name the biggest threat to the rural economy for 2014. Approximately 80.6 percent named lower agriculture prices to be the greatest economic threat in the next year while 10.6 percent said the Affordable Care Act was the biggest economic challenge for 2014,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University.

Iowa: The December RMI for Iowa advanced to 55.3 from November’s 53.9. The farmland-price index for December sank to 52.3 from November’s 53.5. Iowa’s new-hiring index for December was unchanged from November’s 53.9.

Nebraska: After moving below growth neutral for January, Nebraska’s Rural Mainstreet Index has been above growth neutral for 11 straight months. The December RMI slipped to 54.4 from 54.8 in November.  The farmland-price index for December dipped to 48.0 from November’s 48.3. Nebraska’s new-hiring index stood at 50.1, which was down from November’s 50.4.

Farming: The farmland-price index plunged to 47.0, its lowest level since December 2009, and was down from November’s 54.3. “This is the first time in four years that the farmland-price index has moved below growth neutral. As agriculture commodity prices have moved lower, so have farmland prices,” said Goss.

Farm equipment sales remained below growth neutral for the sixth straight month. The December index sank to a weak 44.3, the lowest reading since August 2012 and down from 47.3 in November. “Over the past year, grain prices have declined by roughly 35 percent. This has significantly reduced farmers’ willingness to purchase agriculture equipment,” said Goss.

Bankers expect 2014 cash rents for non-irrigated cropland to average approximately $252 per acre. “However, 3.2 percent of bankers forecast 2014 cash rents above $500 per acre.   Additional declines in agriculture commodity prices will present a real challenge for a significant share of farmers that are cash renting,” said Goss.

Banking: The loan-volume index climbed to 66.7 from 56.9 in November. The checking-deposit index fell to 66.0 from 72.0 in November, while the index for certificates of deposit and other savings instruments slumped to 37.2 from November’s frail 44.8. 

This month bankers were also asked to name the biggest threat facing community banks in 2014. More than half, or 55.9 percent, expect soaring regulatory costs to be the greatest threat to the community banking industry.  Another 23.5 percent indicated that low loan demand was the chief challenge to community banks for 2014 while 14.7 percent reported that rising competition from Farm Credit represented the prime threat to community banks.  No other issue rose above 10 percent.     

Hiring: December’s hiring index expanded to 56.9 from 54.4 in November. “Rural companies are adding jobs but at a pace below that of their metropolitan counterparts,” said Goss.

Confidence: The confidence index, which reflects expectations for the economy six months out, slipped to 47.0 from November’s weak 48.3. “Despite the recent federal budget agreement, the lack of a farm bill and lower agriculture commodity prices pushed economic confidence even lower,” said Goss

Home and retail sales: The December home-sales index declined to 53.1 from November’s stronger 56.2. The December retail-sales index improved to 54.7 from 47.4 in November. “Higher mortgage rates cooled the growth for the Rural Mainstreet housing market for December,” said Goss. 

Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included. The survey is supported by a grant from Security State Bank in Ansley, Neb.

This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy. Goss and Bill McQuillan, president of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.



Farmers and Ranchers Cow/Calf College at USMARC Jan. 28

            The annual Farmers and Ranchers Cow/Calf College "Partners in Progress – Beef Seminar" will be held at the U.S. Meat Animal Research Center and Great Plains Veterinary Education Center near Clay Center Jan. 28.

            The college will begin with registration, coffee and donuts from 9-9:40 a.m. The program will start at 9:45 a.m. and end approximately at 4 p.m.

            Sponsored by the University of Nebraska-Lincoln Extension's Farmers and Ranchers College, this year's theme will center on celebrations of two note-worthy events -- the U.S. MARC is celebrating its 50th anniversary and UNL Extension is celebrating the 100th anniversary of the Smith Lever Act and Extension at UNL. The seminar will feature internationally recognized speakers and is designed to provide information that should help cattlemen in planning for the upcoming year.

            There is no cost to attend and the public is welcome. Pre-registration is required for meal counts.

            The "Cow/Calf College" will kick off with John Pollak, director, USMARC, and Dale Groteluschen, who will give a welcome and a quick overview of their respective facilities.

            This will be followed by a special presentation by Pollak on "USDA-MARC – 50 Years of History". He will be followed by Ronnie Green, NU Vice President and IANR Harlan Vice Chancellor, who will give his thoughts on "Innovating the Beef Industry: Living in 2013 but Thinking in 2050".

            Beef producers will be able to look at beef production history and peer into the future in one setting. These presentations will be followed by a special recognition for a long time Beef Quality Assurance leader Dee Griffin by the Nebraska BQA director and Farmers & Ranchers College.

            Lunch will be provided and will be handled with a rotation system during two noon sessions featuring Doug Straight, Nebraska Beef Council Director of Industry Relations, and Rob Ehrich, Nebraska Beef Quality Assurance Director, who will team up to give a presentation on: "A New Direction – Nebraska Beef Check-off & BQA Programs".

            Also in the rotation will be a special presentation by Chuck Hibberd, UNL Dean of Extension, who will kick of the celebration of the Smith Lever Act and UNL Extension with "UNL Extension:100 Years Young and Just Getting Started!"

            Attendees also will get to sample some Nebraska Extension Centennial ice cream and MARC 50th anniversary cake to help celebrate the two special occasions.

            The afternoon session will be kicked off by Terry Klopfenstein, UNL animal science professor emeritus in ruminant nutrition, who will treat producers to his discussion of "Cows, Corn and Ethanol –The Golden Triangle."

            He will be followed by Jerry Volesky, UNL range and forage systems specialist at WCREC, who will give his take on the "Range and Pasture Drought Recovery".

            Many beef producers are worried about how the last two year's drought has affected grass and forage production. These two presentations should help beef producers look at feed resource alternatives and management suggestions for recovering from the drought.

           All presenters will then join on stage to pull everything together, give their final thoughts and considerations during a coffee-shop style panel discussion. Cattlemen can ask questions and get answers on topic questions that came to them during the day's sessions. Door prizes will be awarded to those that stay for the entire event.

            Any beef producer or other interested individuals should pre-register by noon Jan. 24 by contacting UNL Extension, 621 North Cedar, Red Cloud, NE 68930, calling 402-746-3417 or emailing  Dewey Lienemann at  dlienemann2@unl.edu to insure a seat, lunch and proceedings for the day. Walk-ins are accepted, but may not get a lunch. For more information, visit the Webster County UNL Extension website at http://www.webster.unl.edu.



Branstad Signs Disaster Declaration Allow More Propane Transport

Gov. Terry E. Branstad Wednesday approved an emergency declaration suspending the regulatory provisions pertaining to hours of service for drivers of commercial motor vehicles transporting propane.

The order went into effect at 12:01 a.m. on Dec. 19 and ends at 11:59 p.m. on Jan. 2.

In the declaration, Branstad said he signed it, "because of the late harvest and the recent high demand for petroleum products throughout the upper Midwest portions of the United States, the people of the State of Iowa are faced with extremely low supplies of propane."

"The limited suspension of certain hours of service regulations for drivers of commercial motor vehicles transporting propane in our state will increase the amount of propane transported throughout the State of Iowa, thereby reducing the potentially damaging effects of this shortage," Brandstad's declaration stated.



New Cuts Key to Sustaining U.S. Beef Growth in Taiwan

Taiwan’s love for American beef is evident by the growth in exports to the Asian island nation this year, and U. S. Meat Export Federation (USMEF)-Taiwan’s team, contractor to the Beef Checkoff Program, is exploring new channels to sustain that progress.

Australian beef has held an edge in Taiwan in recent years, and beta agonist concerns in 2012 further challenged U.S. beef sales, but persistent cultivation of Taiwanese importers and merchants by USMEF has helped reverse that trend, winning new converts to the taste and value of grain-fed American beef.

Looking to sustain that momentum, USMEF recently held a seminar for about 75 restaurant and hotel foodservice professionals to introduce them to new cuts of U.S. beef while providing them background on food safety, product handling and business operations. The program was conducted with support from the USDA Market Access Program (MAP) and the Beef Checkoff Program.

The audience included recipients of USMEF’s Platinum U.S. beef certification – 5-star hotels and restaurants that sign a contract stating that they offer either prime or choice U.S. beef, buy products from certified importers, label them as U.S. beef, and source a minimum of 50 percent of their beef from the United States.

The petite tender and the clod heart were the center of attention at the two-day seminar where Chef Chiang, executive chef from the Hotel Royal Chiao His, demonstrated different menu applications for the two cuts to give food service operators options to offer their customers.

“It is very wise and strategic by USMEF to provide some middle-priced products for the Taiwan market,” said a senior executive from Chez Jimmy restaurant, who noted that the restaurant chain has begun selling petite tenders as steaks, and is hoping to see new cuts offered as consumers are increasingly embracing U.S. beef.

Seminar participants enjoyed the taste and juiciness of the petite tender, indicating that they likely would serve it either as a steak or in yakiniku dishes.

The clod heart also was welcomed by the chefs, who said they would use it in hot pot dishes, serve it pan-grilled or as roast beef, or use it for further processing. The general manager of HaurYang Enterprise indicated that based on the seminar, he would recommend the clod heart to his customers.

The seminar also included information on food safety practices and business practices including customer service and staff education.

With only a 5 percent domestic self-sufficiency in beef, Taiwan relies heavily on imports to meet the needs of consumers. Last year, the U.S. was a distant third behind Australia and New Zealand in beef sales to Taiwan, both in terms of volume and value, as Australia held a 47 percent market share to New Zealand’s 18 percent and nearly 15 percent (volume) for the U.S. – 17.5 percent in terms of value, according to the Global Trade Atlas.

This year, U.S. beef has made great strides in regaining lost market share in Taiwan. Through the first nine months of 2013, sales of U.S. beef have grown nearly 214 percent in value to $199 million, taking 41 percent market share versus 34 percent for Australia and 20 percent for New Zealand.

Australia still holds an edge in terms of volume – 38.5 percent versus 32 percent for the U.S. and 21 percent for New Zealand, but American beef sales have grown 159 percent year-over-year while the top competitors have seen their shares fall.

“We will continue to introduce new offerings to buyers in Taiwan so that they will understand that there are options for different cuisines and different menu price points,” said Davis Wu, USMEF-Taiwan director. “We have many friends in Taiwan who love and support U.S. beef. It is a long-term relationship that we will continue to cultivate.”



Red Meat Production Down 4 Percent From Last Year

Commercial red meat production for the United States totaled 4.12 billion pounds in November, down 4 percent from the 4.31 billion pounds produced in November 2012.

Beef production, at 2.06 billion pounds, was 7 percent below the previous year. Cattle slaughter totaled 2.57 million head, down 8 percent from November 2012. The average live weight was up 17 pounds from the previous year, at 1,338 pounds.

Veal production totaled 9.1 million pounds, 10 percent below November a year ago. Calf slaughter totaled 60,600 head, down 14 percent from November 2012. The average live weight was up 12 pounds from last year, at 256 pounds.

Pork production totaled 2.04 billion pounds, down 2 percent from the previous year. Hog slaughter totaled 9.65 million head, down 5 percent from November 2012. The average live weight was up 7 pounds from the previous year, at 283 pounds.

Lamb and mutton production, at 11.8 million pounds, was down 5 percent from November 2012. Sheep slaughter totaled 184,200 head, 1 percent above last year. The average live weight was 128 pounds, down 9 pounds from November a year ago.

January to November 2013 commercial red meat production was 45.0 billion pounds, down 1 percent from 2012. Accumulated beef production was down 1 percent from last year, veal was down 6 percent, pork was down 1 percent from last year, and lamb and mutton production was down 1 percent.

State Data
Nebraska ...........:     644.3 million pounds, +3% from November 2012   
Iowa ..................:     576.0 million pounds,  -2% from November 2012   



Pork Imports Up Strongly in October

According to the USDA's "Livestock, Dairy and Poultry" report, the United States imported more than 77 million pounds of pork in October, an increase of almost 16 percent compared with a year ago.

Most of the increase is attributable to Canada, the primary source of pork imported into the United States. Imports from Canada increased almost 15 percent over October 2012.

Imports were also higher from other important foreign sources of imported pork: Denmark (+14 percent), Poland (+50 percent), and Italy (+25 percent).

Mexico was the only important source of imported pork whose shipments were lower in October: 6 percent less than a year ago. It is likely that higher imports are the result of tight red meat markets in the United States.

Attractive U.S. pork prices are likely serving as a strong magnet, pulling U.S. imports to year-over-year higher levels.



November Milk Production up 0.3 Percent
                       
Milk production in the 23 major States during November totaled 15.0 billion pounds, up 0.3 percent from November 2012. October revised production, at 15.4 billion pounds, was up 1.4 percent from October 2012.  The October revision represented an increase of 27 million pounds or 0.2 percent from last month's preliminary production estimate.  Production per cow in the 23 major States averaged 1,762 pounds for November, 1 pound above November 2012.  The number of milk cows on farms in the 23 major States was 8.50 million head, 22,000 head more than November 2012, but 4,000 head less than October 2013.

Iowa:  Milk production  in Iowa during November 2013  totaled 366  million  pounds,  down  less  than  1  percent  from November  2012,  according  to  the  USDA,  National Agricultural  Statistics  Service  –  Milk  Production  report. The  average  number  of  milk  cows  during  November,  at 206,000  head,  was  1,000  more  than  last  year,  but unchanged  from  last month. Production per  cow  averaged 1,775 pounds, 15 pounds lower than in November 2012.  



US–EU Hold T-TIP Negotiations Session

The United States and European Union Transatlantic and Trade Investment Partnership (T-TIP) are holding their third round of negotiations this week in Washington, D.C. Negotiators on either side are trying to find enough common ground so that early next year they can go beyond conceptual discussions on new rules and start laying down proposals for discussion and negotiation.

Earlier this year, the U.S. Grains Council provided presentations in two different stakeholder panels and has advocated for a more streamlined and efficient EU biotechnology authorization system with data requirements and approval timeframes that are more in line with the United States and other comparable government systems.

The Council has begun a series of separate meetings with select EU countries, such as the Netherlands, that are also supportive of streamlining the EU biotech regulatory structure. With the assistance of the Council's Biotechnology and Trade Policy Advisory Teams, the Council and meeting participants will finalize a strategy to actively participate in future T-TIP negotiation sessions that are expected to extend through all of 2014. The Council will also request further discussions with U.S. Trade Representative and U.S. Department of Agriculture to coordinate efforts with their negotiating strategy and expected outcomes on resolving the biotechnology and other sanitary and phytosanitary trade barriers.



Celebrating Six Years of the RFS – New Report Proves Success

Six years ago today, President George W. Bush signed into law the Energy Independence and Security Act of 2007 (EISA). The bill was passed by the Senate on a vote of 86-6 and the House on a vote of 314-100. The centerpiece of EISA was a greatly expanded Renewable Fuel Standard (RFS). The new RFS required rapid growth in the consumption of renewable fuels, culminating in 36 billion gallons in 2022. In addition, the law required renewable fuels to meet certain environmental performance thresholds and created specific categories for cellulosic and advanced biofuels.

In a signing ceremony at the Department of Energy, President Bush declared that, “Today, we make a major step with the Energy Independence and Security Act. We make a major step toward reducing our dependence on oil, confronting global climate change, expanding production of renewable fuels and giving future generations a nation that is stronger, cleaner and more secure.”

Bob Dinneen, President and CEO of the Renewable Fuels Association (RFA), noted, “Just six years later, tremendous progress has been made toward achieving the original objectives of the expanded RFS. Renewable fuel production and consumption has grown dramatically. Dependence on petroleum—particularly imports of refined products—is down significantly. Greenhouse gas emissions from the transportation sector have fallen. The value of agricultural products is up appreciably. And communities across the country have benefited from the job creation, increased tax revenue, and heightened household income that stems from the construction and operation of a biorefinery.”

Dinneen continued, “Meanwhile, the doomsday outcomes threatened by opponents of the RFS simply have not materialized. Agricultural land use continues to shrink, the Gulf of Mexico ‘dead zone’ continues to contract, deforestation rates continue to fall, and food price inflation has followed historical trends.”

This brief report, “Celebrating Six Years of The Renewable Fuel Standard”, examines how the world has changed since passage of the expanded RFS in 2007.

In summary, Dinneen said, “While substantial progress has been made toward accomplishing the legislative goals of EISA, the RFS has just gotten started. Indeed, we’re not even halfway through the revolutionary 15-year energy plan that became law six years ago today. We must fight hard to protect the advances this country has made under the RFS toward energy independence and economic security. We are fighting for the future while Big Oil and Big Food fight selfishly to protect their profit margins.”

To read the report in full, please go to: http://ethanolrfa.org/page/-/rfa-association-site/Resource%20Center/Celebrating_Six_Years_RFS.pdf.



Obama Announces More Key Administration Posts

Today, President Barack Obama announced his intent to nominate the following individuals to key Administration posts:
·         Paige Eve Alexander – Assistant Administrator for the Middle East, United States Agency for International Development
·         Sharon Y. Bowen – Commissioner, Commodity Futures Trading Commission
·         John C. Cruden – Assistant Attorney General for the Environment and Natural Resources Division, Department of Justice
·         Janet McCabe – Assistant Administrator for Air and Radiation, Environmental Protection Agency
·         Leon Rodriguez – Director of the United States Citizenship and Immigration Services, Department of Homeland Security
·         Ambassador David B. Shear – Assistant Secretary of Defense for Asian and Pacific Security Affairs, Department of Defense

President Obama also announced his intent to appoint the following individuals to key Administration posts:
·         Jane Watson Stetson – Member, Board of Trustees of the Woodrow Wilson International Center for Scholars
·         Mary Jacksteit – Chairman, Federal Service Impasses Panel, Federal Labor Relations Authority
·         Martin H. Malin  – Member, Federal Service Impasses Panel, Federal Labor Relations Authority
·         Don Wasserman – Member, Federal Service Impasses Panel, Federal Labor Relations Authority
·         Eric Dannenmaier – Member, Joint Public Advisory Committee of the Commission for Environmental Cooperation
·         Robert Varney  – Member, Joint Public Advisory Committee of the Commission for Environmental Cooperation
·         James J. Murren – Member, National Infrastructure Advisory Council
·         Hill Harper – Member, President’s Cancer Panel

President Obama said, “I am grateful these accomplished men and women have agreed to join this Administration, and I’m confident they will serve ably in these important roles. I look forward to working with them in the coming months and years.”

Backgroud:  Sharon Y. Bowen, Nominee for Commissioner, Commodity Futures Trading Commission
Sharon Y. Bowen is a partner at the law firm of Latham & Watkins LLP.  She joined Latham & Watkins as an associate in 1988 and became partner in 1991.  Prior to this, from 1982 to 1988, Ms. Bowen was an associate at Davis Polk & Wardwell LLP.  Ms. Bowen also currently serves as a Member and Vice Chair of the Board of Directors of the Securities Investor Protection Corporation, a position she has held since 2010.  She has served on the Boards of Northwestern University School of Law, the New York City Economic Development Corporation, the New York Lawyers for the Public Interest, and Public Education Needs Civic Involvement in Learning.  Ms. Bowen received a B.A. from the University of Virginia, a J.D. from Northwestern University School of Law, and an M.B.A. from the Kellogg School of Management.



Global Beef  Industry Q4 2013:  Outlook for High Global Prices to Continue as Supply Remains Tight

The Rabobank Global Cattle Price Index has risen by 6% since June, driven by lower-than-expected beef supply in the main exporting countries and strong Asian demand. According to a new report from Rabobank, global beef supply will remain tight, especially in 1H 2014, driven by lower feed costs, induced herd rebuilding in the U.S. and the strong export demand from Brazil and Argentina, which will continue to support strong prices.

In 2014, Rabobank forecasts continued high prices while global beef supply is expected to rise only slightly, meanwhile China's demand for imports are expected to increase. The recent announcements to (re-)open import markets will benefit beef trade going forward.

Rabobank analyst Albert Vernooij says, "The Rabobank Global Cattle Price Index improved further in H2 2013, supported by both continuing strong Chinese import growth and lower-than-expected supply in the main export markets making cattle prices mainly positive."

However, the market has been unable to reach its full potential due to consumers' resistance against high prices in the United States and the European Union, still two of the main beef markets. In addition, exchange rate movements have impacted the competitive position of exporters, resulting in Brazilian and Argentine beef becoming increasingly attractive and leading to a surge in exports.

For 1H 2014, Rabobank expects further upside for the global beef market, with cattle prices remaining elevated in most regions. The main question in many regions remains where to source sufficient beef supplies. With herd rebuilding as the first priority globally, supported by improving climate conditions and moderating feed costs, global beef production will increase only slightly and is expected to decline sharply in key markets like the U.S. The main demand wildcard will be consumer resistance to high beef prices and the growing availability of competing animal proteins due to the improved margin outlook as feed prices tumble.

"China's importance and influence on the global beef market is set to continue to increase in 2014," commented Vernooij. "China's imports of both frozen and chilled beef are expected to grow further, driven by the shortage of beef in the domestic market, reflected in record high retail prices. We believe that the value of the Chinese markets will grow in excess of 10% annually over the next three years."

A number of recently announced trade deals will also come to bear in the beef market over the coming months and years, including commitments to reopen closed or impeded markets for beef imports and the Trans-Pacific Partnership, which set goals to improve trade between five beef-exporting countries. The removal of trade barriers will be positive for global beef trade and, combined with lower feed costs, should support renewed investment in the global beef industry.



Global Dairy Industry Q4 2013:  Dairy Pricing to Continue at High Levels in 2014 due to Chinese Demand

Rabobank has issued a new report on the global dairy industry, forecasting continued high prices in 2014 due to Chinese demand.

In its new report, Rabobank says that international dairy commodity prices strengthened from already high levels in the three months to mid-December and are expected to remain high at least for the first half of 2014.  The increase of export supply since September, as producers have responded to improved margins, has been largely soaked up by continuing vigorous buying from China.

"Global prices have remained high despite the taps being turned on in key export regions," commented Rabobank analyst Tim Hunt. "China continues to buy exceptionally large volumes of product from the international market to supplement falling local milk supply and this is likely to mop up most, if not all, of the increase in exports arising from key surplus regions in Q4."

Despite a small softening in prices in October and November, global prices have remained high due to an uptick in December.  By mid-December, Whole Milk Powder (WMP) held above 5,000 USD/tonne in fob Oceania trade, while prices of other key commodities rose between 3% and 5%, as Southern Hemisphere processors switched milk type towards the higher yielding WMP.

China's buying has left the rest of the buy-side of the international market with less supply to go round, keeping the market tight. Rabobank believes that many of the buyers in regions including South East Asia, the Middle East and North Africa, have used up all meaningful back up stocks after a period of prolonged belt-tightening. They are now struggling to secure enough supply to sustain sales of key lines. With export supply still in the early stages of recovery, prices have had to edge up even further in Q4 to ration supply.

The global dairy market will enter 2014 with farmgate milk prices at record or near record highs in many export and import regions. Meanwhile the prices of commodity feeds such as soybeans and corn have fallen 10% to 40% below prior year levels in US dollar terms, opening up large margins for milk producers in intensive feeding regions.

Rabobank expects a further increase in China's dairy purchases from the world market in 2014. A strong Northern Hemisphere production season, following on from an exceptional season in the Southern Hemisphere should generate more than enough exportable supply to exceed China's additional demand.

"2014 will be an intriguing period for the global dairy market. We expect prices to hold around current highs before easing from mid to late 2014 with continuing supply growth in response to significantly improved margins. Any subsequent reduction in pricing will be limited by structural constraints on suppliers, the need to replenish depleted inventories and ongoing demand growth in line with a slow economic recovery," commented Hunt.



Global Poultry Q4 2013:  Outlook Bullish Due To Lower Feed Costs And Tight Global Supplies Of Pork And Beef

Rabobank says the outlook for the global poultry sector in 2014 is generally bullish, driven by the tailwind of sharply lower feed costs and tight global supplies of pork and beef (which are poultry's main substitutes).

In a new report, Rabobank says that in Q3, producers in the Americas enjoyed another quarter of favorable margins as tight supplies of competing proteins kept prices high and lower corn and soy meal prices drove more favorable feed costs, while EU producers follow here with some delay. Bucking a five year trend, Western Hemisphere producers outperformed their counterparts in the Eastern Hemisphere on profit margin for Q3 and for most of 2013.

Rabobank analyst Nan-Dirk Mulder says, "Global poultry fundamentals for 2014 look positive, with cost relief coming from lower feed costs, high prices of competing proteins and recently improved export volumes, but supply growth discipline will be the key element between profitable and not-profitable industries under these bullish market fundamentals."

On a regional basis, the robust profitability in the Americas of the last few quarters is expected to continue in 2014, with poultry pricing benefitting from tight supplies of pork and beef, although the recent slowdown of Asian demand may cause a new challenge for the industry.

For Europe, the latest projections for 2014 indicate growth of 0.6%, which is estimated to be in line with EU demand. Under such circumstances, the industry should be able to benefit from favorable market conditions with tight pork and beef markets and lower feed prices.

Conditions in Russia are improving after a tough year, and the country will benefit from price support from the local government. In South Africa, the poultry industry will enjoy new safeguards from Brazilian imports. However any optimism here, is tempered by large and growing imports from the EU, resulting in a mixed outlook for South Africa in 2014.

Nan-Dirk Mulder commented, "Despite the broadly positive global outlook, the challenge remains to keep markets balanced. Key Asian markets of China and India are in the midst of a supply glut because of weak demand following food safety and animal disease issues (China) and slower economic growth (India). Early indicators for 2014 reflect better conditions for both markets as supply levels tighten, but in the case of Thailand, a big concern will once more be oversupply."

Rabobank believes that animal disease and food safety will continue to be major issues in 2014. The poultry industry in China has not yet recovered from the outbreak of H7N9 this spring, which has put consumption growth under pressure. In Mexico, the industry is rebuilding domestic supply but there is a lingering risk that the bird flu will reappear this winter as temperatures fall.