Rabobank meat market analysis suggests COVID-19 disruptions present greater opportunity than risk

19 Nov 2021 --- According to a new Rabobank report, global meat producers face a “leadership test” as the COVID-19 disruptions affecting food markets continue to pose challenges. Notably, animal protein supply chains face four areas of cost inflation pressures in animal feed, labor, energy and freight.

Speaking to FoodIngredientsFirst on the specifics of these market conditions – including details on industry’s recovery from African swine fever and outbreaks of avian influenza – is Justin Sherrard, global strategist for animal protein at Rabobank.

His research concludes that the same conflicting factors also bring opportunities for agri-food business and trade to drive long-term growth.

The Chinese pork market’s ongoing recovery from African swine fever is forecasted to be a major driver of its domestic production levels.“Rabobank sources data from public authorities, industry agencies and private and proprietary sources, as part of its assessment of global animal protein markets,” he remarks.

“We use proprietary models and classical analytical techniques to assess the data, and also rely on industry insights, in forming our views on the outlook for 2022.”

Opportunity outweighs risk
Rabobank’s annual Global Animal Protein Outlook, analyzes meat and seafood markets around the world.

The analysis identifies that while the disruption that has permeated sectors throughout 2021 will persist next year, progressive animal protein businesses will see the changes within the market as an “opportunity for growth rather than solely as a risk.”

On a consumer level, Rabobank expects demand for beef to remain solid, demand for salmon and shrimp to show ongoing strength, improving demand for poultry and strong sales of alternative proteins.

“Traditional meat producers won’t have time to lick their wounds after a challenging 2021,” Sherrard notes.

“Those that show agility and resilience in embracing a rapidly evolving global market will be best placed to make the most of the opportunities for growth that will be presented to them.”

“This won’t be easy,” he concedes. “Shifting consumer tastes and channels, biosecurity issues and COVID-19 disruption are hurdles meat producers need to clear. But those that show the ability to do so will emerge as the real winners in 2022.”

Recovery of pork markets in China and North America
Rabobank forecasts that the Chinese pork market’s ongoing recovery from African swine fever will be a major driver of its domestic production levels, reducing its dependence on imports from Europe, Brazil and North America.

Last month, pork producers hailed a potential vaccine candidate that provides defense against the potentially devastating pig virus.

Demand for salmon was at “record high levels” in 2021 after consumers switched to at-home consumption during the pandemic.Despite a slight decline in production levels in the EU and UK, a broader increase in supply in the global market will push overall pork prices down globally, the Dutch bank anticipates.

Global beef production will decline marginally, reflecting changes in herd cycles in major producing regions. The strength of demand for beef in most markets, given this tightening of supply, will keep cattle and beef prices at firm levels into 2022.

Poultry businesses weather bird flu outbreaks
Elsewhere, Rabobank expects the poultry market to recover from a mixed year which has seen high demand stimulate growth despite outbreaks of avian influenza.

Earlier this month, Wageningen Bioveterinary Research confirmed a new outbreak of highly pathogenic H5N1 avian influenza among broiler chicken from a Dutch poultry farm. 

Elsewhere, high feed costs and labor issues continue to depress global market dynamics.

Rabobank forecasts global production growth of about 2%, ranging from 1% to 5% in the major markets in 2022, as demand continues to be strong.

Salmon hits peak consumption
Demand for salmon was at “record high levels” in 2021 after consumers switched to at-home consumption during the pandemic, but Rabobank anticipates it will be strengthened further by a recovery of the foodservice market in 2022.

Despite high feed and production costs, global demand will remain strong enough for farmers to keep prices high, even though production will expand.

“With economies reopening it would be natural to conclude that trade will recover in tandem, but our research shows a mixed picture,” adds Sherrard.

“The main feature of global trade will be the ongoing decline in China’s pork imports in 2022, which will exacerbate the oversupply situation in Europe.”

“Beef trade should remain active and poultry trade should increase, pending resolution of temporary, biosecurity-related barriers. The boom in trade should come from shrimp and salmon, as exporters respond to demand recovery in many markets,” he notes.

Plant protein dynamics
Opportunities will emerge for animal protein chains that require minimal incentives to transition to more environmentally sustainable production systems, the bank claims.

Alt-protein players have made significant moves in scaling fermented mycoprotein and 3D-printed plant-based whole cut meat that “bleeds” authentically. (Credit: Redefine Meat)In recent weeks, players in the alternative protein space have made significant moves in scaling fermented mycoprotein and 3D-printed plant-based whole cut meat that “bleeds” authentically.

“Both animal protein and plant-based alternatives will keep growing in the coming years, at quite different rates that reflect the size and the relative maturity of each industry,” states Sherrard.

The growth of plant-based alternatives could shape animal protein company strategy, he suggests. “The growth of plant-based alternatives could, for example, trigger greater diversification of proteins and products, it could trigger a stronger focus on new product development, and a stronger push to focus on consumer preferences and priorities, by animal protein companies.”

“Secondly, the current difference in prices and margins between animal protein and plant-based alternatives could see prices and margins grow, for animal protein products, and tighten, for plant-based alternatives, as food retailers and foodservice companies consider allocation of shelf-space and menu items.”

According to recent Boston Consulting Group estimates, plant-based alternative proteins are anticipated to achieve parity by 2023, while those based on microorganisms by 2025, and those based on animal cells by 2032.

Sherrard adds that the growth of plant-based alternatives could generate an even stronger focus from animal protein companies on improving the sustainability of animal protein supply chains. In addition, he expects increased activity among these players in promoting the health and nutrition benefits of animal protein products, especially among fresh products.

Sustainability presents growth opportunities
In line with Innova Market Insights’ Top Trend for 2022, “Shared Planet,” Rabobank expects the focus on sustainability to increase further in 2022, as food retailers and foodservice chains actively position on this theme with consumers and regulators. 

Inflation is also less of a worry for the segment, with products typically going through a more automated manufacturing process that leave them less vulnerable to labor costs.

Overall, Rabobank sees agile business leadership as the “most likely route to sustainable growth,” advising firms to embrace consumer preferences for sustainability and to be prepared for a surge in demand as economies continue to reopen following global lockdowns.

By Benjamin Ferrer