Feed prices continue to dominate as a major story in our May update. But, the bigger story may be the waning influence of COVID-related production and consumption declines that was the number one impact in 2020. The resumption of demand more in line with pre-pandemic levels will be what’s needed to boost stability in the sector’s profitability. It may not reach those levels during this outlook period, but consumption is likely to soon start, moving in the right direction. A possible damper on industry revenues is the increased imports of chicken into Canada made possible under CUSMA and CPTPP. However, for the time being, imports are both expensive and hard to source, and chicken is likely to remain competitively priced relative to beef and pork in the domestic market.
Sector continues to fight mounting feed cost pressures
In January, we noted rising feed costs as a trend to monitor throughout 2021. That hasn’t gone away, and if anything, Ontario corn prices have increased and are expected to rise even higher over the next three months (Table 1). While there may be a break in soymeal prices, the overall Eastern broiler feed price is forecast considerably higher in 2021 than the five-year average. That’s true in the west too, where the two main sources of feed are both expected to be well over the five-year average.
Rising feed prices are an issue, but broilers are a sector perhaps better situated than beef or hogs to accommodate them, given the broiler price is adjusted according to a feed price index. Therefore, with profitability tied to overall production levels (themselves a function of demand), we expect to see profits moving in the right direction during the outlook period as demand increases, prompting gains in production.
That said, the next forecasts of the respective sizes of the South and North American crops and China’s seemingly insatiable appetite for feed imports will each bear weight in shifting these feed costs further, either in a supportive or pressuring role.
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