Global chicken industry to rebound by 2022

In early January, US-based poultry economist Paul Aho was expecting a bullish outlook for the global chicken industry on the back of a pork shortage due to African swine fever (ASF) in China and other Asian countries, writes ARIEF FACHRUDIN.

China alone produced 54 mt of pork in 2018, almost half of global pork production. But this year its production is predicted at only 24 mt, yielding a big gap of 20 mt, which according to Dr Aho, “is impossible to be filled completely.”

China has tried to fill the protein gap by increasing chicken and fish production, which then narrowed the gap by 27%. The Asian country also imported pork and chicken, but this only covered 23% of the gap.

Dr Paul Aho

In total, the efforts only covered 50% of the gap. “So, there is still a gap of 10 mt which has increased the price of animal proteins worldwide,” said Dr Aho at Ussec’s Asia Trade Exchange 2020 webcast.

Then Covid-19 struck, swiping aside the potential advantages of ASF to the global chicken industry. It is undeniable that the viral disease has impacted the industry and consumption worldwide.

Some countries have relaxed their social movement restrictions, following the decreasing number of positive Covid-19 cases. However, Dr Aho believes “it’s not the end, and not even the beginning of the end, but it’s perhaps the end of the beginning.”

“It’s difficult to predict the future, but the more likely scenario is sometime in 2021 we will have either a vaccine or a cure. If we get one, we can put Covid-19 aside,” he explained. “Between now and then, there are going to be multiple waves of outbreaks around the world and significant economic disruption.”

U-shaped recession

The next question is what kind of recession are we expecting? V or U-shaped recession?

Dr Aho said the V-shaped recession would be nice where the global economy goes down this year and bounces back next year, but it is unlikely since the vaccine or cure will only surface in 2021.

“So, a U-shaped recession is more likely. This year the global economy will enter negative territory. We will see a little bit of recovery next year, and then finally in 2022 we can expect real economic growth again,” he said.

The assumption for the global chicken industry is similar. “The industry was strong last year with almost 4% growth. It will dive to negative this year, struggle to come back in 2021 and then finally start increasing rapidly again in 2022,” said Dr Aho.

Courtesy of Dr Paul Aho.
Courtesy of Dr Paul Aho.

Crisis & chicken consumption

To easily understand the recession, Dr Aho analyzed income quintiles (from the richest to the poorest groups of people) and chicken consumption per capita. In 2019, average worldwide chicken consumption was 12.1 kg/capita – first quintile consumed 25kg while the fifth quintile consumed only 1kg.

“What is going to happen next, between 2019 and 2021, is that we are going to lose about half a kilo of worldwide per capita chicken consumption due to Covid-19.

“During this period, nothing happens with the first quintile, while the second, third and fourth quintiles will only lose 1kg. However, the situation is dramatic for the last quintile which will lose 1kg while they consume only 1kg. This means the poorer you are, the more the pandemic is going to affect you,” he explained.

The analysis also proves that when times are hard, people will cut back on their consumption of meat.

Slight decline for trade

The recession caused by Covid-19 has lowered global chicken demand. “Although we have seen increased demand in China, but reduced demand in other places. It’s important to remember that oil exporting countries are particularly important buyers of chicken. As they lose income and their economies fall, they are going to be importing less chicken,” Dr Aho said.

However, he believes global chicken trade will be less affected. “There will be a slight decline this year and next, but export will not be affected as much as production and consumption are,” he said.

His prediction is based on the fact that 88% of all chicken is produced and consumed in the same country. Only 12% ends up for trade due to the restraint from a welter of non-tariff and tariff barriers. “This small trade, from 2011 to 2019, was stable,” he said.

Courtesy of Dr Paul Aho.
Courtesy of Dr Paul Aho.

‘The King of Meats’

The ‘race’ in chicken and pork productions amid this recession is the other interesting thing to observe. Dr Aho said in the past three years, global pork production figures surpassed chicken production.

This year however, global pork production is predicted be lower than global chicken production, due to ASF and Covid-19. With a U-shaped recession, he said it will be interesting to see how the two meats will rebound and he believes chicken will be ‘The King of Meats’.