Rabobank: Cost Inflation to Impact Global Protein Supply Chains

Animal protein supply chains face significant cost inflation during 2022 in four key areas – animal feed, labor, energy and freight.

That’s according to Rabobank’s specialist team of animal protein analysts based around the world. Rabobank released its seventh edition of the Animal Protein Outlook, with a look at the year ahead for beef, pork, poultry and seafood markets in North America and beyond. In a 33-page report, Rabobank analysts also examined global issues such as continued push for sustainable production and the uncertainty around African swine fever.

“This next year has the potential to accelerate structural change as a result of escalating costs,” says Christine McCracken, senior animal protein analyst for Rabobank. “Success will most likely go the players that adapt to the changing business environment; embracing consumer preferences for sustainability and preparing for a surge in demand as economies continue to reopen and adjust following COVID-19-induced lockdowns.”

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

“Although demand will be strong and supporting livestock prices, North American feed costs are expected to remain at high levels,” says Don Close, senior animal protein analyst. “Producers will need to be vigilant on finding opportunities to lock in profitable margins.”

The report notes, however, that those “hoping that 2022 will bring calm after multiple market disruption will likely be disappointed.” The authors say that while markets are expected to settle “somewhat in 2022,” many drivers of recent change will remain. Markets will also be driven by the transition to more sustainable animal protein, biosecurity challenges and COVID.

“Against this backdrop, we expect animal protein prices to remain firm in 2022 (with some exceptions), supported by ongoing supply constraints and general strength in demand,” the authors said.

Additional insights from the report:

• The ongoing recovery of China’s pig herd is expected to be the largest single driver of growth in global markets in 2022.
• Stronger cattle prices are expected, as beef cow liquidation continues in the U.S.
• U.S. chicken production will increase to support stronger exports and foodservice sales. Domestic egg and turkey markets should see a lift in demand as well from the normalization of travel and holiday activities.
• U.S. pork prices are expected to remain strong to the start of the year, then will trail near-record 2021 levels as production increases and markets adjust to the implementation of Proposition 12 sow housing mandates.
• The focus on sustainability will increase further in 2022, as food retailers and foodservice chains actively position on this theme with consumers, investors and regulators.