We are currently experiencing unprecedented levels of market disruption in Poland, the world’s second largest chicken producer, due to a mass outbreak of Avian Influenza (AI). So far, there have been over 30 million birds culled, with the latest mass culling being 70,000 breeding birds. As the outbreak has now reached not only the parent, but grandparent flock, the duration of the disruption is forecast to last between five to six months. Estimates of reduction on production are currently running between 30-40%, which equates to approximately 8% of the total EU production.
The knock-on effect of this will be felt across all origins of EU chicken and will inevitably result in prices rising. It does also raise the possibility of shortages of product within the UK at a time when foodservice, which relies heavily on Polish chicken, is reopening with strong demand.
At DB Foods, we benefit from being a stable and well-respected company within the industry. We work closely with a broad range of suppliers with whom we have strong relationships with. Whilst we are vulnerable to movements in market price, like all suppliers, we as a business are best placed within the industry to minimise disruption to availability to our customers.
Whilst the UK market has traditionally not been impacted by fluctuations in the price of EU products, the problems in Poland are on such a scale that it will be different this time. As the availability of EU chicken reduces, the market will dip more into UK RTA chicken which will put pressure on suppliers and lead to price increases.
Beef Market Update:
The cattle price continues to soar with availability in the UK/Eire remaining low. The situation regarding beef in the UK/Ireland remains largely unchanged since April. The cattle price remains extraordinarily high and supplies remain tight and are forecast to remain this way until early Autumn.
As hospitality has returned with the lifting of lockdown restrictions and retailers have launched their BBQ ranges the demand for trims, as a result of strong burger sales, has increased significantly, resulting in a sharp increase in prices for these products. Steak cuts were already at very high levels and these have continued in this manner, and will do so throughout the summer months as foodservice returns and retailers fight to keep their share of business with aggressive promotions. The forecast for ribs/rib-eyes looks to be particularly vulnerable to high pricing.
The picture for South American beef is not dissimilar in that cattle numbers are short and prices are high. The key driver for South America is China which remains a insatiable market for all proteins. Processors are also struggling with outbreaks of Coronavirus, which are reducing production capacity.
Lamb Market Update:
The price of English lambs has continued to climb throughout April and is now touching £8/kg. As a result of this, processors are losing money on lamb and have reduced their kills to try and minimise the discomfort and take some of the heat out of the lamb prices. As a result of lower kills, availability of this product is becoming more difficult, particularly on trims, where less is being generated. The result is that prices remain high, particularly on trims which are seeing strong demand as the BBQ season begins in the UK.
The next challenge we have with lamb is New Season, with some quoting deadweight prices of £9/kg. Historically when lamb has got to this level, sales have dropped and the price has fallen back. The forecast is that this will not be the case until at least August / September, when good numbers of NSL come forward into the market place.
Pork Market Update:
Until the middle of February the pork market was one that looked to be stable in amongst a volatile situation on all other proteins. Unfortunately, this has now changed. In the last three-week period from 19 April, the German pig price increased by up to 28% and the Danish price by 17% currently. Once again, it was the impact of China coming back into the market that has driven this sharp increase in pig prices. Certain cuts are proving particularly susceptible to increase with the leg being the product affected most drastically, this will feed through into gammon and cooked ham prices.
From a UK perspective, whilst the pig price remains stable, and tends to be less volatile due to the dominance of a small number of major producers and the preponderance of retail on the market, we are seeing a steady week-on-week increase in the pig price and some initial upward pressure on pork prices.
As we approach the summer months, we would expect the usual seasonal increases on manufacturing (shoulder) cuts and legs (for hams) and loins as BBQ season kicks off. Baby back / loin ribs is another item that is currently seeing very strong demand globally, which is forcing prices up significantly.