Rabobank: Animal protein companies face an inflection point

Animal protein companies face an inflection point with a need to respond to structural changes in the market even with production levels and prices likely to remain elevated next year, according to Rabobank

Producers and processors of meat, poultry and seafood approach 2023 after a year marked by rising input prices, supply chain disruption and geopolitical issues. Yet at a structural level they also face the need to adapt to sustainability challenges and disease threats to animal health if they are to remain competitive in the market over the longer-term.

Rabobank expects animal protein production levels to increase, with a year-on-year growth in major markets of 5 million tonnes (1%) to a total of 430 million tonnes in 2023, driven by demand for poultry, fish and seafood offsetting the weaker performance of beef and pork. However, the production growth rate will be lower than 2022’s 2%.

Salmon is set to continue to enjoy strong demand. Chicken will benefit from its value proposition against the tough economic backdrop, with the bank forecasting global economic growth of just 2% in 2023. By contrast, consumers are likely to cut back on more expensive cuts of meats.

Structural and cyclical headwinds

To prosper in future, animal protein companies must pivot to become more sustainable businesses. Rabobank expects producers and processors to intensify their emissions commitments next year, but this will require greater investment in areas such as smart data to make their operations and supply chains more sustainable. The most successful businesses are also moving on to a more proactive footing to manage disease risks. 

Meanwhile, companies are responding to high costs by shrinking packet sizes and reducing ranges. They must also factor in consumer behaviour in a recessionary environment, such as the move towards convenience products and trading down.

Justin Sherrard, Global Strategist for Animal Protein at Rabobank: “We expect prices to remain high next year, even as the market enjoys steady production growth on the back of a growing supply of aquaculture and poultry. This masks reductions in the supply of beef, due to contraction in the US after years of drought, and the weakening pork market in Europe. 

“There is then the greater challenge of how animal protein companies approach the next decade of growth, not simply the next year. Structural changes in the market, such as increasing awareness of carbon footprints and a proactive approach to managing disease, offer opportunities for the most forward-thinking companies to invest and prosper. In other words, it is now decision time.”

View the report ‘Global Animal Protein Outlook 2023’