Expanding Global Production Set to Increase Competition in Animal Proteins Sector in 2018
Animal protein production is expected to expand around the world in 2018 increasing both trade competition and
competition between different meat types, according to a new industry report from agricultural banking specialist
Rabobank’s Global Outlook for animal protein in 2018 says production increases are likely in most regions with Brazil, China and the US expected to record particularly
strong production growth. In New Zealand, beef and sheepmeat production is forecast to remain similar to 2017 levels.
The report says beef and pork will be the strongest contributors to global animal protein expansion – with global beef
production projected to increase for a third consecutive year in 2018, and a further year of significant growth in pork
production anticipated. Poultry and seafood production are also set to register production growth in 2018, but the
growth rate in these sectors is anticipated to be slightly lower than that recorded during 2017.
Rabobank animal proteins analyst Blake Holgate says two of the impacts of the expected production increase would be more
competition between species for share of consumer wallet, and between exporters for access to trade flows.
“Many countries will be looking to increase their level of animal protein exports in 2018 and we expect to see intense
competition in key importing markets, particularly in the Chinese market,” he said.
“We also expect the increased production will create margin pressure along the supply chain - with food retailers and
foodservice companies best placed to benefit.”
Mr Holgate said while price and margin pressure were likely to be central themes for the sector in 2018, production
growth would also create areas of opportunity for the industry.
“As the changes brought about by increased production take shape, new areas of opportunity will open up in all markets
and we believe animal protein companies and supply chains that are well connected to markets, and most agile and
innovative in responding to these opportunities, will be best placed to benefit.”
For New Zealand, the report says, farm-gate beef prices are likely to come under downward pressure as rising global beef
production increases competition through 2018.
“However, provided consumer demand remains positive in New Zealand’s key export markets of the US and China, cattle
prices are expected to hold up reasonably well and sit above long term average returns,” Mr Holgate said.
The report says signs are also positive for New Zealand’s sheepmeat producers, with low levels of global lamb inventory
expected to support strong prices in 2018.
Mr Holgate says while New Zealand’s sheep flock is forecast to reduce by close to one per cent in 2018, favourable
breeding and lambing conditions are likely to result in a marginal increase in the supply of New Zealand lamb onto the
global market in 2018.
“Lamb prices are now at near-record levels and the challenge for exporters will be to maintain the current level of
consumer demand given the availability of other less-expensive animal protein alternatives,” he said.
“Mutton prices are also likely to remain high due to an expected reduction in New Zealand export volumes and continued
high demand out of China.”
Key Watch Factors
Looking beyond trade, the report highlights four key watch factors which are anticipated to play a major role in the
direction of the animal proteins sector in 2018 and beyond - industry consolidation, the evolving retail landscape,
increased adoption of agricultural technologies and the rise of alternative proteins.
Mr Holgate says industry consolidation was expected to advance most swiftly in the poultry and beef industries.
“The poultry industry is likely to continue its rapid move from a nationally-organised industry to a more regional and
global industry, while in the beef industry further consolidation is expected, albeit at a slower pace,” he said.
Animal protein companies would also be wise to keep an eye on the evolving food retail landscape in the coming 12
months, according to the report.
“Food retail is being re-shaped at a rapid rate and the Amazon/Whole Foods deal is a great example of this. This deal,
and others like it, is resulting in the availability of more food products via an increasing number of channels,” Mr
“These changes will create opportunities for the sector and we expect to see more investment from animal protein
companies into new product development and increasing the efficiency and the visibility of their supply chains.”
The report says uptake of agricultural technology is a further factor to watch over the coming 12 months.
“There are a number of drivers behind increased uptake of technology such as cost efficiency, improved productivity and
the reduction of environmental footprint and we anticipate more use of technologies like automated robotics will be
utilised allowing processors to increase meat yields, improve cut quality, reduce costs and fill gaps in the workforce,”
Mr Holgate said.
“Despite this, widespread adoption of technologies is still likely to be hindered by barriers such high technology
costs, lack of sufficient infrastructure and, in some cases, the lack of a clear value proposition.”
The report says alternative proteins would also be much talked about in 2018 and generate additional competition for
Mr Holgate said alternative proteins had broken out of the niche of vegetarian products and high growth rates were
expected in future years.
“The current market for alternative proteins is largest in the EU and in North America and in these regions alternative
protein products have captured the attention of flexitarians and the interest of sustainability and animal
welfare-minded customers,” he said.
“Rapid growth of alternative proteins is likely in coming years, however, it’s important to note that the market for
alternative proteins is still very small in comparison to the total animal proteins market.”