Navigating Challenges: Rabobank's Insight into the 2024 Animal Protein Sector

In a recent report, Rabobank, the prominent food and agribank, has cautioned that the growth in the animal protein sector is poised to slow down in 2024. This deceleration, combined with tighter profit margins, will compel producers to adapt to a new reality of elevated prices and increased production costs to sustain success.

Rabobank's annual Global Animal Protein Outlook reveals that after four years of continuous growth in global animal protein production, 2024 is expected to witness a deceleration or even a decline in some species. The report predicts that only poultry and aquaculture will experience production growth in 2024, albeit at a slower pace than in the previous year. Conversely, wild catch seafood is anticipated to revert to its long-term trend of declining production after a brief expansion in 2023.

The tightening of profit margins is attributed to structural changes in market conditions, leading to higher production costs. This, in turn, will drive up animal protein prices, placing constraints on global consumption throughout the year.

Rabobank identifies certain market changes as permanent. Demographic shifts are expected to tighten the labour market, elevating production costs, while a reduction in population growth will likely slow consumption. Justin Sherrard, global strategist for animal protein at Rabobank, acknowledges the resilience and flexibility of companies along the animal protein supply chains in the face of these challenges. He emphasises that companies must adapt to the structural changes in the market to sustain their success.

Sherrard suggests that companies should focus on doubling down efforts to improve productivity, reviewing existing portfolios, strengthening supply chain partnerships, increasing investment in new product development, and adjusting pricing strategies. Despite the cost of living crisis pressuring consumer finances, there continues to be demand for animal protein, and companies have successfully navigated challenges, including high costs, regulatory uncertainty, and disease, to capitalise on it.

To navigate the challenges of the coming year, Sherrard advises animal protein businesses not merely to weather the storm but to take stock of their strengths and prepare to transition their supply chains to operate in an environment characterised by high costs and tight margins.

Acknowledging that not all structural changes are detrimental, Sherrard encourages companies to view these changes as opportunities to enhance their processes and products. He believes that companies demonstrating agility in adapting to the new environment and understanding consumer preferences will be able to seize opportunities in the tighter market and emerge successful.

Rabobank's report paints a challenging but adaptable landscape for the animal protein sector in 2024. Producers and businesses are urged to be proactive in embracing change, enhancing efficiency, and strategically positioning themselves to not only weather the challenges but also thrive in the evolving market conditions.