Avian influenza (bird flu) and currency exchange volatility are to continue to affect the global poultry meat trade, according to the Rabobank Poultry Quarterly Q1 2016.

However, the margin outlook for the global poultry industry is gradually improving after challenging conditions in the fourth quarter of 2015, notably significant oversupply, the report found.

Increasing demand, lower supply growth in key regions, the US, China, Thailand and Europe and price support from recovering red meat markets are the main factors driving recovery.

Rabobank notes that the biggest factor to watch for in 2016 is Asian supply, given restrictions on breeding stock will reduce production – primarily in China, and also in Thailand and Korea – in the second half of 2016.

Animal Protein Senior Analyst with Rabobank, Nan-Dirk Mulder, has said that this will have a strong short-term local and global market impact and will lead to local tight market conditions, increased Chinese imports and pressured Thai exports.

Looking at global poultry meat trade, it has said that prices for the main traded poultry cuts have dropped – by 20% for breast meat, whole birds and processed, and up to 50% for leg quarters.

This free-fall has now stabilised and will gradually recover in 2016, although bird flu outbreaks in key export markets are a wild card.

Meanwhile, due to currency fluctuations and local crop harvest conditions, there are big differences between regions when it comes to feed costs.

According to the Poultry Quarterly, regions like India and South Africa are hit by adverse crop conditions, while Brazil and Russia feel the impact of negative currency exchange impacts.

In Brazil, this means a more than 30% increase in feed costs compared to last year.

In the short-term, the big winners in trade are Brazil and Thailand however, Rabobank has said that changes are in the pipeline.

Malaysia, Russia and Ukraine are currently being approved for exports to key import markets.