The outlook for the global poultry industry is gradually improving after challenging conditions in the fourth quarter of 2015, according to Rabobank's poultry quarterly report.

The main factors driving the recovery, according to Rabobank, are increasing demand, lower supply growth in key regions like the US, ChinaThailand and Europe, and price support from recovering red meat markets.

The biggest factor to watch for in 2016 is the Asian supply, given restrictions on breeding stock will reduce production — primarily in China, and also in Thailand and Korea — in the second half of 2015. Rabobank's animal protein senior analyst Nan-Dirk Mulder says: "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."

Continued impact of avian flu, foreign exchange volatility

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Global poultry meat trade will remain highly affected by avian influenza (AI) and foreign exchange (FX) volatility. Prices for the main traded poultry cuts have dropped — by 20 percent for breast meat, whole birds and processed, and up to 50 percent for leg quarters. This freefall has now stabilized and will gradually recover in 2016, Rabobank forecast, although avian influenza outbreaks in key export markets are a wild card.

Impact of feed costs

Although the global outlook for feed costs is for corn and soybean to be range-bound at current levels, big differences exist between regions, depending on foreign exchange and local crop harvest conditions. Regions like India and South Africa are hit by adverse crop conditions, while Brazil and Russia feel the impact of negative foreign exchange impacts; in Brazil, this means a more than 30 percent increase in feed costs compared to last year.

Brazil and Thailand are the big winners in trade in the short term, but changes are in the pipeline, with newcomers like Malaysia,Russia and Ukraine currently being approved for exports to key import markets. In the case of breeding, there will be a mixture of more local breeding programs (China and Russia) and inter-nationalization among GPS suppliers worldwide.