"A key concern for the coming months is the spread of avian flu, which has become a global issue in recent months," said Nan-Dirk Mulder, a Rabobank analyst. "Several avian flu strains are already endemic in several parts of Asia and Mexico, and the disease is increasingly spreading globally via wild birds."
Affected regions, such as the European Union and Canada, will continue to suffer lost export markets and economic damage, Rabobank reported. Industries need to prepare for ongoing "disaster pressure", especially during periods of wild bird migrations, Rabobank noted.
"Trade restrictions, namely Russia's import ban on US and EU poultry meat, will lead to ongoing record high prices and margins in Russia," the report states. "The outbreaks of avian flu in Northwest Europe have been a big wake-up call for the Russian industry as markets have been highly affected by import restrictions on day old-chicks and hatching eggs as Russia depends on 15 percent of total hatching egg supply on imports mainly from these countries."
To date, the H5N8 virus has been reported in South Korea, Japan, China, German, the UK and the Netherlands. South Korea reported the first outbreak in January. The first affected farm in Europe was confirmed on Nov. 4 at a turkey farm in Germany, followed by confirmation at a duck farm in the UK and at five poultry farms in the Netherlands.
The report goes on to say that Russia will face a future supply risk despite re-opening imports of hatching eggs and day-old chicks from non-affected regions. Any outbreak in Northwest Europe can affect future market conditions significantly especially if the outbreak spreads in the Netherlands.
Brazil turns out to be the big winner as global trade streams shift. Brazil will likely strengthen its export position in Russia and capture the US and EU export market shares, Rabobank reported.
"Despite the big impact of avian flu on international markets, global industry margins are still bullish on ongoing strong markets and low feed prices and global poultry trade prices are expected to remain stable after declines in recent quarters," Rabobank reported.