February 17, 2004

 

 

Bird Flu To Cost China Poultry Industry 100 Billion Yuan

 

The bird flu outbreak in Asia could cost China up to 100 billion yuan in losses, analysts said.

 

Supermarkets and fastfood chain sales have slumped, processors have warned of losses and potential layoffs and millions of impoverished small farmers are losing a valuable source of income as their birds are slaughtered.

 

"The fallout of the bird flu is disastrous and it will take at least half a year for China to return to its 2002 level of exports even if the virus is put under control immediately," warned Lin Xiangjin, agricultural research fellow with the Chinese Academy of Social Sciences (CASS).

 

China's poultry industry was worth around 242 bln yuan last year, official statistics show.

 

It is the world's fifth largest exporter and shipped out poultry products worth some 900 mln usd in 2002, according to the United Nation's Food and Agriculture Organization (FAO).

 

"The (poultry) sector was basically unscathed by the SARS outbreak last year, but it seems to be our turn this time with the bird flu attack," said Gong Guifeng, an official at China Association of Animal Husbandry (CAAH).

 

"The knock-on effects have already started to spread across the whole poultry supply chain. Poultry suppliers, feedstuff producers and chicken farms have all been devastated."

 

Chen Xiwen, deputy director with the government's Central Financial Work Leading Group, added that the damage was only likely to get worse.

 

Although millions of farmers across China raise poultry on a small scale to supply local markets, the main farming and processing bases are concentrated in five provinces -- Shandong, Guangdong, Liaoning, Jilin and Sichuan.

 

The CAAH estimates major producers such as Dalian Hanwei Group, Wen's Group, and Huadu Roiler Corp, are each posting monthly losses of over 100 million yuan, and will be forced to shutter production if the virus continues unchecked.

 

Huadu spokesman Chen Yuanfeng said the company's chicken exports, which normally run at 700 tons per month, have crashed to zero and the firm is considering laying off workers in an effort to cut expenses.

 

In the meantime, listed poultry breeders and suppliers, including ST Shenzhen Kondarl (Group) Co, Daying Modern Agriculture Co Ltd and Inner Mongolia Prairie XingFa Co have all warned of the impact of the outbreak on profits.

 

"We have definitely been hit by the virus, but it is difficult to quantify the impact at the present stage," ST Shenzhen Kondarl official Zhang Minghua said.

 

Mainland feedstuff producers, such as Sichuan New Hope Agribusiness Co, have also been mauled by decreasing demand for their products in China and key overseas markets.

 

In China, where urban consumers are becoming increasingly wary of buying raw chicken or even cooked chicken, domestic poultry sales have also fallen, with sales in some areas plunging by as much as 60 pct, CAAH's Gong said.

 

Following the confirmation of the H5N1 virus in Shanghai, sales of poultry products slumped even though retail prices slipped 30 pct.

 

At large outlets such as France's Carrefour, US-based Wal-Mart, Germany's Metro AG and domestic Lianhua Supermarket poultry purchases from suppliers have been slashed, although they insist that the impact is limited as it accounts for about 1 pct of their overall sales.

 

"We have cut poultry orders but are increasing orders for beef, pork and seafood and will continue to adjust our stocks in response to market demand," said Xiao Yinglin from Lianhua.

 

More than one-third of China's 31 provinces and regions are affected by bird flu.