April 5, 2004

Malaysian Chicken Exporters Cash In On Bird Flu Epidemic

The recent outbreak of bird flu in Asia has given an unexpected boost to non-traditional suppliers of chicken such as Malaysia and the Philippines, the Food and Agriculture Organization (FAO) of the United Nations said.

Both Malaysia and the Philippines are eyeing the huge chicken consuming market of Japan which has, in the past, relied heavily on chicken imports from Thailand. The outcry in Japan over the possibility of bird flu infected meat coming in from Thailand, led the Japanese authorities to suspend Thai chicken imports. In effect, Japan had to turn to alternative suppliers: Malaysia and the Philippines appear to have gained as the region's suppliers to Japan.

According to the FAO, Malaysia will export some 200 to 240 tonnes of boneless chicken to Japan while the Philippines is expected to ship 30,000 tons. But Japan is also planning to resume imports of heat-treated poultry from Thailand. Out of the US$450 million worth of Thai poultry exports to Japan last year, approximately one quarter is reported to be in processed form. The European Union (EU) has already started importing processed products from Thailand.

The losses quantified by the FAO as a result of the animal disease outbreaks are staggering. Approximately one-third of global meat exports, including chicken, beef and pork - or roughly six million tonnes - are presently affected by animal disease outbreaks. With the value of global meat and live animal trade estimated at US$33 billion (excluding the EU intra-trade), this could amount to world trade losses of up to US$10 billion, if import bans extend through 2004.

The FAO says that trade losses will likely accrue to the 12 countries which are facing export bans or market constraints as a result of animal disease concerns related to avian flu. This estimate does not include costs of public disease control measures, losses to producers and consumers through destabilised markets and fluctuating prices, and the general costs to the industry. The impact on small poultry producers in Asia may be considerable, with over 100 million birds estimated to have died or have been culled over the past two months.

In particular, the impact of import bans on export-dependent countries, such as Thailand, which has culled around 36 million birds or 25 percent of the domestic flocks, will increase the income vulnerability of small producers as local prices drop sharply. Chinese exports are forecast to decline by 20 percent in 2004 in response to bird flu outbreaks; meanwhile, imports are expected to decline even more, down 25 percent due to a slowdown in consumption and poultry product import bans on bird flu affected suppliers, including the U.S.

Even consumption patterns in those countries not directly affected by the bird flu are shifting. For example, in India, chicken prices have dropped by one-third, fuelled by the Asia-wide concern over the disease. The poultry industry there is reportedly losing more than US$2.2 million daily due to a crash in demand for chicken and eggs.

Both Canada and the United States, in addition to 10 Asian countries, have reported outbreaks of bird flu. These countries account for four million tonnes or 50 percent of the world's exports of poultry meat (with the United States accounting for nearly 35 percent).

While avian flu outbreaks in North America have not been reported in commercial flocks, any prolonged ban on U.S. exports, which constitute 15 percent of domestic production, will put downward pressure on all U.S. meat prices. As a result of poultry and beef import bans, the FAO expects demand for alternative meat products such as pork to increase significantly. This is already visible in Japan where shortages of beef and chicken have led to pork prices surging 40 percent in February following import bans on U.S. beef and Asian poultry.