April 28, 2015
America's H5N2 epidemic: Damaging, not disastrous - but please, no vaccines
America will not suffer anything like Thailand's decade long ban from major importing countries but a vaccine could make the outbreak far worse than it already is.
By Eric J. BROOKS
An eFeedLink Hot Topic
Dogged by falling chicken prices and a rising, export hindering US dollar, an intensification of late 2014's bird flu outbreak was just about the last thing US broiler meat exporters needed.
H5N1 + H5N8 = H5N2
H5N1 infected birds from Southeast Asia flew to Siberia. There, the virus they carried recombined its genes with the DNA of the already present H5N8 virus. H5N2, as the new, mutated strain is called, then used migrating infected birds to reach America's west coast in the fourth quarter of 2014, jumping from wild birds to domesticated chickens and turkeys late that year. From its initial outbreak sites in Washington, Oregon and California, H5N2 epidemics have rapidly swept into heartland Midwestern states where most of the country's chickens are grown. It may not harm humans like its H5N1 relative, but H5N2 has certainly proven lethal to America's broiler sector.
Infecting poultry in 12 of the 48 continental US states, the second last week of April brought news of the virus being detected in a flock of Wisconsin chicks and of 5.5 million Iowa broilers needing to be destroyed because of it. The news was already denting markets for everything from soymeal to chicken legs when in late April, news of a second Iowa outbreak impacting an additional 2.3 million layers and pullets shook the market all over again.
Once afflicted with symptoms, mortality can occur in under two days. With Arkansas, the leading broiler producing state, Iowa the leading layer producer and Minnesota, the leading turkey producer all forced to declare states of emergency, the industry cannot help but feel H5N2's impact. In all, since late 2014's initial outbreaks on the west coast in late 2014, over 9 million birds have needed to be culled across fifty outbreak sites in a dozen states by the time of this article's publication.
No output impact, but exports lowest since 2007
While these numbers may seem big, they have so far only resulted in less than 0.1% of America's annual broiler slaughter and 1.5% of its turkey harvest culled. In fact, with per capita chicken consumption projected to increase from , April saw the USDA raise its per American broiler meat consumption from 37.9kg in 2014 to 40.1kg this year, it expects higher domestic consumption to absorb most trade-related export losses,. It thereby revised its expected 2015 broiler meat production to 17.96 million tonnes, up 3.8% from 2014's 17.30 million estimated from 22.052 to 22.172 million tonnes
Nevertheless, the psychological impact, particularly in the world broiler trade however, has been much more serious. Even before the latest, more serious outbreaks in Iowa, Arkansas and Missouri, earlier H5N2 infections on the west coast triggered blanket bans on all US poultry meat by South Korea and China, which bought 5.5% of America's 2014 broiler exports. In March, shortly after loosening up import restrictions imposed in late 2014, bird flu's spread to top broiler producing state Arkansas made Mexico re-introduce new, more stringent restrictions on US chicken meat exports.
At that time, alongside Mexico, Canada, the EU and several dozen other countries placed temporary, 90 day bans on chicken meat exports from leading producer state Arkansas as well as Missouri, California, Oregon, Minnesota and several other states. This list of states and regions from which broiler meat cannot be exported expands whenever bird flu outbreaks occur more rapidly than the 90 day bans can expire –which has been the case for the first four months of this year.
Consequently, chicken meat exports were down 17% in February from a year earlier and with the outbreaks continuing, similar 10%+ declines in monthly shipments could carry on well into the second quarter. Hence, the USDA has gone from expecting a 1.3% increase in 2015 broiler meat exports late last year to an 8.5% decline.
Instead of rising 1.5% from 2014's 3.313 million tonnes to 3.364 million as initially projected, the USDA's latest report expected them to fall to 3.03 million tonnes. But it is very likely that the USDA will revise this figure to a 10% drop such that export volumes total under 3 million tonnes for the first time since 2007.
Damaging, but not catastrophic
According to The US Poultry and Egg Council, "Most restrictions are on products from affected states, and a few are limited to the affected counties or states. Bans normally remain in place for 90 days past the date the affected farm is cleaned and disinfected." The good news is that unlike Thailand, which saw its broiler exports fall by up to 90% at one point, no such dark fate awaits America's poultry industry.
By supplying over a third of world poultry exports, top importing countries cannot afford to ban US poultry meat the way they did Thai frozen chicken for nearly a decade: That would cause their domestic chicken prices to skyrocket, thereby creating political headaches in many of the importing countries themselves. That is also why that with the exception of China and South Korea, most bans expire 90 days after the affected US state or country cleans up the infected broiler farm and reports no more bird flu cases from that region.
The bad news is that while most bans on imported US chicken are temporary and regionally based, this tendency for H5N2 outbreaks to keep recurring is making for a very problematic situation. As long as H2N1 outbreaks keep occurring, the various temporary bans on US chicken imports will be rolled over from one set of US states in one quarter to a newly afflicted American poultry exporting regions in the next three month period.
Hence, with bird flu now repeatedly breaking out and even infecting top producing states like Arkansas, an export decline of more than 10% and even up 20% is plausible. With 20% of US chicken output sold abroad and a rising dollar already making it difficult to export, a drop of that magnitude, while not catastrophic, means that this year's profits will be nowhere near last year's level.
For example, out of the US$3 billion of chicken exports last year, South Korea and China (which announced total bans on its import) bought US$428.5 million. Together with several hundred million dollars in lost exports to other countries, that will hurt US chicken producers.
On the other hand, with US$45 billion in 2014 revenues, the drop in exports of even up to a billion dollars, while hardly desirable, is nothing compared to what Thailand (which was faced under 50% capacity utilization at one point) went through during its bird flu epidemic and subsequent bans.
Vaccines are NOT the answer
Interestingly, despite industry pressure to find a 'magic bullet', a bird flu vaccine like the ones currently under researched may not be the answer. In fact, in an article in the April 27 2015 issue of New Scientist, Henry Wan, the Mississippi State University researcher who discovered H5N1 in 1996, states that using such vaccines may create a far larger problem than the current epidemic: An unending succession of endemic, chronic avian influenza outbreaks like the ones now seen in China, Indonesia and Egypt.
According to the New Scientist article, "Vaccination has moreover driven the evolution of H5N1 as these viruses adapt to the vaccinated birds. China is now trapped, say researchers: It wants to give up expensive poultry vaccination, but if it did, ubiquitous, silent infections with H5N1 would decimate the unvaccinated birds."
For this reason, Wan states that, "vaccination will always be the last option for avian influenza." This means that after summer's warmth stimulates bird immune systems and sunshine's UV light kills viruses, bird flu may make a second return come autumn, when wild ducks could reintroduce it into the domestic poultry population. This however, might be preferable to America falling into the same vaccine-driven trap that China's beleaguered poultry sector now finds itself in.
Advantage, Brazil
It also means that poultry will follow pork, as the second major US meat exporting lines in two years to have its world prospects dented by a disease outbreak. However, while Brazil does not have the means to eat America's breakfast in the world swine market, it has more than enough productive capacity to take advantage of America's woes in the world broiler market.
Boosted by the real's 35% fall against the US dollar since last August, Brazil was initially expected lose market share to smaller, regional competitors like Turkey and Thailand. Instead, amid constrained supplies of more costly US broiler meat, Brazil will probably take more market share from the US broiler sector than it loses to second tier exporters.
Over the medium term, H5N2 will make America's broiler sector more domestically oriented, with its share of the world broiler market slipping towards 30% and Brazil's approaching 40%
All rights reserved. No part of the report may be reproduced without permission from eFeedLink.
