November 21, 2005

Broiler producers in China facing massive losses consequence of bird flu

An eFeedLink exclusive report

Within a period of one month, bird flu had hit poultry populations in China's provinces of Hunan, Liaoning, Anhui and Hubei as well as the automonous regions (AR) of Inner Mongolia and Xinjiang. Two outbreaks have been reported each in Liaoning and Anhui, where live birds within three kilometres from the affected areas have been culled. In China, the total number of live birds culled has reach 13 million.

Broiler producers in the major production regions of China had been badly affected by the recent slew of outbreaks, which had caused broiler prices to plummet. Prices of China breed broilers have fallen by 36 to 45 percent, from RMB5.50-5.60/kg before the bird flu to RMB3.00-3.60/kg. Prices of day-old chicks registered a 70 to 80-percent decline from RMB1.00/kg to about RMB0.20-0.30/kg. In some provinces, poultry producers had to cull day-old chicks as buyers have mostly stayed away from the markets these days.

In order to control the bird flu situation, Chinese authorities have banned the trade of live birds in wholesale markets in Beijing, Tianjin and Xiangtan (Hunan). Demand for poultry products have also fallen sharply following the bird flu. In some regions, consumption has fallen by as much as 70 percent.

In Henan province, restrictions on exports of broiler meant that producers in the province have to depend on domestic consumption to drive demand. Farmers there faced difficulty in selling their day-old chicks and some breeders have stopped breeding yellow-feathered chickens.

In Guangxi Zhuang AR, prices of fast-growth broilers (49 days) have fallen from RMB5.80/kg to RMB3.60/kg. Meanwhile, prices of day-old chicks there have reached a low of RMB0.30/kg, RMB0.50/kg below prices before the bird flu.

In Guangdong province, poultry sales have declined by more than 50 percent following the bird flu outbreak. Prices of different breeds of broilers have fallen sharply and poultry producers are already incurring losses. Sales of day-old chicks have slid as farmers cut back on stock replenishment. Some farmers have even resorted to culling day-old chicks as a preventive measure.

In Jiangsu province, prices of white-feather broilers had fallen from RMB4.40/kg to RMB3.60/kg. Prices of China-breed broilers in Suqian district of Huaian county had reached a low of RMB3.20/kg. Poultry producers are facing challenges of an unprecedented scale, with some of them facing a loss of RMB5.00 per broiler. With no improvement in the demand for day-old chicks, many hatchery operators have suspended operations.

Although there were no reported cases of bird flu in Sichuan province, poultry producers there were still worried about possible outbreaks. Broilers prices there have also weakened and some producers there have also started to cull day-old chicks.

Compared to the other provinces, the impact of the bird flu on broiler prices in Shandong province is relatively small. However, the bird flu impact on prices of day-old broiler chicks is greater compared with that of day-old layer chicks. Prices of day-old broiler chicks in the province have fallen by RMB0.5-0.8 per chick. In some areas, prices have dropped to RMB0.2 per chick. Meanwhile, prices of day-old layer chicks have only fallen marginally.

On Nov 15, China's agriculture ministry reported fresh bird flu outbreaks in Urumqi and Zepu in Xinjiang Uyghur AR after 1347 poultry birds were found dead. Authorities in Xinjiang have culled 322,500 live birds in the vicinity of the affected areas.

Since the first outbreak in October, the Chinese authorities have taken every effort to ensure that they are effectively controlled. Affected areas have been sealed off to prevent further spread of the virus. As of Nov 15, the Ministry of Agriculture has lifted restrictions on movements of people and traffic in the affected areas of Xiangtan (Hunan) and Tianchang (Anhui) after outbreaks there have been successfully contained. Meanwhile, the situations in other regions are being closely monitored.

Without any doubt, the greatest losers amid this slew of bird flu outbreaks are the broiler producers. In Liaoning, the government has only compensated farmers RMB10.00 for every live bird culled. In turn, these farmers have to bear a loss of RMB3.00 to 5.00 per live bird.

With the discovery of more outbreaks, many poultry producers and consumers are beginning to worry that the virus may continue to spread relentlessly. In China's major poultry-producing provinces, broiler chick hatcheries have suspended their operations and many day-old chicks were culled. Poultry consumption in the major cities has declined by as much as 70 percent. Since the banning of live bird trade in Beijing's wholesale poultry markets, authorities have also prohibited or restricted the sales of live birds in other provinces.

The bird flu has, and will remain the focus of the broiler trade in China for a while. The decline in broiler stocks in many poultry farms will certainly result in their short supply in the next few months. If the bird flu can be completely eradicated by then, the steady return of consumer confidence in poultry products accompanied by the shortage in broiler supply are likely to lead to soaring broiler prices. On the other hand, if the bird flu situation worsens, broiler producers' losses would be immense.

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