February 5, 2004

Small-Scale Broiler Operators in China Facing Threat to Survival

An eFeedLink Exclusive Report

Of late, China¡¯s broiler operators are facing up to incur huge losses, as export activity has basically been brought to a standstill and local demand dropped, due to the bird-flu outbreak.

The impact on the bigger large-scale broiler exporters is somewhat measured. Being bigger, they have relatively longer production chains and their modern processing facilities help to keep chickens temporarily frozen to cut down losses.

At minus 18 degree Celsius, broilers can be preserved for up to a year. As such, the most significant impact of the bird flu crisis on large-scale broiler operators in China is an increase in inventories. Their stronger capability to withstand market risks enables them to suspend exports temporarily against the plunging domestic broiler demand, thus minimizing extensive financial losses.

With the temporary suspension of broiler exports, China¡¯s large-scale broiler exporters are therefore switching from export markets to sell their produce in domestic markets. With this move, the smaller-scale operators' market shares will soon be negatively affected.

As the Chinese government has recently forbidden slaughtering of live chickens in common retail sales outlets, the lack of advanced processing facilities would prevent domestic small-scale broiler operators to meet the newly imposed regulations.

If their predicament continues for an extended period of time, some of the small-scale broiler operators would face extra costs pressure, with several expected to be forced to shut down their businesses. Since the outbreak of bird flu in January, a large number of small-scale broiler operators China have already temporarily halted their procurement of day-old- chicks, market participants revealed.