February 10, 2004

Further Gains For Brazil Chicken Export Following US Bird Flu

Brazilian chicken exporters are expecting further growth following the bird flu outbreak in the United States.

News of the outbreak in the U.S. state of Delaware, where some 12,000 chickens are being exterminated, should boost orders for Brazil's leading chicken companies: Sadia SA (SDA), Perdigao SA (PDA) and Seara SA. Officials from these companies weren't immediately available for comment. Their shares rallied last month as the flu spread in Asia, though they have yet to trade Monday.

"At first sight, this is an enormous positive for Brazilian exporters," said Basilio Ramalho, an equity analyst at the Unibanco brokerage in Sao Paulo. "Even if it's for a short period, the biggest exporter (the U.S.) will be out of the market and the obvious country to fill that role is Brazil."

Brazilian chicken exports have grown rapidly in recent years. Brazil said that it overtook the U.S. last year as the world's top chicken exporter in dollar terms. The U.S. is still the top chicken exporter in terms of volume.

Last year, Brazil's chicken export revenues rose 18% to $1.8 billion. That helped the government post a record trade surplus last year of $24.8 billion, allowing the government to close its current account deficit for the first time in a decade.

Brazil's chicken exporters association, or Abef, forecast sales volume to rise 10% this year before news of the outbreak in the U.S. The U.S. and Thailand, which have both been hit by Avian flu, are Brazil's main competitors as chicken exporters. Export revenues should also rise thanks to rapidly rising global prices.

In response to the flu problem in Delaware, Japan, South Korea, Singapore and Malaysia issued bans on U.S. chicken imports. Russia, a major buyer of U.S. chicken, has yet to respond.

Brazil's agriculture ministry is expected to issue a similar ban on U.S. chicken imports after recently banning imports from about a dozen Asian countries infected with the flu. Though Brazil imports little chicken, it hopes to protect its flock from infection.

Indeed, as a source at one major chicken producer said: "The spread of the flu is sad because I'm worried it could get here."