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H7N9 bird flu threatens global poultry outlook

By Carina Perkins, 30-May-2013

Related topics: Industry & Markets, Products, Environment, Livestock, Financial, Analysis, Poultry

The outbreak of H7N9 in eastern and central China could threaten the outlook for global poultry sales, according to the latest quarterly poultry report from Rabobank.

The report found that the outlook for the global poultry industry had improved due to a better balance in supply and demand, falling feed costs and higher prices for red meats such as beef and pork.

However, it added that the impact of the bird flu outbreak on the Chinese industry and weak global trade developments would prove “key wildcards” for the rest of the year.

“Conditions for the global poultry industry have improved thanks to a further slowdown in feed price growth which is helping to boost margins,” said Rabobank analyst Nan-Dirk Mulder.

“Whilst we expect this trend to continue, a positive outlook will depend very much on how well the industry can balance its markets and on whether the bird flu outbreak in parts of China can be contained. If it were to spread further across the Asian region, we can expect an impact on poultry markets globally”.

China’s industry has been under considerable pressure since the outbreak of H7N9, which has infected over 130 people and killed 36 patients. Demand for poultry in China has plummeted and authorities have slaughtered thousands of birds, with farmers waiting to see how the outbreak pans out before replacing stock.

There have been no new cases of H7N9 in recent weeks, resulting in some stabilisation of poultry demand, but it is expected that it will take some time for the market to recover completely and current estimates suggest the industry has already lost as much as RMB40bn (US$6.5bn).

Regional authorities in affected areas of China have pledged financial support in the form of purchasing programmes and compensation for slaughtered birds in a bid to limit the damage and the Chinese government has implemented a RMB 600 million breeding programme to ensure future supply, but prices remain low.

Elsewhere, the US and Brazilian poultry industries saw an improvement in the second quarter, and Thailand’s poultry industry benefitted from oversupply and strong demand in the EU and Japan.

The EU remained the weakest performing region for poultry as a result of “relatively high feed prices combined with abundant supply,” said the Rabobank report.