AI Market Ramifications

At the onset of avian influenza (AI) outbreaks in 2004 consumption lagged in Asia and the loss of export markets for regional supplies led to an 8% decline in international trade. Over 2 years, as nondisease affected countries moved to fill in the in available supplies, poultry prices were driven up in international markets by over 30%. The overall price impact on poultry prices were additionally aggravated by shortages of other meats in international markets, particularly beef from North America due to BSE.

In November, 2005 forecasts were being made the world broiler industry in 2006 would mark the first year in which broiler exports were expected to increase 7% resulting in broilers surpassing beef exports. Poultry’s share of global meat trade has risen from 22% in 1990 to 40% by 2005. In 2006, the U.S. broiler exports were initially expected to increase 2% to just over 2.5 million tons.

Analysts were also anticipating in 2006 a continuation of the previous trends in which poultry prices would continue to climb, global meat consumption would decline and trading patterns would shift to fill in any gaps. In addition, spill over effects would be noticed in the feed industry as lower meat production due to avian influenza, BSE and various other diseases pushes down grain consumption. Europe’s $42 billion dollar feed sector was citing demand losses up to 40% in some countries in response to their crisis.

As 2006 began to progress it has started to indicate a very different market environment. Unlike in 2004 and 2005 when the AI consumption impact was largely restricted to the Asian region, new AI detections in February, 2006 have risen to more than 20 nations in Africa, the Near East and Europe have resulted in immediate and pronounced consumption declines in importing countries in Europe, the Middle East and Central Asia.

India just recently announced the detection of its first case of HN51 forcing it to cull 200,000 chickens. Declining international and domestic prices are expected to restrict both production growth and import demand. An erosion of previously expected gains in per capita poultry consumption will likely push down global poultry consumption in 2006. Current estimates by FAO are nearly 3 million tons lower than the previous 2006 estimate of 84.6 million tons. Global trade prospects are anticipated to erode from the gains witnessed in 2005. Sharp poultry price declines are leading to lower chicken placements in many affected countries, pushing FAO’s production projection down 8.2 million tons, only marginally higher than 2005. However, history seems to reveal that changing consumption and trade patterns related to zoonotic animal diseases tend to recover within 2 years.
Sources: USDA/FAS, UN/FAO and various news sources

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Source: USDA's Agricultural Marketing Service - 7th March 2006