Bird flu hits China's poultry consumption, curbs soybean demand

Business & Markets 2013
Written by Reuters
Thursday, 25 April 2013 09:54
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SINGAPORE/BEIJING, April 25 (Reuters) - A dropoff in Chinese
demand for soybeans used to feed poultry and livestock could last for
months, as consumers lose their appetite for poultry in response to a
deadly bird flu virus outbreak and amid lingering images of rotting pig
carcasses floating in a river.
China, which buys 60 percent of the world's traded soybeans, could
further reduce bean imports this year - already down some 13 percent
year to date on food security concerns and high stocks - which will likely
curb a rally in benchmark Chicago prices.
Authorities have culled tens of thousands of birds as it tries to contain
the spread of the H7N9 virus that has killed 22 people and infected 108
since the first deaths were reported in March.
"We are not eating chickens anymore," said Shao Fei, a 35-year-old
office worker in downtown Shanghai. "We have tried to switch to beef
and fish, but those are expensive, so we are having a lot more
vegetables at home these days."
In Shanghai, where the flu has been most pronounced, about 111,000
birds had been culled as of last week and authorities have shut down
live poultry trading at 196 markets. The impact has been felt among
restaurants on Shanghai's streets. One popular chain, The Grandma's,
has pulled a popular green-tea chicken dish off the menu.
Poultry sales have dropped by 80 percent in eastern China and by about 30 percent in other parts of the country, analysts
and industry officials say. Fewer birds to feed means less demand for soybeans and corn.
"We don't see any signs of recovery" for poultry consumption, said Wang Xiaoyue, an analyst at Beijing Orient Agri-business
Consultant Co. "There is a possibility of 20 to 30 percent decline in consumption this year if the flu lasts for some time."
The price of one-day-old chicks, which poultry farmers buy from breeders to restock, have plunged more than 85 percent,
according to the National Poultry Industry Association.
Breeders have scaled back and, in the northeast city of Shenyang, millions of baby chicks were burned as prices fell to 0.5
yuan each compared with 4.75 yuan per chick last year, local media reported.
SETBACK FOR PRICES
"The bird flu could have a big impact as the poultry sector consumes almost half of total feed production," said Jean Yves

Chow, a senior livestock industry analyst at Rabobank in Hong Kong.
"The slowdown could last for one or two quarters depending on how quickly the government is able to contain the disease."
China's soybean imports had risen for eight consecutive years, rising almost five-fold to 58.39 million tonnes in 2012 from
10.43 million tonnes in 2000, driven by rising wealth and demand for high-protein food such as pork, poultry and seafood.
China now accounts for half of the world pork consumption and close to 15 percent of the global poultry production.
China's soybean imports in 2012/13 could still be in line with last year's level because of strong growth in pork consumption,
the China National Grain & Oil Information Center said.
But this year, soybean imports have already dropped more than 13 percent to 11.49 million tonnes in January-March from a
year ago as port congestion in Brazil delayed shipments while demand slowed partly in response to a tainted chicken
scandal.
Lower soybean stocks should typically translate into increased purchases, but that has not materialized.
"There is no rush to buy," said a trading manager at Singapore-based international trader. "In a normal situation it would have
resulted in aggressive buying."
Soybeans are crushed to make soymeal, which is used with corn to make animal feed.
A decline in soybean imports by China, which buys close to a quarter of the world's soy production, is likely to be bearish for
Chicago Board of Trade prices. However, benchmark prices have notched their biggest two-week gain since early
September, driven by tight old-crop supplies in the United States.
Bird flu fears could also reduce China's corn imports, which are expected to climb to a record 6-7 million tonnes in the
2013/14 marketing year beginning Oct. 1 on lower domestic supplies.
The avian influenza was first detected in China's commercial capital Shanghai and adjoining provinces at the end of March but
cases have since been reported in the northeastern and central parts of the country. Investigators have yet to detect any
human-to-human transmission of the virus.
The bird flu outbreak comes after some 16,000 pigs were found dead in China's Huangpu river last month, and KFC's parent
Yum Brands saw its sales slide following the tainted chicken scare late last year, heightening concerns over food safety in
China.
On Tuesday, Yum, which runs more than 5,100 restaurants across China, warned that fears surrounding the flu were
continuing to depress sales.
Analysts said consumption of pork, the staple meat for Chinese consumers, remained steady. China had per capita animal
protein consumption of 76.2 kilograms in 2010, one of the highest in Asia, according to analysts. That compared with U.S.
protein intake of 129.5 kilograms per person in 2010.