Lending markets

Avian flu remains a threat to poultry supply and export markets | Poultry

The widespread outbreak of highly pathogenic avian influenza that rocked US poultry production earlier this year and led to soaring egg and turkey prices has subsided. HPAI cases have decreased significantly with warming temperatures and the end of the migratory season for wild birds. However, the risk of another outbreak this fall remains high and the stakes for poultry producers couldn’t be higher, according to a new report from CoBank’s Knowledge Exchange.

The value of poultry products had increased significantly before this year’s HPAI outbreak due to limited supply and strong consumer demand for animal protein products. The added burden of HPAI-related supply shocks further exacerbated tight market conditions, sending values ​​soaring. Table egg prices tripled in several markets and turkey breast meat reached historic highs.

Similarly, the value of US poultry exports through June was up 19% year-over-year. In 2021, total U.S. poultry exports reached $5.9 billion, and the current pace of exports points to an all-time high potential in 2022. Increased reliance on export markets for certain poultry products such as chicken feet and thigh quarters increases the vulnerability of subject exporters. possible commercial restrictions that could result from future outbreaks of HPAI.

“Fortunately for U.S. poultry exporters, current global views on HPAI-related trade restrictions have eased since the last major outbreak in 2014 and 2015,” said Brian Earnest, chief animal protein economist at CoBank. “Rather than a blanket ban, trading partners established new restrictions at the county, state or regional level because epidemics had become commonplace around the world, not coincidentally, because politicians around the world worried about the rapid escalation of food prices following Russia’s invasion of Ukraine.”

Although current trade restrictions are limited, this could change. At the start of the HPAI outbreak in 2014, China immediately closed its borders to US poultry, and prices for export-dependent leg quarters fell by 50% between mid-2014 and mid-2015. Chicken feet prices have fallen even further. Chinese markets won’t reopen to US poultry until 2019, which happened under the US-China phase one trade deal.

The 2014-2015 HPAI outbreak devastated US producers, with direct costs associated with the euthanasia and slaughter of 43.2 million laying hens and 7.3 million turkeys estimated at 1, $6 billion. Including associated recovery costs, the total jumped to more than $3.3 billion.

Since this outbreak, poultry production in the United States has increased by an average of 2% per year from 2016 to 2020. Dependence on exports has continued to increase and access to foreign markets remains vital to the economy. poultry industry in the United States. With the stakes much higher, it is even more crucial for producers, consumers and other entities along the value chain that the production flow is safe from the threat of animal disease.

What future for the egg, turkey and broiler markets?

The HPAI shock to domestic markets was more severe than during the 2014-2015 outbreak, which is considered the biggest outbreak in history. The hardest hit sectors this year are egg and turkey producers, much like the last outbreak. And while industries have implemented best practices over the past seven years, production methods haven’t changed much.

In 2015, the US egg industry experienced an immediate increase in productivity rates after mass depopulation, followed by a flattening for several years. With feed, labor and other production costs much higher today, Earnest expects producers to be slower to rebuild their herds this time around.

“A smaller national layer flock means a smaller egg supply in the coming months, higher egg prices and fewer eggs consumed,” he said.

Coinciding with outbreaks of HPAI in U.S. turkey flocks this year, wholesale cash market values ​​for fresh tom breast meat have eclipsed $6.50 a pound in recent weeks, a level previously deemed unreachable. Meanwhile, cold store breast meat fell to a low of 43 million pounds in April, before safety stocks started to recover slightly again in May.

The impact of HPAI on broiler meat production in 2015 and 2022 appears minimal. But the impact on exports and prices is decidedly different this time around. US chicken meat exports fell by nearly a billion pounds in 2015 and dark meat prices fell. However, export markets look more favorable for U.S. chicken meat in 2022. The current 12-month total is less than 1% of the volume reported a year earlier and the 2022 total is on track to reach the best volume of 2015 of more than one billion books.

CoBank is a cooperative bank and member of the Farm Credit System.