The impact of China's bird flu outbreak on poultry production and feed demand remains uncertain but may be less than initially feared. As reported last week, China's bird flu incidents saw live bird markets close around the Shanghai region and in South China.

As cases spread to other regions such as Beijing and Henan, the effects of these closings and the reduction of poultry inventories will reduce feed consumption in the poultry industry. However, if consumers switch to pork instead of poultry meat, this will offset the losses in the poultry sector and reduce the net effect on feed demand.

"Since hogs are less efficient converters of feed to meat and use a higher proportion of energy feeds like corn, any substitution of pork for poultry that occurs will dampen the negative effect of reduced poultry production on feed demand, particularly corn," said Bryan Lohmar, U.S. Grains Council director in China. "Conversely, fish are more efficient converters and use less energy feed, so if consumers switch to fish this will help soybean increase demand a little, but not corn."

While there are no confirmed reports, there are suggestions that people may be substituting pork for poultry. Some shoppers who shun poultry will instead buy pork, and groups at restaurants may order two pork dishes rather than the more typical one chicken and one pork dish.

Research has shown that pork is the primary substitute for chicken. There is also speculation that consumers are avoiding meat in general, which could have more negative implications for corn feed demand. Fish prices are however rising, an indication that consumers may be substituting fish for poultry, not pork.

The ultimate effect on feed demand will depend on the duration and geographical spread of the outbreak. So far, all but five cases have been found in Shanghai, Jiangsu and Zhejiang provinces, home to about 11 percent of China's population.

 

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The five additional cases have been found in Anhui (2), Henan (2) and Beijing (1), home to another 13 percent of China's population. If we assume these provinces represent also about 25 percent of China's poultry consumption, and about half the birds are slaughtered in these provinces over one month's time (a liberal assumption), then that would result in only a little more than a one percent reduction in poultry production.

At a feed industry conference today in Chengdu, some poultry producers expressed the view that there is too much hype over the problem, and they are already getting ready to restock inventories.