Poultry Exports: Coping with Bird Flu
U.S. poultry exports continue to face one of their worst crises ever, thanks to the recent outbreaks of bird flu in Texas, Delaware, and other states. Since the first case was reported in Delaware in early February, more than 60 countries have imposed full or partial bans on U.S. poultry.
The strains of flu that have appeared in the United States, in contrast to some in Asia, are not harmful to humans. However, their appearance has caused widespread concern among trading partners and threatened $1.5 billion in annual poultry exports.
Although Wayne Farms exports a smaller percentage of its total production than many competitors (about 11% by weight compared to the industry average of 15%), the effect of the bans has been substantial.
The most serious impact has been the loss of China, which has traditionally purchased large quantities of drumsticks and wing tips, as well as virtually all of the company's chicken paws.
Wayne Farms CEO Elton Maddox notes that there is simply no market
for paws except China, and that unexported paws go directly to rendering. China's purchases of drumsticks are also important since the company's primary industrial and food service customers do not purchase much of this product. At the same time, since the company is not in the retail business, it lacks an alternative outlet for drumsticks and is forced to sell most of them on the export market.
As a result of China's ban, the company has also had to deal with containers that were already in transit when trade was blocked. ContiGroup COO Vart Adjemian notes that Asian Industries SVP Mike Hoer and Merchandising Manager Betty Tsui have done a very good job managing this situation and limiting its financial impact on the company. "Mike and Betty worked closely with the local authorities and Wayne Farms to clear many of the containers that were in transit or held up in customs" says Vart. "The impact would have been much worse if they had not been on top of the situation."
In addition to their effect on exports, the flu outbreaks have also had an impact on the production side. The company continues to restrict access to facilities and, in keeping with the second of its three biosecurity levels, has also been taking steps to sanitize the wheels of feed trucks and other vehicles.
"We're very concerned about controlling access and maintaining a strong level of biosecurity," says Elton. "We have 1500 contract growers throughout the Southeast, and we need them to be careful about who is coming into and out of their farms."
Despite the flu's impact, it is important to note that prices for most products—both high-end and low-end—have remained remarkably strong over the last several months. Elton notes that this strength can be traced to two key factors. First, the industry has rationalized production, sending fewer eggs to hatcheries and placing fewer chicks at farms. This has meant less volume than in previous years and has helped to keep prices high.
The second reason is higher demand, fueled in large part by Atkins and other similar diets. "South Beach and Atkins are no longer just fads. They're becoming lifestyles and they're leading a lot of people to consume, or at least to purchase, more meat protein," says Elton. He adds that poultry has also benefited from high beef prices over the last year—prices that have themselves been spurred in part by the popularity of low-carb diets.
As for controlling avian flu over the long term, there are no easy answers. One part of the solution, however, clearly involves stricter control over live poultry markets. These largely unregulated markets have been identified as a major factor in bird flu transmission, both overseas and in the United States. "We know that live markets have been a source of the disease in Asia, and we're seeing the same thing here," says Elton. "Hopefully we'll see tighter regulation of these markets in the U.S. and be able to reduce the risk of future outbreaks."