Impact of China’s Bird Flu Outbreak on U.S. Grains

According to the U.S. Grains Council - the impact of the bird flu outbreak in China on poultry production and feed demand is uncertain. As live bird markets close - the Council says the reduction of poultry inventories will reduce feed consumption in the industry. But if consumers switch to pork - the losses in the poultry sector will be offset - reducing the net effect on feed demand.

U.S. Grains Council Director in China Bryan Lohmar says any substitution of pork for poultry will dampen the negative effect of reduced poultry production on feed demand because hogs are less efficient converters of feed to meat and use a higher proportion of energy feeds like corn. If consumers switch to fish - Lohmar says soybean demand will likely increase some.

The Grains Council says there are no confirmed reports - but there are suggestions people may be substituting pork for poultry. There is also speculation consumers are avoiding meat in general. The Council notes that could have more negative implications for corn feed demand. Still - fish prices are rising - indicating consumers may be substituting fish rather than pork for poultry.

The ultimate effect on feed demand - according to the Grains Council - will depend on the duration and geographical spread of the outbreak. Crunching numbers based on the location of the cases so far - the U.S. Grains Council found a little more than one-percent reduction in poultry production. But if the virus continues for another month or two and spreads around the country - the effect would be more significant.

The Council notes China produces around 17-million metric tons of poultry meat - so a five-percent reduction is 850-thousand metric tons of meat. A five-percent reduction in meat production would result in about 2.25-million tons (88.5-million bushels) reduction in corn feed demand - or about 1.6-percent of China's 144-million tons (5.6-billion bushels) of USDA's estimated corn feed demand for 2012-13 and 1.1-percent of USDA's estimated 207-million tons(8.1-billion bushels)2012-13 total corn demand in China.

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