Markets react to West Bengal avian flu
India’s domestic and overseas markets are severely disrupted by the current H5N1 outbreaks.
28 January 2008; United Kingdom—Agriculture and food minister of West Bengal, Sharad Pawar, tried to calm the situation by claiming that the outbreaks of H5N1 (highly pathogenic avian influenza; HPAI) had not affected India’s domestic and overseas poultry market. “There is no major impact on the market,” said Pawar, but just three days into the outbreak (on 18 January 2008), his optimism was proving misplaced. Experience shows markets react quickly and sometimes violently to reports of H5N1 real or imagined and this latest outbreak in the north-eastern corner of India proved to be no exception. Markets began to suffer almost immediately whether in the state, in neighbouring states like Bihar, Jhorkhand and Assam, in major industrial poultry producing states like Andhra Pradesh (AP) and Tamil Nadu (TN) or for overseas export.
Poultry prices falling
Repercussions were felt country-wide, with egg and meat prices in New Dehli falling up to 30%. “Consumption of poultry and eggs has come down by about 25%, leading to a crash in prices of these products,” explained Surjit Singh, managing director of Chandigarh-based Sagri Hatcheries told the Business Standard. Chandigarh serves as state capital for both Punjab and Haryana and is one of the wealthiest cities in India. Singh said prices had started to fall since the large-scale mortality of poultry was first reported in West Bengal, before the outbreak was confirmed. By 18 January, chicken prices in New Delhi had fallen from Rs50 to Rs38/per kg, while egg prices (100 eggs; ex farm) had declined from Rs200 to Rs140.
Poultry prices in Kolkata (Calcutta; state capital of West Bengal) were already dipping when the outbreak was confirmed on 15 January. Wholesalers were selling broiler chicken for Rs53/kg when the day before it was Rs55/kg. Traders in Kolkata’s Kole wholesale market told The New Statesman how sales had slumped to a quarter of normal trading with hotels ordering 20% less than usual, leading to a progressive fall in prices. By 22 January, chicken sales in Kolkata were down 40%.
Traders were at pains to reassure the buying public that poultry was being sourced from unaffected areas but as one restaurant owner said, “All the chickens brought in from districts such as Birbhum and Murshidabad (both with early confirmed outbreaks) can’t have been sold off. It is not without risk to buy chicken even in Kolkata. Some of the chicken might be diseased. Even if guidelines from the Union Health Ministry are followed, the person preparing poultry is subject to risk.” There was clearly suspicion that poultry from infected areas was being dumped on the market before the culling teams could get to work.
As H5N1 was confirmed in districts neighbouring Kolkata, all eyes were focussed on the state capital’s urban sprawl, comprising 15 million people and scores of poultry markets. To eat or not to eat chicken and eggs became the big question in Kolkata, said Times of India (TOI).
WB officials advise against eating poultry
Clearly stung by severity and speed of spread, West Bengal health department asked the people of Kolkata on 26 January not to eat chicken or eggs for the next 10 days at least. This official advice conflicted with strategy of the National Egg Coordination Committee (NECC) which was going all out to convince the population of Kolkata that eating eggs and chicken is safe.
According to TOI, the resulting confusion caused intervention by the Union Health Ministry. Health secretary Naresh Dayal said, “The situation in West Bengal is grave. The state government has already asked people to stay away from poultry products,” apparently supporting local authorities and overriding previous official advice given to the public on safe preparation, cooking and consumption of poultry. Meanwhile, poultry culling in districts around Kolkata city was frantic and frenetic as the authorities strived to keep disease out of the state capital.
Exports of live chicks from West Bengal to neighbouring states were badly hit when Jharkhand and Bihar imposed blanket bans on the import of chicks from that state. Dilip Chakraborty, principal secretary of the animal resource development department, told Hindustan Times how West Bengal exports 40,000 chicks to Jharkhand and 60,000 to Bihar every day. By 23 January, the state had disbursed Rs70 million in compensation for poultry culled, with a further Rs50 million allotted that day as the cull continued to rise.
Effects were especially severe on the main poultry-producing states like Andhra Pradesh and Tamil Nadu, which supply poultrymeat and eggs to export markets as well as other Indian states. Andhra Pradesh produces daily 50 million eggs and 600,000 broilers , accounting for 30% of the entire Indian poultry industry worth Rs320 billion. The poultry industry there moved quickly to protect its huge investment with a cap on the retail price of eggs, temporary cutbacks in egg production and publicity campaigns to maintain consumption.
Traders strike tough deals with producers
“This is both to reduce the losses and stabilise the market,” explained K.V.S. Subba Raju, Chairman of NECC’s Hyderabad zone, to Hindu Business Line. The Poultry Federation placed a cap of Rs135 per 100 on the retail price of eggs to boost farmer morale. Price had already plummeted from Rs175 per 100 to around Rs100, causing huge losses for poultry farms because break-even point is Rs150. Broilers prices were also hit hard.
Poultry farmers in the Hyderabad are of Andhra Pradesh decided not to fall prey to questionable tactics of dealers and traders. “They are trying to fish in troubled waters. They are quoting a lesser price, saying that another farmer had agreed to sell at a low price,” claimed one poultry farmer from Rangareddy district. Subba Raju called on farmers to stay united, not to give into such arm-twisting by traders and not to resort to panic selling. He said, “Unlike in the earlier crisis [in Maharashtra and Gujarat in 2006], this time around consumers are not shying away from buying eggs and chicken. The problem lies with the traders.”
There were immediate problems at both producer and consumer levels. In addition to depressed sales of poultrymeat and eggs in retail outlets, the West Bengal poultry industry stopped taking the 500,000 hatching eggs normally received from Andhra Pradesh everyday.
Down the east coast of India in neighbouring Tamil Nadu, another huge poultry industry was reeling under the impact of avian flu thousands of kilometres away from West Bengal. Tamil Nadu exports worth more than Rs22 million (US$560,000), most destined for Arabian Gulf countries, were stranded on the dockside. The huge concentration of farms (800) in and around Namakkal [the state’s poultry capital], and 700km from the state capital Chennai, rears 30 million chickens and produces 20 million eggs a day, representing 15% of Indian production.
An incredible six million eggs are normally exported daily mainly to Middle Eastern and West African countries from Tamil Nadu. Among consignments languishing dockside were 22 containers full of eggs destined for Oman and Qatar before these countries imposed bans on Indian exports. “Our egg consignments to the Middle East are lying at the harbour. If the situation persists, it will be very bad for egg exports,” V.K. Sivakumar of VKS Exports told IANS.
Exporters were trying hard to divert consignments to alternative buyers in West Africa to cut down on losses before the 90 day shelf-life expired. Middle Eastern countries imposed bans on Indian eggs following the H5N1 outbreak in 2006 and all (except UAE) resumed purchases after the World Health Organisation (WHO) declared India free of avian flu. Indian egg producers started to explore new export markets, shipping eggs to Kyrgyzstan, Albania, Afghanistan, South Africa, Sierra Leone and Angola. Middle Eastern countries remain the most important markets for Indian eggs and especially those from TN. By 24 January, TOI was reporting cumulative losses for Tamil Nadu poultry industry approaching Rs5 billion.
Countrywide, the situation became dire as H5N1 sliced into production, sales and profits of India’s gigantic poultry industry. Amit Sachdev, market analyst and India representative of US Grains Council, told Financial Express that around 40 million birds are sold every week on the Indian market, and that losses are estimated at Rs100 million a day. With 134 million eggs sold per day, additional daily losses are estimated at Rs65 million.The HPAI outbreak in West Bengal has already clocked up a projected cull of between two and three million birds – much higher than the one million birds culled in 2006. The response from export markets was surprisingly muted. Nepal, Bhutan, Sri Lanka, Oman and Qatar lined up impose bans on Indian poultry exports. UAE had been about to lift its ongoing restriction but decided to leave the ban in place.