A case of bird flu confirmed Wednesday in the heart of America's poultry region, is certain to mean more export restrictions, increasing U.S. supply and likely forcing the world's biggest poultry companies to trim prices.
The U.S. government announced the infection of highly pathogenic H5N2 avian flu in turkeys in Arkansas -- home to Tyson Foods Inc, the world's biggest chicken company. The virus is unlikely to kill enough U.S. birds to offset the drop in overseas demand, however.
There will be "more product on the domestic market and that will depress prices," said Jessica Sampson, agricultural economist at Livestock Marketing Information Center.
Shares in producers Tyson, Pilgrim's Pride Corp and Sanderson Farms Inc tumbled on Wednesday, with Tyson's stock price hitting its lowest point in five months and the stock price for JBS SA unit Pilgrim's Pride dropping as much as 9 percent.
The USA Poultry & Egg Export Council said it expects 30 to 40 additional countries to impose new trade restrictions on U.S. poultry and eggs in the $5.7 billion export market. Additional limits could come from Mexico, the top U.S. chicken importer, which already is blocking poultry imports from Minnesota, Missouri and California due to bird flu, the trade group said.
Previous cases of avian flu in other states triggered China and South Korea to recently impose bans, still in effect, on U.S. poultry imports. Last year, they accounted for about $428.5 million in export sales of poultry meat and products, according to U.S. Department of Agriculture data.
Other countries have banned exports from only states or counties with positive cases of avian flu.
With the export market already hit by the strong dollar, "we don't need anything else that would make those exports any softer," said Mike Cockrell, chief financial officer for Sanderson Farms.
The United States exports about 20 percent of the chicken it produces and about 14 percent of the turkey produced, according to Livestock Marketing Information Center.
While the H5N2 strain poses no threat to human health, according to USDA, it is deadly to poultry. Avian flu can spread rapidly through a flock, killing birds in as little as 24 hours.
So far, viral strains have been identified in wild birds and commercial turkey farms, predominantly west of the Rocky Mountains. But the industry has been on alert since Minnesota and Missouri confirmed cases in the past week.
Minnesota is the nation's leading turkey producer, while Arkansas ranks third and Missouri is fifth, according to the USDA.
The poultry sector fears the virus could spread to the much bigger domestic chicken industry. Arkansas is the third largest chicken producer.
PRICING QUESTIONS
Poultry companies have been enjoying large profits recently thanks to high meat prices and declining feed costs. In January, Tyson reported operating income of $351 million for its chicken business in the quarter ended Dec. 27, up almost 40 percent on the year.
Trade restrictions could drive down prices by 5 to 10 percent in the United States for dark meat, which makes up the majority of chicken exports, said H.L. Goodwin, a poultry economist at the University of Arkansas.
How poultry companies will handle such pricing woes is not yet known. At North Carolina-based Butterball LLC, a "limited number" of turkeys from farms in Missouri and Arkansas that supply birds to the company have been diagnosed with H5N2 bird flu, according to a statement.
The company, which accounts for 20 percent of all U.S. turkey production, declined to comment on its pricing.
Tyson also declined to discuss the impact bird flu may have on the company, but said no flocks grown for Tyson have been diagnosed with the virus.
Tyson "has the ability to ship products from multiple states, so we believe we can meet demand for both domestic and global markets," spokesman Worth Sparkman said.