Propping Up Poultry During H7N9

China's Zhejiang Province is giving emergency aid to key players in its poultry industry to tide them over through a severe downturn resulting from the H7N9 crisis.

Since December 2013, China's poultry sales volume and prices have fallen due to consumer fears that poultry could transmit H7N9 and many poultry markets have been closed. Poultry farms and processors have experienced serious losses and some face bankruptcy. On March 10, Zhejiang authorities issued a bulletin awarding emergency aid of 50 yuan per bird to core breeding farms that supply "grandparent" birds. The cost of the subsidy is split between provincial and local governments--70% provincial share in poor areas and 30% provincial share in other areas. The province is also giving subsidies of 80 yuan per metric ton to processors to keep their unsold inventories of chicken meat in cold storage during March through May.

Graphic showing emergency aid for poultry farms in Zhejiang Province.

The province's emergency bulletin called on local governments to give subsidized loans to processing plants and address their borrowing problems to tide the poultry companies over through the crisis. The bulletin also exhorted government organizations, schools, mining companies, supermarket chains and other units to take the lead in purchasing frozen poultry to revive sales.

On May 12, at the National Peoples Congress in Beijing the chairman of the New Hope Group, Liu Yonghao, requested government aid for the poultry industry. He said the industry had been blamed unfairly for the H7N9 epidemic, arguing that no poultry farms or companies have been implicated in transmitting the virus and have thus been victims of "discrimination from society." He claimed poultry farmers and companies had experienced losses of 80 billion yuan. Liu recommended removing the "avian" from references to "avian influenza" and educating the public on the cause of H7N9. Liu said the epidemic is like an earthquake or flood and the industry should receive similar emergency aid to compensate for their losses.

Since the beginning of the year, the price of broiler chicks has fallen from 3 yuan to 0.2 yuan and broiler chicken meat sales volume has fallen 30%.

An article about Suqian, a major chicken-producing area in northern Jiangsu, touts the market-stabilizing effect of marketing contracts. Farmers there have signed contracts to sell chickens to COFCO--China's state-owned agribusiness giant--and are able to keep selling to the company even though its sales have plummeted. In effect, COFCO is bearing the market risk.

Farmers in Suqian have been given guidance to implement biosecurity measures. Now all farms must strictly control people entering and exiting the farm and increase farm disinfections from twice a week to daily. Suqian officials strengthened oversight of poultry markets. Poultry entering the market have to go through strict inspection and quarantine and markets have to be disinfected regularly. No H7N9 has been detected in over 1100 samples tested.

Temporary subsidies to get farms and companies through a temporary downturn prevent instability that might result if poultry populations are decimated and processing capacity is lost through bankruptcy. Preserving the capacity through a temporary downturn averts future costs of having to rebuild when the market recovers. However, this is the second year in a row of a severe H7N9 crisis. Aid was given last year at this time, too.

Is there too much capacity in China's poultry industry? Where did all that poultry demand go? Chinese consumers haven't switched to pork--that industry is also experiencing plummeting prices (without major disease problems). Even the relentless rise of beef and mutton prices has cooled off in the last month.