Poultry Pays the Price

In less than two months since Chinese New Year in late January, Xie, who leads a poultry production cooperative in Dangyang, Hubei Province, was forced to purge his stock of 330,000 chickens, selling off 210,000 for half the market price and culling the rest. Live burials of unwanted livestock were a last resort for many poultry farmers as sales channels were blocked. 

The 10-year-old farmers’ cooperative has lost more than 3 million yuan (US$423,000) in the wake of the Covid-19 outbreak.　

“Many people in the poultry industry for over 30 years have told me they have experienced nothing like this. Chickens and chicks were buried alive nationwide,” said Zhang Mingrui, manager of Beijing Huadu Yukou Poultry Company’s business in South China. His company, built in the 1970s and one of the three largest hen breeders, lost over 70 million yuan (US$9.9m) in February alone. 　

China’s poultry industry thrived in 2019 due to pork shortages caused by African swine fever (ASF). But with shipping paralyzed nationwide and wet markets closed down during Covid-19, the industry took an unprecedented hit.　

China Animal Agriculture Association (CAAA) estimated more than 14.98 billion yuan (US$2.1b) in losses between December 2019 and March 2020. In addition, experts predict that many poultry farmers will either be unable or hesitant to resume production in the wake of the outbreak, causing a shortage of supply and a price increase over the next two months. 　

Zhang was forced to turn around. He eventually sold the hatchlings at a huge loss, discounted from 5 yuan (US$0.7) to 0.05 yuan (US$0.007) each, which Zhang said “won’t even cover the gas.”　

The increased roadblocks and lockdowns saw feed supplies cut and wholesale markets closed, straining the poultry industry chain. When the epidemic broke out, Xie’s cooperative had 330,000 chickens. But with no hope in selling them, farmers buried 120,000 chickens alive. For the remaining 210,000 they reduced feeding from twice a day to once every three days - barely enough to keep the chickens alive. 　

Many farms even used hormones that force hens to moult early, during which they stop laying and eat much less, as a way to save feed and prevent them from producing eggs the farms couldn’t sell. 　

Wang Xianzhong, technical director of breeding industry consultancy Jinong Pharmaceutical Group, estimated that in 2019 there were about 1.3 billion laying hens in China. Between 10 and 20 percent were given hormones to induce moulting. 　

The situation is more difficult for companies engaged in hatching and distribution. Duan Jun, general manager of Laide Ecological Agriculture Company in Wuhan, told NewsChina that usually chicks were transported to breeders on the third day of the lunar new year. Since highways were closed this year, Duan culled 40,000 hatched chicks by burying them and disposing of fertilized eggs, a process that Duan said pained him deeply at first. But after 20 days of having to kill off his stock, Duan said he has numbed to it. 　

Despite these hard decisions, Duan kept the business running. He renegotiated with customers and promised to ship once authorities reopened the roads. Normally, Duan employed 40 farm workers on a 200,000-yuan (US$25,000) monthly payroll. But as most workers could not return to work, he was forced to hire costly seasonal labor at a minimum 300 yuan (US$45) a day. The farm eventually racked up 5 million yuan (US$705,000) in losses. 　

“In less than 20 days after the lunar new year, almost all chick suppliers in the countrywere killing their birds. They had no choice while all the roads were blocked,” said Zhang. 　

Covid-19 differs from previous avian flu outbreaks, where only specific sections of the chain were affected, explained Ma Chuang, vice general manager of Boya Hexun Agriculture Technology Company, an agriculture consultancy.　

Eager to get feed to farmers in need, Xie appealed for permission to Dangyang government on January 25, but he was refused, despite having a license from the destination city. Eventually, he got one shipment through, which he said barely helped. 　

The difficulties in transporting agricultural products sparked concern among authorities early on. Chinese ministries of agriculture, transport and public security issued a notice on January 30 that prohibited local authorities from setting up unapproved checkpoints and roadblocks to allow for shipment of fresh produce and agricultural supplies. 　

But this did little to solve the problem. In an open letter on February 1, the CAAA accused some local governments of taking epidemic control measures too far and stopped shipping altogether, preventing the sale of livestock and feed.　

“There was no unified policy to address the problem. Only when local officials in charge pay attention, will it be solved,” said Wu Zhimin, supervisor of the Hubei Poultry Association. 

　

Hubei is the sixth-largest producer of poultry and eggs in China. In 2019 it sold some 530 million birds and had nearly 350 million in stock that required 3,000 tons of feed daily. Facing epidemic controls and transport restrictions, “most farms were running out of food,” read a letter from Hubei Poultry Association seeking help from the CAAA on January 28. 　

The closure of wet markets only aggravated the situation. On February 1, Henan became the first province to close its wet markets, followed by other regions. “At that time, 27 provinces and cities closed their wet markets. For certain species of poultry, wet markets provide an important trade channel. The closure clogged it,” said Gong Guifen, secretary general of the CAAA poultry branch. 　

Starting March 10, Zhang traveled south from eastern Shandong Province through Anhui, Zhejiang and Jiangxi provinces to survey the impact of the epidemic on poultry farming. He said the wet market closures had been devastating. 　

“Many farmers said they would stop buying chicks before April to cut their losses and hoped wet markets would open soon,” said Zhang, adding that while some chicken farmers are adjusting to the changes, others are hesitant. Some are leaving the industry altogether.　

The vulnerability of the live poultry market has been a long-standing problem for the industry. “Every time there is a major epidemic it affects poultry. Poultry markets are closed before the origin of the virus is located. This recklessness hurts chicken farmers,” Gong said. 　

To protect chicken farmers from such outbreaks that happen every few years, Ma suggested that the industry establish standard protocols for every link to ensure product safety and protect farmers. 　

Ma said that growth in family consumption - the only area sustaining sales - would not offset losses from mass consumption, such as schools, companies and restaurants. What’s worse, prices will surge after Covid-19 control measures are relaxed and demand spikes, Ma said.　

Zhang Mingrui also predicted one or two months of soaring prices because of reduced supply. 

“The reduction of chicks in February will lead to a reduction in meat supply. The Covid-19 pandemic might also result in a decrease in chicken imports. So I believe chicken prices will spike to a record high in April,” Zhang said. Some experts have already observed chicken prices increasing since March.　

The rises in chicken and pork prices will probably overlap. In 2019, African swine fever drove pork supplies down 21.3 percent compared to 2018, and production has not yet fully recovered. Market experts expected other meats to fill that gap in demand in 2020, such as poultry products. 　

To address these uncertainties, Gong suggested that authorities purchase overstock to mitigate farmers’ losses like in Hubei, where the government bought eggs from farms and provided subsidies for transportation and electricity between February 18 and March 20.　

After sustaining such huge losses, many farms do not have the capital to reboot production. On February 26, the People’s Bank of China (PBoC) announced it would prioritize loans to livestock and poultry farmers. 　

Back on Duan Jun’s chicken farm in Wuhan, the eggs are about to hatch. But he worries if the chicks will reach raisers. Owing payments for feed, back wages and vaccines, these deliveries are his last hope of surviving. “More problems will emerge after the outbreak recedes,” said Duan, adding that feed producers are already pushing for payment.　

Renewing confidence in the market will take time. Farmers from Xie Hua’s cooperative are hanging their hopes on seeing profit later this year. But many remain hesitant. Some have not bought chicks for nearly two months, and the cost of their uncertainties will probably get passed on to consumers.