Texas economist: Consumers likely to see cheaper chicken at grocery outlets

March 03, 2004

COLLEGE STATION - Consumers may soon see a drop in the price of chicken at grocery stores after the recent discovery of avian influenza in the United States.

With many countries already enforcing bans on poultry produced in the U.S., that could damper the country's $2.3 billion export market and create a backlog of processed chicken.

Fifteen countries had banned all U.S. poultry and another five had banned poultry from Texas and other states as of Feb. 27. Countries banning Texas poultry were Canada, Costa Rica, Romania, Russia, and Taiwan.

"If prolonged over several weeks or months, the ban will back up supplies," said Dr. Parr Rosson, Texas Cooperative Extension economist. "It will bring down prices in the near term, and for consumers it will likely result in some bargains at the grocery stores."

Chicken meat prices have increased by about 14 cents per pound over the last six months to $1.85 per pound, while stocks have fallen to their lowest levels since 1995.

"These trends suggest lower chicken prices at retail could be several weeks away unless all U.S. poultry exports are banned," Rosson said.

With a majority of poultry production on contract to suppliers, Rosson said, the poultry industry hopes that chicken processors won't experience long-term losses.

"There could be potential for some disruption of trade," he said. "And this could become a much more difficult situation if it stretches into years."

But cheaper prices for chicken could give poultry a competitive edge over competing meats.

"If it's long-term and takes many months to resolve, some cuts of beef, pork and possibly lamb could feel competitive pressure from poultry," Rosson said.

Export trade among the United States and other countries could continue if avian influenza is "regionalized."

"Under NAFTA and the World Trade Organization, it's possible for a country to isolate and contain the disease," he explained. "During this process, if an exporting country can convince its trading partners that the disease is isolated, or regionalized and won't spread, then the importing country can allow exports from regions that are unaffected by the disease."

The ban on U.S. exports "will vary by country," Rosson predicts, with some Asian and European countries likely to hold out longer before exports are allowed to resume.

"As soon as we can convince them we've isolated the problem and contained it, trade could be resumed within weeks, if not a couple of months - at least to some countries."

With exports accounting for about 14 percent of U.S. poultry production, trade is important to the industry. Russia is the United States' No. 1 export market for poultry - purchasing mostly leg quarters - followed by Hong Kong, Mexico, China and Canada. These markets together represented nearly two-thirds of all U.S. poultry exports in 2003.

Byproducts, such as chicken feet, wings, viscera and leg quarters, are supplied to China. Turkey cuts and chicken meat are the main products supplied to Mexico.

There's not likely to be much consumer backlash towards chicken, Rosson said, when comparing the avian influenza outbreak to the mad-cow disease discovered in Washington state in December.

"In the case of the BSE (bovine spongiform encephalopathy) discovery, most people were surprised at how resilient the consumer market was," he said. "We didn't see much immediate reduction in beef consumption. In this case with poultry, there is not any link between sick birds and the consumption of chicken meat. So we shouldn't expect consumer backlash in terms of reduced consumer purchases of meat products."

Still, Rosson urged consumers to use safeguards when handling or cooking any meat products.

"Exercise safe cooking procedures," he said. "Make sure any meat is fully cooked and don't cross-contaminate meat by using dirty cooking utensils."

Texas A&M AgriLife Communications

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