Effect of Bird flu Already Felt in US

Avian influenza has not hit North America, but fears about the virus abroad already have inflicted severe financial damage to the U.S. poultry industry — a multibillion-dollar business in Georgia, the heart of chicken country.

Atlanta-based Gold Kist on Tuesday became the latest poultry processing company to report a steep slide in second-quarter earnings in its chicken business and cited consumer bird flu concerns abroad. Gold Kist reported a loss of $16.2 million, compared with profit of $38.7 million in the second quarter last year.

"A drop in consumption in export markets due to avian influenza concerns contributed to greater domestic supply and lower prices," Gold Kist CEO John Bekkers said.

Two other major poultry processors with operations in Georgia — Tyson Foods and Pilgrim's Pride — said their chicken business for the latest quarter was hurt by fears in other countries about bird flu. Atlanta-based Popeyes and Church's Chicken restaurant chains have seen sales drops in some foreign markets.

Poultry has a $13.5 billion annual impact in Georgia, the country's largest broiler-producing state, with 4,000 farms and 57,700 direct industry jobs in the state.

So far, large processing companies such as Gold Kist and Pilgrim's Pride have announced slight cuts in poultry production but have not resorted to layoffs.

Health authorities say the H5N1 strain of avian flu that has ravaged wild birds and poultry flocks abroad has infected 207 people since 2003 and killed 115. Nearly all of the victims are believed to have contracted the disease from close contact with poultry. Even though authorities stress that properly cooked chicken is safe to eat, fears apparently have caused demand for chicken to drop precipitously in affected countries, especially recently.

As reports of avian flu spread through Russia and other nations in Asia and Eastern Europe, consumption of chicken dropped. In Russia alone, a big market for chicken exports, the downturn was 25 percent to 30 percent, according to Toby Moore of the USA Poultry & Egg Export Council, based in Stone Mountain.

"Russia is our largest market," Moore said. "It's our 800-pound gorilla.''

He blamed "consumer fear and concern" for driving down consumption where bird flu has been detected.

December exports for the chicken industry were down nearly 30 percent, according to the Washington-based National Chicken Council.

The drop in consumption abroad has had a ripple effect by driving down prices for exports and helping to cause an oversupply of chicken in the United States, according to industry experts. Recent wholesale chicken prices have dropped by more than 10 percent, although U.S. shoppers have not seen a similar drop at the supermarket, experts say.

If the weakened chicken demand continues through 2006, it would cost producers more than $1.7 billion, with about $260 million of that impact in Georgia, said John McKissick of the University of Georgia's Center for Agribusiness and Economic Development.

Paul Aho, a Connecticut-based consultant who follows the industry, said continuing bird flu concerns could cause some processing plants to close.

"Every piece of chicken is lower in price," Aho said. "The industry is hoping this story gets off the front pages and disappears."

Fearing U.S. consumer reaction, the poultry industry braced for Tuesday's airing of the ABC-TV movie "Fatal Contact: Bird Flu in America," a fictional flu pandemic that begins in poultry in China.

As the network promoted the movie, the U.S. Department of Agriculture sent public-service announcements to TV and radio stations to counteract public angst over chicken, a $36 billion industry nationally.

The USDA said it had planned the ads for months, but industry experts said the timing was not coincidental. "I'm sure they put it out to counter what fears came out of that movie,'' said Don Dalton, president of the Tucker-based trade group, the U.S. Poultry & Egg Association. The ads emphasize that poultry is safe to eat with proper cooking and handling.

The Georgia Poultry Federation, meanwhile, says avian influenza has sparked an unprecedented public education campaign by the industry. Its message: Substantial firewalls exist against an outbreak in a commercial chicken flock.

Dalton, of the U.S. Poultry & Egg Association, said the poultry industry "is more concerned about what the consumer is thinking, rather than an actual outbreak'' in a flock, which can be contained and eradicated.


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