Implications of the Suspension of Argentina's Poultry Products Exports

Published Mar 7, 2023

On February 28th, Argentina suspended its avian product exports due to avian flu. Cases have been growing since then up to date. Exports of those products surpass $400 million annually. Producers will turn into the domestic market for now, increasing domestic supply and pressuring prices down, but the potential supply disruptions are having a bullish effect on prices.

Context:

On February 28th, Argentina's government, through the National Sanitary and Agrifood Quality Service (SENASA), announced it would be suspending its avian product exports due to a case of avian flu in domestic fowl in the province of Rio Negro. The same organization mentioned that avian production would continue normally and exporters could continue selling the products domestically.

In the following days, up through March 5, the SENASA announced more cases, with a total, up to that day, of 36 cases throughout the country, most of them on domestic fowl.

The estimated time of duration of the suspension is roughly three to four months. However, Argentina is working on agreements with particular countries to resume exports. In fact, on March 2nd, the SENASA announced Argentina would be resuming chicken egg exports to Japan.

According to Instituto Nacional de Estadística y Censos (INDEC) data, in 2022, Argentina exported 223 thousand mt of chicken meat and offal (HS Code 0207) with a total worth of USD 373 million. Export volume grew 5% YoY, while export value grew 22% YoY. In export value, 44% of total exports went to China.

Meanwhile, in the same year, Argentina exported 3.05 thousand mt of chicken egg products (HS Code 0408), with a total worth of USD 18.6 million. Including other prepared meats containing chicken and eggs, the total export value of avian products surpassed $400 million. Argentina produces around 2.5 million mt of chicken meat per year, but exports less than 10% of production.

Implications:

Local reports indicate that many exporters will try to sell their products in the domestic market. This will bring an excess of supply domestically, which will pressure prices down (or limit upside room) in Argentina in the very short term. However, if the flu cases significantly hamper production -due to affected fowl being culled- a significant portion of the product originally meant for export may need to be redirected to meet the domestic market demands which is bullish for prices. In fact, the anticipation of this outcome could also bring upward pressure to prices now, offsetting the effect of higher supply in the domestic market.

In the longer term, and especially if the suspension lasts longer than expected, the effect of lower sales abroad will likely continue hurting the economy of the country, further exacerbating the decline in its currency and overall inflation, hurting both producers and consumers alike. From a cost perspective, this situation is bullish for prices. Moreover, a weaker Argentine economy, as has happened in the past few years, will likely continue hurting the demand for more expensive protein, such as beef, and indirectly, boost the demand for chicken meat, which is relatively cheaper. This potential outcome is also bullish for chicken prices.

Globally, avian flu cases have soared since the past year, with a considerable impact in many markets. Find out more about it here.