FAO Symposium: Market and Trade Dimensions of Avian Influenza Prevention and Control. 14 November 2006 Rome-Italy How do markets respond to the Avian Influenza outbreaks? The differential impact on market participants: A Case study in Turkey Prof.Dr. Cengiz Yalçın Ankara University Veterinary Faculty Department of Animal Health Economics and Management
Overview of Turkish Poultry Sector before the AI outbreak ( 2005): Place in the national economy (2005 statistics): Annual turnover of the poultry sector was around US$2,5-3billions. Approximately 500.000 people works in poultry and its related sectors Production: Poultry meat production 1,062,000 tons/year 983,000 tons were commercial broiler and Turkey (93%) Average yearly growth rate between 19990-2005: 14.4% Table egg production: 9 billions (fluctuating between 7-12 billions across the years) Estimated Proportion of backyard poultry in the total poultry population: 3,1% Consumption: Turkish consumers mainly consume broiler meat and turkey in urban areas. Consumptions of other poultry meats are negligible. Broiler meat consumption 13 kg/person Consumption of spent hens and backyard poultry (estimated): 1kg/person Table egg consumption: 122 eggs/person (declining over the years). Export/Import 178 million eggs (124 millions table eggs)/17 millions breeding eggs Broiler: Negligable, but had a good potential to improve
Continued... Organizational Structure of the the Turkish Commercial Poultry Sectors Broiler and turkey Layers Type of integration Mainly vertical integrations Mainly horizontal integrations (cooperatives) Explanations Generally sectors 1 and 2 type Comprise: breeder units, hatcheries, feed mills and slaughterhouses Generally sectors 2 and 3 type Few vertically integrated firms recently Sizes of the operations in the Turkish poultry sector Average size of contracted Broiler farms 20,000 heads Proportion of layer farms >50,000 heads 65% Contribution of the largest 5 integrated 50% broiler firms to the total broiler production Contribution of the largest 15 integrated 80% broiler firms to the total broiler production
History of the AI Outbreak in Turkey The first outbreak: 05 th October 2005 in Balıkesir provice (quickly eradicated) The second outbreak: in 26 th December 2006 in Iğdır provice. Lasted 31 st of March The statistics related to the AI outbreaks in Turkey Total No of confirmed cases (30 in wild, 199 in backyard, 1 in commercial) 230 Total No of provinces with confirmed cases 53 Total No of birds dead from disease 6,510 Total No of birds culled 2,522,872 Total No of spent hens culled 13,500,000 Total No of Human cases (death in parenthesis) 12(4)
Government Measures on Combating and Prevention from the AI In the outbreak and surveillance zones: Stamping out all poultry Strict movement control Cleaning and disinfection of vehicles in outbreak areas Nationwide measures Increase of public awareness Banning wild birds hunting Prohibiting sales of live poultry (icluding spent hens) Establishing check points for the control of illegal movements Carrying out a serological surveys on backyard poultries, wild birds and commercial poultries. Strengthening veterinary diagnostic laboratories Improving cooperation amongst the Ministries (Agriculture,Internal Afairs,Health, Environment and Forestry)
Market impacts of the AI Outbreak in Turkey Data sources Type of information Broiler meat and table egg prices Broiler meat sales volumes Differential impacts of market participants (integrated firms, contracted broiler farms, layers, consumers) Other related industries (feed mills and veterinary product suppliers) Data source TURKSTAT Ankara Chambers of commerce, Preliminary results of the project Yalcin et al. (2006) Socio-economic Impacts of the Avian Influenza outbreaks the poultry sector, backyard poultry producers and consumers in Turkey The Feed Producers Association, The Veterinary Drug Suppliers Association
Market impacts of the AI Outbreak in Turkey: continued AI impacts on broiler prices Price (YTL/kg) 3,30 3,10 2,90 2,70 2,50 2,30 2,10 1,90 Jan Prices of broiler meats (real prices: Dec 2002=100) US$1=1,45YTL Feb Mar Apr May June July Aug Sep 2004 2005 2006 Oct Nov Dec Months Months Prices Index 2005-1 2,10 2005-2 2,05 2005-3 2,10 2005-4 2,49 2005-5 2,49 2005-6 2,52 2005-7 2,70 2005-8 3,08 2005-9 2,85 100 2005-10 2,38 83 2005-11 1,97 69 2005-12 2,04 72 2006-1 2,09 73 2006-2 2,09 73 2006-3 2,62 92 2006-4 2,93 103 2006-5 2,39 84 2006-6 2,16 76 2006-7 2,29 80 2006-8 2,33 82 2006-9 2,40 84 2006-10 2,52 88 2006-11
Market impacts of the AI Outbreak in Turkey: continued... AI impacts on sales volume of broiler meat Sales volumes (tonnes) 2900 2400 1900 1400 900 400 Sales volume of broiler meat in the meat auction market in Ankara Jan Feb Mar Apr may June July Aug Months Sep Oct Nov Dec 2005 2006 Months Sales (tonnes Index 2005-1 2904 2005-2 2841 2005-3 2071 2005-4 1779 2005-5 2028 2005-6 2197 2005-7 1308 2005-8 1522 2005-9 1829 100 2005-10 823 45 2005-11 2522 138 2005-12 1458 80 2006-1 486 27 2006-2 2142 117 2006-3 1213 66 2006-4 2403 131 2006-5 1395 76 2006-6 931 51 2006-7 971 53 2006-8 882 48 2006-9 948 52 2006-10 1213 66 Source: Ankara Chamber of commerce
Market impacts of the AI Outbreak in Turkey: continued... AI impacts on prices of table egg Price (YTL) 0,150 0,140 0,130 0,120 0,110 0,100 0,090 0,080 0,070 0,060 Consumer prices of table eggs (real prices) Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec 2005 2006 Months Months Price Index 2005-1 0,117 2005-2 0,109 2005-3 0,109 2005-4 0,101 2005-5 0,092 2005-6 0,085 2005-7 0,085 2005-8 0,084 2005-9 0,114 100 2005-10 0,105 92 2005-11 0,082 72 2005-12 0,081 71 2006-1 0,074 65 2006-2 0,088 77 2006-3 0,088 77 2006-4 0,087 76 2006-5 0,093 82 2006-6 0,086 75 2006-7 0,107 93 2006-8 0,114 100 2006-9 0,141 124 2006-10 0,140 123
Differential impacts of the AI in different market participants: continued... 1- Impacts of the AI on Integrated Broiler firms (3 firms: market share:25,4%) % Change during AI (01Oct2005-31Jan2006) % Change after AI (01Feb2006-30April2006) No of breeding hens -15-24 Production of concentrated feed -8-15 Capacity use of slaughterhouses -12-33 Total enterprise incomes -25-18 Exports of poultry products -69-94 Broiler meats in the cold storages 121 163 Interests paid for loan 80 560 Unpacked broiler sales -24-54 Number of contracted enterprises -31-18 Capacity use in the contracted farms -23-8 Payments of contracted producer (per kg meat) -9-11 5 firms went to bankrupt, 4 of which were due to the AI crisis.
Differential impacts of the AI in different market participants: 2- Contracted broiler producers (117 farms) Impact of the AI Crisis on the contracted broiler producers (117 Producers) Before the AI (1Oct2004-31May2005 After the AI (1Oct2005-31May2006) Number of Broilers produced (heads) 6.505.911 4.717.922-27,5 Number of cycle 3,9 2,7-29,5 Income from poutry production 481.166 307.269-36,1 %change 3- Impacts of the AI on table egg producers (12 producers): Before AI During AI After AI % Chage During AI % Chage During AI Number of layer hens 69.545 48.145 60.875-31 -13 Average age at culling (weeks) 78 69 82-11 6 Total debts 61.667 144.000 163.750 134 166 Average income from the poultry business 2.293-1.711 1.968-175 -14
Differential impacts of the AI in different market participants: continued... 5- Impacts of rural families (village/backyard producers) Livelihood, Nutrituon, and psychology of rural families (35% of the population) have been negatively affected by the AI outbreaks.
Differential impacts of the AI in different market participants: continued... 4- Consumer perceptions towards the crisis Results of Web Based Consumer survey on the Avian Influenza Number of respondent 189 % male 73 % Married 62 % University graduate 89 % of respondants stopped or reduced consumption of poutry products 68 % of respondants having sufficienf info about the AI 68 % of respondants considering the official information unreliable 24 % of respondants considering the info. at newspapers unreliable 40 % of respondents started consuming the products by March 2006 38 % of respondents started consuming the products by June 2006 80 % Increase in the branded products in broiler meat 12 % Increase in the branded products in table egg 25
Impacts of the AI in the related industries 1- Impacts of the AI on poultry feed mills: Change in the production of 50 Largest Poutry Feed Mill in Turkey Months 2005 2006 %Change January 380.767 350.872-7,9 February 384.627 359.846-6,4 March 445.860 397.995-10,7 April 407.363 379.252-6,9 May 398.273 424.788 6,7 June 361.889 395.483 9,3 July 365.538 405.710 11,0 August 370.722 401.887 8,4 September 368.651 397.778 7,9
Impacts of the AI in the related industries: continued... 2- Impacts of the AI on Veterinary drug and vaccine provides Sales of veterinary products to the poutry sector ( 000 YTL) Before the AI Crisis (01.10.2004-31.01.2005) During the AI Crisis (01.10.2005-31.01.2006 After the AI crisis (31.01.2006-31.05.2006) % Change during AI % Change after AI Disenfectants 2255 2700 2600 20 15 Vaccines 5415 4060 4440-25 -18 Drugs 3390 1900 2550-44 -25 Vitamins 1500 675 1000-55 -33 Feed additives 25000 17500 20000-30 -20 Total 37560 26835 30590-29 -19
Government compensation Type of support All taxes were postponed for 6 months Electricity bills postponed until the end of 2006 Loan with a lower interest rate Spent hens over 60 weeks-old were culled and paid 1.1 YTL for each. Birds in areas of quarantine and surveillance zones were culled, and compensation is paid Utilisation Mainly integrated firms Integrated firms and layers and few contracted broiler producers All commercials Layers Village backyard producers
Concluding Remarks (1) Summary of the impact of AI in Turkey 1) Overall: Only two month of panic has shown that, long lasting AI outbreaks causing human death would cause devastating effects on the poultry sector and its related industries (both upstream and downstream); consequently in the national economy as a whole. 2) The Integrated firms: Negatively affected during the outbreak periods, but have been quickly recovering. Several medium scale semi-integrated and integrated firms went to bankrupt. However, survivors are likely to become better off in the future. Firms invested in brand development have become better off. Collaborations amongst integrated firms are improved (establishment of Healthy Chicken Meat Platform by the largest 19 integrated firms). Industry increased their sales volumes in the rural markets
Concluding Remarks (2) 3) The Contracted broiler producers On average they lost 1 cycle. Most of them are operating now. Negative impacts on integrated firms are directly transferred to the contracted producers. The government tends to neglect them when supporting the industry. 4) The layers After culling of 13,5 million spent hens, most of the producers have not re-stocked due to the unclear picture in the market, Those producing eggs, expanding their sales in the rural areas and enjoying high egg prices. 5) Backyard producers Psychology, nutrition and income of rural families have been severely affected. They have not re-stocked yet. Therefore, the problems are still continue.
Concluding Remarks (3) Consumers: During the crisis, they lowered the protein intake, and paid higher price for the substitute protein sources (red meat and fish). But now, enjoying better quality and safer poultry products The Government Had a good experience on how to manage contagious animal diseases. Realised that media communication/management is the most important area in the management of contagious animal diseases.