Beef & Bird Flu

Some insight into how avian influenza (bird flu) in the U.S. could inmpact the beef industry

The bird flu has begun to change the world's agriculture industry, and the cattle business has begun to feel the first ripples of those changes.

So far, the impact has been limited primarily to poultry farmers overseas, and to soybean and corn growers. But the spillover effect is beginning to help the beef industry by exerting downward pressure on feed-grain prices. In the long run, however, the beef industry faces huge losses if this virus jumps from poultry to people and becomes a worldwide killer on a par with the 1918 flu pandemic, which killed about 100 million people.

To date, about 200 million birds have been lost worldwide, either directly to the disease or to the culling designed to control its spread. As the disease has spread from Asia to Europe and parts of Africa, some consumers have shied from poultry due to false fears they can contract the virus from it.

In fact, the Italian farmers association reported in mid February that poultry consumption was down 70% due to consumers' worries over bird flu.

Those two factors have cut noticeably into world soybean consumption and, to a lesser extent, corn consumption. As a result, U.S. soybean exports are down more than 20% and the price has softened. That works to the benefit of cattle feeders using soybean products in their feedlot rations.

Bird flu also infects pigs

Pigs are also susceptible to this strain of flu virus, officially know as H5N1, and there have been reports of some pigs contracting the virus in Asia. The danger is the disease could spread if it took hold in hog facilities in the U.S. Though the bird flu hasn't surfaced in the U.S., the United Nations said it could be here in six months to a year, or sooner.

Should large numbers of pigs get sick, demand for corn would fall, which would likely moderate corn prices.

“If pigs get sick, there's no doubt it would slow grain consumption,” says Don Roose, president of U.S. Commodities, an Iowa-based research and trading firm. “Hogs are big corn eaters, and they also eat soybeans.” That scenario would work to the benefit of cattle feeders who use large quantities of corn and soybeans.

What about cattle?

Cattle would also benefit if U.S. consumers turned from poultry to beef and pork.

“The consumer will eat some protein, moving to the one he thinks is the safest,” Roose says. Large American poultry operations are run on a bio-secure basis, however, which may minimize the chances of U.S. poultry being infected by migrating wild birds.

Cattle, meanwhile, are unlikely to contract the disease.

“Bovines haven't been susceptible to influenza in the past. While we can never say never, there's no reason to believe it will happen with H5N1,” says Michael Osterholm, director of the University of Minnesota's Center for Infectious Disease Research and Policy.

But if the bird flu virus were to mutate for easy human-to-human transmission, the beef industry could suffer badly. To date, there have been only about 100 human deaths from the disease, almost all attributed to contact with infected birds. The great fear is it will become a deadly person-to-person pandemic.

Should that happen, the consequences for the beef industry would be enormous.

“People in agriculture need to understand their livelihood is at risk from a pandemic because of what this would do to the world economy,” Osterholm says.

As he told a U.S. House Subcommittee last December, “I firmly believe if an influenza pandemic began today, borders will close, the global economy will shut down… health care systems will be overwhelmed and panic will reign.”

One victim of that panic would be the food industry, which would suffer as international trade ceased and consumers stayed home.

“Restaurants should expect to see their business evaporate,” said a food industry study prepared with data from Osterholm's center.

In other words, consumers would avoid the fast-food chains that account for much of U.S. beef sales. As restaurants, ports and other businesses shut down, workers would lose their jobs — at least until the panic subsided — and have less to spend on food.

Still, food would fare better than some industries. People can forego new cars and many other things, but they can't forego food.

“In a pandemic, it's not clear what they would eat, or where they would eat,” Osterholm says. “People may take in less calories, but they've still got to eat.”

Doug McInnis is a business trends writer based in Casper, WY.