Brazil cleans avian flu area, considers easing export barriers

The area around an avian influenza outbreak in Brazil's Rio Grande do Sul state has started a 28-day sanitary empty period after the country's Ministry of Agriculture, Livestock and Supply said May 22 that it had cleaned and disinfected the affected commercial poultry breeding facility.

If no new cases are reported during this period, Brazil may self-declare itself free of the disease in that region.

On the same day, the government of the state of Santa Catarina announced that the suspicion of avian influenza in a commercial flock tested negative for highly pathogenic avian influenza. The case remains under investigation to determine the cause of mortality, with a conclusion expected within a week.

Market participants reacted with optimism to this news, highlighting that bilateral negotiations for regionalization are underway with some countries that imposed export embargoes.

"The expectation is that, after the 28 days of the sanitary empty, and in the absence of new confirmed cases, the barriers will be relaxed at the state and municipal levels," a source said.

Regarding the impacts on market prices, some industry participants stated that the situation is less severe than expected, as major buyers such as Japan, the UAE and Saudi Arabia have imposed embargoes at the municipal and state levels. The three destinations accounted for 25% of Brazilian poultry exports in April, according to Secretariat of Foreign Trade data.

"The leg market should not experience a sharp decline, as supply was quite tight, primarily due to labor shortage in the Brazilian industry, and also due to strong domestic market demand, which was facing low stocks and high demand," commented one source.

Furthermore, the source highlighted that the demand for bone-in legs in West Africa is strong, due to high product prices in the US.

"There are no reasons to lower prices at the moment," a source said about the boneless leg market. "South Korea has already signaled a regionalization of the blockade against Brazil, which should reduce volume pressure and concerns from the Japanese importers."

"In the breast market, the situation is a bit more delicate, as major destinations like Mexico and the EU represent a significant portion of exports," another source said, reiterating that the domestic market could also benefit from a higher supply to replenish stocks and meet demand.

The markets for feet, paws, and mechanically deboned meat are considered the products at the highest risk of losses, according to industry sources. These items, which are widely consumed by China and South Africa, do not have significant demand in the domestic market or from other destinations.

"These products will certainly have to be discarded or processed by the pet food industry," said another source.

Brazil sent a total of about 80,000 mt, or 18% of its exports, to China and South Africa in April, according to SECEX data.

A third ongoing discussion, according to sector information, involves the relaxation of shipping dates accepted by trade partners. The official embargo report issued by the Ministry of Agriculture indicates that Mexico established that products with inspection certificates issued until April 16 could not enter the country, even if they were already in transit. Sources state that this measure is being negotiated to allow the entry of products shipped by that date, except for items produced in the state of Rio Grande do Sul.