H5N1 bird flu outbreak in Brazil disrupts South Korean poultry market, spiking prices

An outbreak of H5N1 bird flu announced May 16 in Montenegro, Rio Grande do Sul, Brazil, has disrupted the South Korean poultry market, spiking chicken prices.

With import restrictions on Brazilian poultry now in place, South Korean buyers are seeking alternative sources, leading to soaring prices for boneless chicken legs and concerns over supply shortages.

"The export suspension, anticipated to last up to 60 days for major importing countries, is a critical uncertainty that may hinder the growth of East Asia's imports into 2025," S&P Global Energy protein analyst, Jessie Khor, said.

South Korea imposed a stringent ban on Brazilian poultry imports, leaving buyers concerned about their inventory levels following the outbreak.

"We're trying to look into other origins, possibly Thailand," said a South Korean buyer. "However, both importers and suppliers are waiting to see if there are any announcements from the government about regionalizing restrictions."

Despite exploring alternatives, the prices of boneless leg from Thailand are too high for the South Korean market, according to a local market source.

South Korean restaurants and franchises that feature boneless chicken menus will face challenges, as they typically source boneless chicken from Brazil. Domestic production is unable to meet demand, leading to soaring prices, sources said.

Following the ban, Brazilian boneless chicken leg prices in the South Korean domestic market surged, with trades reaching Won7,000/kg on May 20, up from Won4,200/kg prior to the announcement May 16.

"However, the current price increase may not represent the market in full," said a seller based in South Korea.

Minimal impact in Japan

Conversely, the chicken market in Japan was experiencing minimal impact. A local market source said the import ban for poultry meat only affects the specific municipality of Montenegro, which lacks a slaughterhouse that exports raw chicken to Japan.

"The Japanese are quite calm, as Rio Grande do Sul is not the main exporting state and we have enough inventory," said a meat trader based in Japan.

As a result, supply remains stable and prices are expected to hold steady unless more cases are confirmed, sources said. Furthermore, the country has sufficient inventory, with April volumes returning to normal levels of above 30,000 mt after facing continuous declines in Brazilian boneless leg supplies since November 2024, sources said.

Brazil exported 33,395 mt of boneless legs to Japan in April, a 25% increase month on month, according to the Brazilian Foreign Trade Secretariat, or SECEX.

"Most of the buyers believe that their domestic inventory won't be short following the April increase," said another Japanese source.

Poultry meat can be exported to Japan from affected areas after the Japanese animal health authority confirms the absence of bird flu outbreak for 28 days postinfection, according to the Ministry of Agriculture, Forestry and Fisheries of Japan.

Energy analysts anticipate Brazilian exports to eastern Asia to return to preban levels by the third quarter, should no further outbreaks occur.

However, chicken meat imports in China and South Korea are projected to decline in 2025 due to strengthening domestic production. This trend may further reduce reliance on Brazilian imports, opening market opportunities for competing suppliers, particularly those in Thailand, Khor noted.

Thailand sees market opportunities

Thailand, Asia's primary poultry exporter, views the current situation as an opportunity for market expansion.

"Thailand could serve as an alternative chicken supplier for China, the EU and South Korea amid the outbreak," Kukrit Areepakorn, manager of the Thai Broiler Processing Exporters Association, told Platts, part of Energy.

Importers can also source products from countries like Argentina and the US, Kukrit added.

"Countries that imposed an import ban on Brazilian chicken are highly likely to turn to Thailand for chicken imports to offset the shortfall," Iman Nur Salsabila, a Energy analyst for proteins, said, emphasizing that the strict guidelines for production and disease control in Thai farms will boost business partners' confidence in the safety of Thai chicken products.

Platts assessed CFR North Asia chicken leg prices up $25/mt, or 1%, month over month at $2,395/mt on May 21 for cargoes loading in June to July.