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Getting Over the Flu
Two years after the avian influenza outbreak, the poultry industry is finally showing signs of recovery
By Hossam Zaater
February 2006 It all started with seven seemingly unexceptional chickens: four in Cairo, two in nearby Giza and one in Minya. The Prime Minister?s office made an announcement, and the World Health Organization (WHO) confirmed it: ?Avian influenza hits Egypt.? No human cases were detected at the time, but a month later, a 30-year-old woman was infected, ending in a fatality that stirred nationwide panic. </PARAGRAPH></P>
Since then, the H5N1 virus, also known as avian influenza or bird flu, has claimed the lives of 90 people across the globe, mostly in South-East Asia. Following a ban on chickens and chicken-related products implemented across Egypt, squawking echoed across the country?s poultry farms as health officials initiated a slaughter of millions of chickens, the slaughter taking down with it many companies attached to the poultry industry. </PARAGRAPH></P>
The lethal strain ruffled the feathers of Egypt?s LE 17 billion poultry industry, which produced around 750?800 million chickens each year before the virus arrived. That production capacity was cut by half after the initial outbreak, resulting in an industry that used to employ as many as 1.5 million people (among corporate breeders, smallholders and private citizens) suffering over LE 2 billion in losses from both the culling of infected birds and people giving up chicken in favor of other meat products. Today, two years after the outbreak, business is picking up again for the companies that were fortunate enough to emerge from the crisis intact. </PARAGRAPH></P>
Responding to the Outbreak</PARAGRAPH>
</P>
The poultry industry as a whole, estimated to be currently worth LE 18 billion, is comprised of some 40,000 chicken farms. For a food product that is seemingly simple, the industry is not uncomplicated. The production line goes through several major stages, each with its own specific conditions. So-called ?integration projects? include all steps in one: Chickens are purchased and brought to a comprehensive facility which hatches and breeds them, before eventually slaughtering the birds and selling them to major food outlets. </PARAGRAPH></P>
When bird flu hit the nation in 2006, the World Health Organization (WHO) issued a 200-page guidebook on how to deal with the influenza for all parties involved: government, agencies, breeders and farms. But the public alarm and chaos that ensued, says Hisham Hassan, senior vice president of Alpha Group, a consortium specializing in poultry-related equipment and chicken feed, led the government and regulatory safety bodies to unwise precautionary measures. </PARAGRAPH></P>
?The government enforced the [WHO] rules, but not intelligently. When you have an infection at one site, you?re supposed to cull the farm, put the site and its 10-kilometer radius under quarantine and keep all neighboring farms under close monitoring. [In Egypt] if there was a sign of infection, they would cull the whole 10 kilometer radius!? Hassan says, visibly agitated.</PARAGRAPH></P>
Hassan explains that farmers? lack of awareness about how to tend to the fowl also played a role in exacerbating the outbreaks. The WHO guidelines advise that chickens should be kept in cages so they don?t mix with migratory birds, but most farmers do not realize the importance of following these instructions. ?Farmers have little or no access to media and if they don?t understand something, they?re left unconvinced [] Farmers raise the birds they eat with the stock, left out in an open area,? Hassan says, adding that infections that begin on small farms for these reasons can easily spread to nearby breeding farms.</PARAGRAPH></P>
Alpha Group had a net profit of LE 8 million in 2005, selling 1,200 tons of feed per month. But after word of the flu arrived, the company began selling less than 600 tons per month, unable to reach the required 800 tons to break even. ?[After] the first strike in 2006, our production levels went down to 40%,? Hassan says. ?Poultry production and demand [plummeted] so our clients didn?t buy our feed. Out of our 100 breeder clients, 60 of them were [already] in debt when the avian flu hit.? </PARAGRAPH></P>
Hassan adds that there was a vicious cycle because those who bought raw materials from him did so on a credit basis. ?They go off to breed their chickens and then sell them so they can compensate me with the returned income,? Hassan says. </PARAGRAPH></P>
Ibrahim El-Kholly, marketing manager of Gamal El-Sowah Poultry, says his company also saw its share of misery. ?What we dealt with was like all the other companies around us. Our bo?ra [infected sites] were in the town of Belbais. Almost all the farms on Ramses Road in Belbais were infected, although at different stages and were consequently culled,? he says. ?Needless to say, these farms were severely hurt, especially since a lot of the business was local.? </PARAGRAPH></P>
Gamal El-Sowah Poultry has been in the industry for 12 years and operates 18 farms of parent-stock breeding. Parent-stock are used for breeding other chickens and are much more valuable than regular birds. El-Kholly says that only one of their farms was infected but he speculates that their losses were some LE 25 million. ?The loss was huge because [we had to shut down] chambers [] and this limited production, causing phenomenal losses. I can?t really quantify the losses because the shutting down of chambers is one thing and the culled chickens are another,? he says. </PARAGRAPH></P>
While the government did take measures to mitigate some of the losses, their effectiveness has been debated. ?When the flu hit in 2006, governments around the world compensated companies to protect the market. Here in Egypt, they compensated, but failed to take into account the difference between the types of production facilities,? Hassan says, noting that chicken costs range from as little as LE 5 to LE 800 per head. </PARAGRAPH></P>
?One of my clients had 20 chambers for breeding parent-stock, which was worth LE 25 million. When the infection hit his farm, the total stock was culled within 48 hours. He paid LE 300-800 per chicken and the government compensated him at a rate of LE 5 per head. It was a total loss.?</PARAGRAPH></P>
Two Years Later</PARAGRAPH>
</P>
On March 3, 2008, the Ministry of Health and Population announced the 47th case of avian influenza in Egypt, a four-year-old girl who has since been stabilized in the hospital. The government expects the infection rate to decrease by 93% in 2008 from 2007 levels, and has imported 1.4 billion doses of vaccination just to be on the safe side. </PARAGRAPH></P>
?Since the outbreak, there have been 20 deaths total and 26 cured cases,? says Dr. Nasr El-Sayed, assistant to the Minister of Health and Population. However speculation abounds however that the official numbers are understated, with rumors placing the number closer to 200. </PARAGRAPH></P>
In terms of business though, things aren?t looking as bleak as they once did. El-Sayed says most companies are back on track, indicating that production has bounced back to around 2 million chickens per day, close to its pre-outbreak levels.</PARAGRAPH></P>
?Prices have risen, including the prices of feed. A kilo of chicken is now LE 15, whereas it bottomed out at LE 3-4 during the outbreak,? says El-Sayed. The methods of dealing with the situation will no longer present such dramatic financial setbacks as they did during the first blow, he adds.</PARAGRAPH></P>
To reduce the risk of viral outbreaks ? and more questionably to sustain higher consumer prices ? supply is intentionally lowered in the winter. ?Everyone [in the industry] now knows that the flu only hits in the winter. The virus has no chance of surviving above a certain temperature,? El-Sayed explains. ?So in November, everyone lowers production as a precaution. Breeders use two chambers instead of ten. [] If they survive, the profit will be higher than if they used all ten.? </PARAGRAPH></P>
Things have been picking up for Alpha Group since its losses in 2007, although Hassan says the company is still dealing with an economic stalemate, while the industry as a whole is dealing with a number of setbacks: Vaccines don?t guarantee 100% immunity for the chickens, for instance.</PARAGRAPH></P>
Raw materials are also more expensive than ever. Although Alpha Group?s feed sales were up from 6,208 tons in 2006 to 10,845 tons in 2007, Hassan says the prices of raw materials have spiked due to the increased production of biofuel in the United States.</PARAGRAPH></P>
?The US produces 40% of the world?s corn, which [] is 60% of the [poultry] feed,? he says. ?Poultry is supposed to be a cheap alternative protein source, but prices in the commodity market reached highs I?ve never seen before and since corn is such a basic ingredient, it?s pulled a lot of other prices up with it,? he says, adding that he used to purchase packaged raw material at LE 2,500 per ton, whereas it?s now at LE 4,000. </PARAGRAPH></P>
El-Kholly shares this view, saying: ?Prices of feed are affected internationally. Everything is imported here: corn, soybeans and all the raw materials are affected by the international market.? </PARAGRAPH></P>
El-Kholly is glad that panic is subsiding and things are getting back to normal. ?The infection came and went and alhamdulillah, there are no infections now either at our farms or those surrounding. The production levels have risen, chambers are up and running, things are falling into place,? he says. ?The big companies didn?t shut down, but the small breeders and farms couldn?t handle the losses. Most of the larger companies are running, but still not at full capacity.? </PARAGRAPH></P>
When asked if production was near pre-infection levels, he replies, ?No way. But we?re doing all that we can to reverse the situation. It?s not going to happen overnight, but in two or three months time the market should pick up.?</PARAGRAPH></P>
The Rumor Mill</PARAGRAPH>
</P>
In the tradition of speculation and rumor mongering in Egypt, Hassan suggests there are some businesses benefiting from bird flue fears. ?It might?ve been a scam. The flu?s been around since the 1850s as a different strain [called] H1N1. But then Roche Pharmaceutical introduced Tamiflu (oseltamivir). It stopped the spreading of the virus in the lungs. All the propaganda indicated that if it could spread via human-human, we?d all be screwed, and they?ve been saying this since the 1800s,? says Hassan. ?I went to buy a [10 tablets] box of Tamiflu and it was LE 300; I got four tablets. The day after the flu hit, it was LE 3,000 a box ? and nowhere to be found because the government confiscated it as an emergency stash in case of infections. They bought it all from Roche.?</PARAGRAPH></P>
According to Roche, over 65 countries ordered pandemic-level stocks of Tamiflu in 2005. ?England ordered a supply of 8 million doses in case of infection, France 4 million, Germany 5 million, all the countries wanted reserves of the only source that had a remote lead to the cure. Now two years later, nothing has happened, the virus changed nearly six times in its strain and none were as scary as they made it out to be,? says Hassan. </PARAGRAPH></P>
Conspiracy theories aside, the fact of the matter is that avian influenza, hype or hazard, blew through the eastern hemisphere in the last two years, taking its toll on companies and lives alike. While cases in Egypt are still being reported, the poultry industry is getting back on its feet, better prepared to deal with another potential shock in the future.</PARAGRAPH> bt</P>
Two years after the avian influenza outbreak, the poultry industry is finally showing signs of recovery
By Hossam Zaater
February 2006 It all started with seven seemingly unexceptional chickens: four in Cairo, two in nearby Giza and one in Minya. The Prime Minister?s office made an announcement, and the World Health Organization (WHO) confirmed it: ?Avian influenza hits Egypt.? No human cases were detected at the time, but a month later, a 30-year-old woman was infected, ending in a fatality that stirred nationwide panic. </PARAGRAPH></P>
Since then, the H5N1 virus, also known as avian influenza or bird flu, has claimed the lives of 90 people across the globe, mostly in South-East Asia. Following a ban on chickens and chicken-related products implemented across Egypt, squawking echoed across the country?s poultry farms as health officials initiated a slaughter of millions of chickens, the slaughter taking down with it many companies attached to the poultry industry. </PARAGRAPH></P>
The lethal strain ruffled the feathers of Egypt?s LE 17 billion poultry industry, which produced around 750?800 million chickens each year before the virus arrived. That production capacity was cut by half after the initial outbreak, resulting in an industry that used to employ as many as 1.5 million people (among corporate breeders, smallholders and private citizens) suffering over LE 2 billion in losses from both the culling of infected birds and people giving up chicken in favor of other meat products. Today, two years after the outbreak, business is picking up again for the companies that were fortunate enough to emerge from the crisis intact. </PARAGRAPH></P>
Responding to the Outbreak</PARAGRAPH>
</P>
The poultry industry as a whole, estimated to be currently worth LE 18 billion, is comprised of some 40,000 chicken farms. For a food product that is seemingly simple, the industry is not uncomplicated. The production line goes through several major stages, each with its own specific conditions. So-called ?integration projects? include all steps in one: Chickens are purchased and brought to a comprehensive facility which hatches and breeds them, before eventually slaughtering the birds and selling them to major food outlets. </PARAGRAPH></P>
When bird flu hit the nation in 2006, the World Health Organization (WHO) issued a 200-page guidebook on how to deal with the influenza for all parties involved: government, agencies, breeders and farms. But the public alarm and chaos that ensued, says Hisham Hassan, senior vice president of Alpha Group, a consortium specializing in poultry-related equipment and chicken feed, led the government and regulatory safety bodies to unwise precautionary measures. </PARAGRAPH></P>
?The government enforced the [WHO] rules, but not intelligently. When you have an infection at one site, you?re supposed to cull the farm, put the site and its 10-kilometer radius under quarantine and keep all neighboring farms under close monitoring. [In Egypt] if there was a sign of infection, they would cull the whole 10 kilometer radius!? Hassan says, visibly agitated.</PARAGRAPH></P>
Hassan explains that farmers? lack of awareness about how to tend to the fowl also played a role in exacerbating the outbreaks. The WHO guidelines advise that chickens should be kept in cages so they don?t mix with migratory birds, but most farmers do not realize the importance of following these instructions. ?Farmers have little or no access to media and if they don?t understand something, they?re left unconvinced [] Farmers raise the birds they eat with the stock, left out in an open area,? Hassan says, adding that infections that begin on small farms for these reasons can easily spread to nearby breeding farms.</PARAGRAPH></P>
Alpha Group had a net profit of LE 8 million in 2005, selling 1,200 tons of feed per month. But after word of the flu arrived, the company began selling less than 600 tons per month, unable to reach the required 800 tons to break even. ?[After] the first strike in 2006, our production levels went down to 40%,? Hassan says. ?Poultry production and demand [plummeted] so our clients didn?t buy our feed. Out of our 100 breeder clients, 60 of them were [already] in debt when the avian flu hit.? </PARAGRAPH></P>
Hassan adds that there was a vicious cycle because those who bought raw materials from him did so on a credit basis. ?They go off to breed their chickens and then sell them so they can compensate me with the returned income,? Hassan says. </PARAGRAPH></P>
Ibrahim El-Kholly, marketing manager of Gamal El-Sowah Poultry, says his company also saw its share of misery. ?What we dealt with was like all the other companies around us. Our bo?ra [infected sites] were in the town of Belbais. Almost all the farms on Ramses Road in Belbais were infected, although at different stages and were consequently culled,? he says. ?Needless to say, these farms were severely hurt, especially since a lot of the business was local.? </PARAGRAPH></P>
Gamal El-Sowah Poultry has been in the industry for 12 years and operates 18 farms of parent-stock breeding. Parent-stock are used for breeding other chickens and are much more valuable than regular birds. El-Kholly says that only one of their farms was infected but he speculates that their losses were some LE 25 million. ?The loss was huge because [we had to shut down] chambers [] and this limited production, causing phenomenal losses. I can?t really quantify the losses because the shutting down of chambers is one thing and the culled chickens are another,? he says. </PARAGRAPH></P>
While the government did take measures to mitigate some of the losses, their effectiveness has been debated. ?When the flu hit in 2006, governments around the world compensated companies to protect the market. Here in Egypt, they compensated, but failed to take into account the difference between the types of production facilities,? Hassan says, noting that chicken costs range from as little as LE 5 to LE 800 per head. </PARAGRAPH></P>
?One of my clients had 20 chambers for breeding parent-stock, which was worth LE 25 million. When the infection hit his farm, the total stock was culled within 48 hours. He paid LE 300-800 per chicken and the government compensated him at a rate of LE 5 per head. It was a total loss.?</PARAGRAPH></P>
Two Years Later</PARAGRAPH>
</P>
On March 3, 2008, the Ministry of Health and Population announced the 47th case of avian influenza in Egypt, a four-year-old girl who has since been stabilized in the hospital. The government expects the infection rate to decrease by 93% in 2008 from 2007 levels, and has imported 1.4 billion doses of vaccination just to be on the safe side. </PARAGRAPH></P>
?Since the outbreak, there have been 20 deaths total and 26 cured cases,? says Dr. Nasr El-Sayed, assistant to the Minister of Health and Population. However speculation abounds however that the official numbers are understated, with rumors placing the number closer to 200. </PARAGRAPH></P>
In terms of business though, things aren?t looking as bleak as they once did. El-Sayed says most companies are back on track, indicating that production has bounced back to around 2 million chickens per day, close to its pre-outbreak levels.</PARAGRAPH></P>
?Prices have risen, including the prices of feed. A kilo of chicken is now LE 15, whereas it bottomed out at LE 3-4 during the outbreak,? says El-Sayed. The methods of dealing with the situation will no longer present such dramatic financial setbacks as they did during the first blow, he adds.</PARAGRAPH></P>
To reduce the risk of viral outbreaks ? and more questionably to sustain higher consumer prices ? supply is intentionally lowered in the winter. ?Everyone [in the industry] now knows that the flu only hits in the winter. The virus has no chance of surviving above a certain temperature,? El-Sayed explains. ?So in November, everyone lowers production as a precaution. Breeders use two chambers instead of ten. [] If they survive, the profit will be higher than if they used all ten.? </PARAGRAPH></P>
Things have been picking up for Alpha Group since its losses in 2007, although Hassan says the company is still dealing with an economic stalemate, while the industry as a whole is dealing with a number of setbacks: Vaccines don?t guarantee 100% immunity for the chickens, for instance.</PARAGRAPH></P>
Raw materials are also more expensive than ever. Although Alpha Group?s feed sales were up from 6,208 tons in 2006 to 10,845 tons in 2007, Hassan says the prices of raw materials have spiked due to the increased production of biofuel in the United States.</PARAGRAPH></P>
?The US produces 40% of the world?s corn, which [] is 60% of the [poultry] feed,? he says. ?Poultry is supposed to be a cheap alternative protein source, but prices in the commodity market reached highs I?ve never seen before and since corn is such a basic ingredient, it?s pulled a lot of other prices up with it,? he says, adding that he used to purchase packaged raw material at LE 2,500 per ton, whereas it?s now at LE 4,000. </PARAGRAPH></P>
El-Kholly shares this view, saying: ?Prices of feed are affected internationally. Everything is imported here: corn, soybeans and all the raw materials are affected by the international market.? </PARAGRAPH></P>
El-Kholly is glad that panic is subsiding and things are getting back to normal. ?The infection came and went and alhamdulillah, there are no infections now either at our farms or those surrounding. The production levels have risen, chambers are up and running, things are falling into place,? he says. ?The big companies didn?t shut down, but the small breeders and farms couldn?t handle the losses. Most of the larger companies are running, but still not at full capacity.? </PARAGRAPH></P>
When asked if production was near pre-infection levels, he replies, ?No way. But we?re doing all that we can to reverse the situation. It?s not going to happen overnight, but in two or three months time the market should pick up.?</PARAGRAPH></P>
The Rumor Mill</PARAGRAPH>
</P>
In the tradition of speculation and rumor mongering in Egypt, Hassan suggests there are some businesses benefiting from bird flue fears. ?It might?ve been a scam. The flu?s been around since the 1850s as a different strain [called] H1N1. But then Roche Pharmaceutical introduced Tamiflu (oseltamivir). It stopped the spreading of the virus in the lungs. All the propaganda indicated that if it could spread via human-human, we?d all be screwed, and they?ve been saying this since the 1800s,? says Hassan. ?I went to buy a [10 tablets] box of Tamiflu and it was LE 300; I got four tablets. The day after the flu hit, it was LE 3,000 a box ? and nowhere to be found because the government confiscated it as an emergency stash in case of infections. They bought it all from Roche.?</PARAGRAPH></P>
According to Roche, over 65 countries ordered pandemic-level stocks of Tamiflu in 2005. ?England ordered a supply of 8 million doses in case of infection, France 4 million, Germany 5 million, all the countries wanted reserves of the only source that had a remote lead to the cure. Now two years later, nothing has happened, the virus changed nearly six times in its strain and none were as scary as they made it out to be,? says Hassan. </PARAGRAPH></P>
Conspiracy theories aside, the fact of the matter is that avian influenza, hype or hazard, blew through the eastern hemisphere in the last two years, taking its toll on companies and lives alike. While cases in Egypt are still being reported, the poultry industry is getting back on its feet, better prepared to deal with another potential shock in the future.</PARAGRAPH> bt</P>
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