While major companies, including a perennial bt100 all-star, capitalized on last year's outbreak of avian flu, small retailers, butchers and consumers are still reeling
Had you stopped by Amm Lamaie's shop in Nasr City a year ago, you would have immediately pegged him as the friendly neighborhood poultry butcher: The feather-strewn floor and cacophony of clucks from the cages along the walls were a dead giveaway. Step inside today and his store's gleaming floor, multiple freezer units and uncharacteristic quiet might make you think he's become an ice-cream vendor.
"Soon after [Egypt's] first avian flu outbreak [in mid-February], the government closed down my shop, even though my chicken was avian-flu free," Amm Lamaie explains. "It took me more than five months to re-start my business, this time selling frozen chicken I buy from official slaughterhouses."
Still, Amm Lamaie complains that his once-thriving business has not yet recovered from the restrictions imposed after the first cases of avian flu were detected in Egypt early last year. Demand for chicken has lagged compared to pre-flu levels, and his sales have dropped by more than 50%. When avian flu first hit, widespread panic wiped out consumer demand for poultry. "Up till now, many people are still afraid and refrain from eating chicken, whether fresh or frozen."
As people shunned poultry, prices for fish, beef and other red meat climbed with demand. To spur his sales, Amm Lamaie began to sell frozen meat and fish for the first time in his life. "Selling frozen meat has [to some extent] helped me absorb the market shock." However, he says that it's not the best economic substitute from a business standpoint, as fewer people substitute meat and fish, which are more expensive, for chicken.
Last February's outbreak doubled poultry and egg prices due to a shortage of locally raised birds, and while prices have dropped gradually after last winter's peak, they have not yet returned to their normal levels. According to Amm Lamaie, frozen chicken now sells at LE 12-14 per kilogram, compared to LE 7-8 prior to the outbreak. Eggs have also dropped to LE 0.50 each from LE 0.70, compared to LE 0.25-0.30 prior to the outbreak.
Lying on the migratory route for more than 2 million birds, Egypt has been hard hit by the virulent H5N1 strain of bird flu, which marched relentlessly through 20 of the country's 26 governorates last year. Authorities were forced to slaughter some 30 million birds to halt its spread. According to public heath officials, the majority of infected birds have been found in backyard gardens and rooftop coops, where low-income residents raise poultry for both personal consumption and sale to supplement their income.
For the first time in recent memory, the government acted before the crisis broke out, preparing a national campaign well in advance that it rolled out the moment the disease was first confirmed in domestic flocks. It all started when Health Minister Hatem El-Gabali woke Dr. Zuheir El-Halaj, the World Health Organization's (WHO) representative in Egypt, at 3am on February 17 to inform him that the first case had been discovered. A government statement to the public followed within hours, making Egypt the first country with avian flu to make the announcement before the WHO.
In a bid to control the spread of the virus, the government immediately convened a Supreme National Committee (SNC) headed by the ministers of health, agriculture, environment and interior to oversee the culling of backyard and rooftop poultry and confiscation of avian livestock being sold in villages and markets. At that time, selling live birds was strictly prohibited, and vendors like Amm Lamaie had to either shift their business to selling frozen poultry from accredited slaughterhouses or face fines ranging from LE 1,000 to LE 10,000.
"The committee's decisions were successfully carried out," says Abdel Rahman Shahine, spokesperson to the Ministry of Health. "However, the ban on livestock retailing found only partial success [because few complied in rural areas]."
Confirmation of the first human fatality in March incited more fear than Alfred Hitchcock's movie The Birds as scores of people rushed to state-run hospitals seeking tests. By April, the Health Ministry was screening more than 100 people with flu-like symptoms each day. Those who tested positive were administered with Tamiflu, an anti-viral drug known to treat symptoms of the disease, free of charge. The Ministry of Health also announced plans last year to manufacture a domestic version of Tamiflu under license from patent-holder Roche.
The virus infected at least 15 civilians last year, killing eight, with the most recent human case reported last December. According to a WHO report released at the beginning of December last year, Egypt has the fifth-highest number of confirmed bird flu-related deaths, behind Indonesia (57), Vietnam (42), Thailand (17) and China (14).
Compensating the Loss
The lethal strain has ruffled the feathers of Egypt's LE 17 billion poultry industry, which produced around 750-800 million chickens a year before the virus arrived. That production capacity was cut by half after the initial outbreak of the virus. An industry that used to employ as many as 1.5 million people (between corporate breeders and smallholders and private citizens) has experienced over LE 2 billion in losses from both the culling of infected birds and people passing on eating chicken.
Salem Hallouti, who comes from three generations of poultry butchers, has totally given up on the family business.
"After the outbreak, the government confiscated all my chickens. Then I shifted to selling frozen chicken, but demand was very slow. People [always] prefer to eat fresh chicken." Later on, Hallouti tried to violate the ban by selling livestock chicken on the market. "However, officials pulled the truck over and confiscated all 120 cages of live chickens onboard." In the end, Hallouti resorted to selling rabbits. "Still, nothing sells as much as chicken did before the crisis."
Prior to the outbreak, Hallouti owned three butcher shops. He has since had to sell two of them for 35% less than their original value. "[All together], I've suffered an LE 300,000-400,000 loss."
As butchers and small producers suffered a violent decimation of stock and income in less than three months, the government promised them fair compensation. "At the beginning of the crisis, the government got involved in organizing slaughtering processes and paid LE 5 for each chicken slaughtered under government supervision," Cabinet Spokesman Magdy Rady told bt in an April interview, adding that healthy chickens were bought from farmers for the same price. The local press reported that the government also intended to make funds and interest-free loans available to small-scale producers to help them gear up to produce frozen chicken.
"Like most of the people, I heard about these compensation schemes on the news, but I haven't received anything yet," Amm Lamaie complains.
The European Commission (EC) has pledged 80 million in aid grants to emerging economies hit by the virus, with 10 million earmarked for the Mediterranean region and 30 million for African countries. Moreover, another 20 million in research funds is earmarked from the Community Framework Program for Research and Technology Development, bringing the total EC pledge to 100 million.
According to Barbara Stacher, first secretary of trade affairs at the EC Delegation in Egypt, the funds are designated for technical assistance and training courses as well as a veterinary mission and a humanitarian mission.
Bigger Fares Better
Major breeders and producers such as Cairo Poultry Company (CPC, bt100 number 24), Egypt's leading poultry producer and the exclusive supplier to the Americana fast-food chain restaurants, have weathered the crisis much better than the smaller producers on the market. Soon, after the outbreak, CPC shrank its broiler production by more than a third, producing only 70,000 chickens per day instead of 110,000.
As live birds were culled, sales of CPC's Koki-brand products largely dominated supermarket freezers, as they were among the handful of chicken products still allowed on the market. "Koki is an all-time success story because people started shifting to frozen chickens, realizing there is no harm in eating it," Hazem Zayed, CPC's chief financial officer, told bt in April. "Koki sales bounced back [recovering from a brief drop] because people could not give up eating chicken, as it is a cheaper source of protein than meat and fish."
CPC, in fact, has seen the crisis as an opportunity to corner the market share previously held by livestock vendors, as the nation's attention turned to the benefits of frozen chickens and automated slaughterhouses. "When butcher shops, which are the main competitors to automated slaughterhouses, closed down due to safety measures, their customers started buying Koki products," Zayed noted. "Frozen chicken became more valuable, so demand increased."
Since the avian flu strain surfaced worldwide, CPC has implemented multiple security procedures to guarantee its farms remain flu-free. "Our farms are secure, within a reasonable distance from each other and sealed to prevent entrance of outdoor birds that might carry the disease," Zayed said in a September interview, adding that they vaccinate their flocks at different stages and test samples before they are sold in the market to make sure that they are safe to eat. CPC employees have also received training on how to protect farms and how to identify flu-like symptoms in poultry. The Ministry of Agriculture frequently inspects their farms and examines chickens before authorizing the sales process.
As summer's heat signaled a temporary end to the flu season, the ban on domestic breeding expired, but health officials continued with their surveillance over the country's bird population, poultry farms inspections and testing campaigns. The Ministry of Health took advantage of the lull to expand laboratory capabilities and establish new lab facilities in Alexandria and Assiut. "A number of doctors and nurses, especially those in rural areas, have received medical training on the control of bird flu," says Shahine, adding that other waste-disposal personnel were trained in how to properly bury birds. The government also allowed imports of duty-free frozen chicken and meat to increase supply and further stabilize prices.
It's Back
September brought the annual fall migra-tion of birds, and the ministry again detected infection in a number of sites across the country. Amid rising concerns that these might spark another nationwide outbreak of the virus, the SNC re-imposed its mid-February restrictions, banning the sale of live birds in shops and inter-governorate transport of poultry unless the birds passed a special inspection. Domestic poultry breeding was entirely prohibited in urban areas, and the committee continued its ban on hunting migratory birds for the 2006-07 season. The Ministry of Agriculture also began to vaccinate domestic poultry raised in rural areas and villages at no charge.
The initial avian flu outbreak in February has given health officials, butchers, producers and citizens valuable insight and perspective for dealing with future outbreaks. Health officials have said that avian flu will be present in Egypt for some time and that new cases will re-surface.
"However, people have become more aware of the gravity of the disease, means of infection and its symptoms," says Shahine, predicting that not as many cases will result in fatalities. He adds that the ministry has so far stockpiled 600,000 to 1.2 million courses of Tamiflu. "By [mid] 2007, we will have stockpiled 2.5 million courses of the drug that will only be available at state-run hospitals."
According to Shahine, state-owned Nile Pharmaceuticals (bt100 number 57) should start manufacturing Tamiflu later this winter under license from Roche, from whom it is importing the hard to make production inputs.
"I believe bird flu is now under control in Egypt. Most of the commercial flocks have been vaccinated, and risk can only come from domestic or backyard flocks [which have recently been vaccinated], a practice that will reduce risks," Magdy El-Sebaie, CPC's general manager, told bt in September.
CPC has now returned to its normal production capacity of 110,000 chickens per day and is working on an LE 110 million processing plant that will up its capacity to more than 300,000 chickens per day. The new plant is due to begin operation early this year.
To immunize itself against future crises, El-Sebaie explained that CPC would no longer heavily depend on supply from the external market for its breeding program. Instead, it plans to adopt new production schemes that increase its internal use of parent and grandparent flocks.
"In the past, we used to sell most of our production capacity in the market and leave around 15% for our internal use," he said. "After the crisis, we decided to separate ourselves from the market, because it is vulnerable to any crisis, and to increase the capacity of our internal cycle."
Butchers predict that 2007 will be a much brighter year compared to last year. "Chicken will regain its position on the market, and production will increase in farms," says Amm Lamaie. However, he complains that some butchers are violating the government's decision to ban livestock retailing. "This hurts the sales of those who complied with the government's decision. So, the government should either ensure that everyone complies or else lift the ban altogether."
CPC's Zayed has a positive outlook for the new year in terms of supply, demand and prices. "Conditions are now stable on the market, and 2007 will [generally] be a good year," says Zayed, noting that chicken and feed sales are now increasing, an indication of increasing demand. He is concerned, however, that companies like his will be badly affected by government imports of duty-free frozen chickens. "If the government wants to stabilize prices, it can, for example, impose quotas on prices of broilers or chickens sold on the market -- but not subsidize imports. This harms us."
Amm Lamaie, however, predicts that imported chickens will not last longer than three to four months on the market. "Many customers don't like imported chicken, saying it's not fresh and has been stored for over four months. They want home-grown chickens."
The Ministry of Health will stay active in the battle against bird flu, with strategies implemented at all levels of the production chain. Shahine says that the government plans to increase numbers of automated slaughterhouses via public-private partnerships.
"Another strategy the government intends on seriously implementing in 2007 is the relocation of pigsties to sites far from populated areas," he adds, noting that the ministry wants to keep pig and bird populations far apart. Strains of pig flu are highly recombinant, meaning they easily mix with bird flu virus strains to form new and potentially very virulent strains.
In the meantime, Shahine says that the Ministry of Health will continue with its current strategy to restructure Egypt's poultry industry, transforming the market from livestock chickens to frozen ones. "This will take time because [many] people are still not used to the idea of eating frozen chicken."
By Sherine El-Madany
© Business Today Egypt 2007
