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Soymeal Demand Declines as Bird Flu Spreads

Analysts say that the economic impact of bird flu is unlikely to last long, despite the virus weighing down the prices of soymeal and some other soybean products on the commodity market.

In fact, a quick revival is expected after the virus is contained, analysts said.

Soymeal, a by-product of soybean and a major poultry feed, is facing declining demand as Asian countries are culling poultry in bird flu infected farms and trading in live poultry has been greatly reduced or entirely halted in many places.

Concern over bird flu also pulled down the Chicago Board of Trade soybeans and soy products in Asia on Monday.

The soy market as a whole will face great pressure in the short term, but it is still hard to calculate the losses, which depend on how quickly the disease is brought under control, said Li Lei, research director of China International Futures Co Ltd (CIFCO).

However, the impact is unlikely to last long, if the epidemic can get contained within one to two months, he said.

It is not the first time there has been a bird flu outbreak, although the impact is being more strongly felt this time. Over the past week, 10 Chinese mainland provinces and municipalities have reported confirmed or suspected cases.

But the authorities have reacted in an efficient and transparent manner to contain the disease, said Li.

China has stepped up its efforts to contain bird flu, since the emergence of the country's first confirmed case of H5N1 avian influenza, or bird flu, in poultry in South China's Guangxi Zhuang Autonomous Region a week ago.

Reductions of poultry production and consumption will unavoidably reduce demand for the feed, but once the disease is contained, demand will rise again and production will catch up.

Following this, China, as the world's most populous country, will see a new boom in the poultry industry and the soymeal sector will also recover, said Li.

China is the world's biggest importer of soybean and is also a major soymeal consumer.

Market demand for soy products had been rising rapidly prior to the bird flu outbreak, and soymeal prices had also been on the way up.

Yang Wennian, a researcher with Shenzhen Goldbull Futures Co, said the soy market's temporary fluctuation is also affected by other factors other than the bird flu, such as increasing costs of soymeal and the expected new supply of South American soybeans to China.

China imported 20.7 million tons of soybean in 2003, up 83 percent from 2002.

However, the high cost of imported soybean also drove up the price of soymeal, forcing some domestic manufacturers out of the market.

The bird flu spread will also place some downward pressure on the soymeal counter in the short term, said Yang.

But when the epidemic is a thing of the past, the market is expected to rebound and the price will recover again.

(China Daily February 3, 2004)

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