H5N1 in North American Birds Will Send Economic Feathers Flying
More than a year ago (4-14-05), The Economist concluded that H5N1 influenza had become endemic in the domestic and wild fowl of Asia. Moreover, one can now calculate that even ignoring the current costs and consequence of human infections, the impact of avian flu on the economies of Vietnam and Thailand has been substantial.
Economic Cost of Bird Flu for Birds
The graphics that US magazines and newspapers use to illustrate bird flu stories tend to leave the impression that the large scale industrial model for poultry production is not used in Asia. This is misleading. Industrial poultry production is used widely in Thailand and Indonesia, and it accounts for a substantial fraction of total poultry production there.
Still, the US is different. Here the industrial model accounts for almost all poultry production. One could hope that this difference means that emergence of H5N1 in North American wild fowl will have little economic impact.
It's Safe to Eat, Right?
When H5N1 is found in North American wild fowl, one can be certain that every news program in the nation will reassure the public that domestic fowl are still safe. Media and PR campaigns from firms like Tyson's and McDonald's will reinforce the story. Even peer pressure will be at work. Anyone who confesses to being a little worried about chicken will be hooted down by friends who have read the media reports.
Oops, There's Not a Chicken in Every Pot
But you know what? The smart money says that chicken sales will still sink. Money managers and others are counting on the old "Don't think of an elephant" syndrome. As millions of us make our own individual consumer decisions, a decent fraction of us will move away just a bit from our usual behavior. Somehow the phrase "I think I'll have roast beef," will come just a little more quickly to a few more lips.
Do the Markets Know This?
This effect has been discounted by stock prices of poultry producers and other firms with products that are tied to chicken consumption. In many cases, the current discounts are substantial. It's anyone's guess whether the current discounts are too light or too heavy.
What happens when we hear the news? Unfortunately, this is not likely to be one of those situations where prices of depressed stocks rally upon the confirmation of the worrisome event.
After the first report of H5N1 in North American wild fowl, one thing is certain. The first report will not be the last. In every media venue, reports (and discussions of reports) will be standard fare for months, perhaps years.
During this long period, our rational minds may often remind us that H5N1 in the wild fowl population has nothing to do with the safety of well-inspected, well-cooked domestic chicken.
Unfortunately for poultry producers, the mind that tells us what to eat is not always the rational one.
Economic Cost of Bird Flu for Birds
The graphics that US magazines and newspapers use to illustrate bird flu stories tend to leave the impression that the large scale industrial model for poultry production is not used in Asia. This is misleading. Industrial poultry production is used widely in Thailand and Indonesia, and it accounts for a substantial fraction of total poultry production there.
Still, the US is different. Here the industrial model accounts for almost all poultry production. One could hope that this difference means that emergence of H5N1 in North American wild fowl will have little economic impact.
It's Safe to Eat, Right?
When H5N1 is found in North American wild fowl, one can be certain that every news program in the nation will reassure the public that domestic fowl are still safe. Media and PR campaigns from firms like Tyson's and McDonald's will reinforce the story. Even peer pressure will be at work. Anyone who confesses to being a little worried about chicken will be hooted down by friends who have read the media reports.
Oops, There's Not a Chicken in Every Pot
But you know what? The smart money says that chicken sales will still sink. Money managers and others are counting on the old "Don't think of an elephant" syndrome. As millions of us make our own individual consumer decisions, a decent fraction of us will move away just a bit from our usual behavior. Somehow the phrase "I think I'll have roast beef," will come just a little more quickly to a few more lips.
Do the Markets Know This?
This effect has been discounted by stock prices of poultry producers and other firms with products that are tied to chicken consumption. In many cases, the current discounts are substantial. It's anyone's guess whether the current discounts are too light or too heavy.
What happens when we hear the news? Unfortunately, this is not likely to be one of those situations where prices of depressed stocks rally upon the confirmation of the worrisome event.
After the first report of H5N1 in North American wild fowl, one thing is certain. The first report will not be the last. In every media venue, reports (and discussions of reports) will be standard fare for months, perhaps years.
During this long period, our rational minds may often remind us that H5N1 in the wild fowl population has nothing to do with the safety of well-inspected, well-cooked domestic chicken.
Unfortunately for poultry producers, the mind that tells us what to eat is not always the rational one.
posted by J. Michael Steele at 5:23 PM
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