4. The vulnerabilities to the supply chain
The UK population consumes double the amount of chicken today than the amount consumed in the 1970’s, and accounts for almost half of all the meat consumed in the UK by weight (National Chicken Council 2015). The UK produces a significant amount of it’s own chicken products, and many countries rely on UK chicken exports to meet their poultry demands: “The UK is a major international producer of poultry meat, home to 14% of total EU production” (Ford, 2015). Food chains are becoming more and more complex; therefore it is increasingly necessary to establish a secure supply chain of chicken products. Identifying the vulnerabilities in existing supply chains assists us in mitigating negative impacts that may occur, helping to secure the chicken supply.
4.1 Disease
A recent surge in globalisation has lead to an increase in the global spread of animal disease, including livestock viral diseases, such as avian influenza (Manning, Baines and Chadd 2007). If widespread outbreaks of these viral diseases occur and are not quickly controlled, it could have devastating impacts on the poultry industry and the global supply of chicken could be disrupted (McLeod et al 2005). The World Health Organisation (2004) describes how the disease is “highly contagious and rapidly fatal, and spreads easily from farm to farm”.
A global outbreak of the H5N1 strain of highly pathogenic avian influenza (HPAI) struck nine Asian countries in December 2003 and continued throughout 2004. The scale of this outbreak was historically unprecedented (WHO 2004). It took time for the outbreak to be controlled and therefore it was able to spread widely, resulting in the death of a huge amount of birds, particularly in Vietnam, with death of approximately 17.5% of the poultry population, and Thailand, approximately 14.5% of the poultry population (McLeod et al 2005). McLeod et al (2005) report how “as a result of HPAI, Thailand lost its position as the world’s 5th largest exporter of poultry meat.” By 2005, this strain of avian influenza eventually spread to Europe and Africa, causing further disaster.
This outbreak led to global fear of poultry products and concerns about food safety; many countries imposed a ban on importing Thai poultry products (Tiensin et al 2005). A decline in the consumption of poultry can have severe impacts on the industry and the GDP of countries involved: “Following the 2003-2004 outbreaks of highly pathogenic H5N1 bird flu, the total losses in GDP as a result of damage to the poultry sector in Asia amounted to almost €8 billion” (European Commission 2006).
Although this outbreak had severe impacts for the countries effected with the influenza, as well as countries that relied on poultry imports from Thailand, it did not have a significant impact on Scotland’s supply chain, as around 90% of the poultry meat consumed in the UK is produced domestically (El Amin 2007). There has not yet been any major HPAI outbreaks in Scotland or the UK that has had a substantial impact on the chicken supply. However, if an outbreak does occur, the country will lose its ‘disease free’ status under International Health Organisation rules, which cannot be restored for another 90 days, assuming no further outbreaks occur (Linden 2015). A loss of the ‘disease free’ status can lead to other countries placing bans on imports from the country. Figure 2 displays that around 342,000 tonnes of fresh and frozen poultry were exported from the UK in 2013, which is estimated to be worth £278.1m (El Amin 2007). Therefore if this trade were lost, it would result in a significant reduction in profits. Additionally, outbreaks of influenza cause buyers to lose confidence in chicken products. The Financial Times reported in February 2007, during an avian influenza outbreak, “Tesco had said shoppers at its stores are shunning poultry in favour of beef”, evidence of concerns about food safety.
4.2 Trade
Many vulnerabilities in the chicken supply chain derive from trade and disputes between countries. The Transatlantic Trade and Investment Partnership (TTIP) is defined by the BBC News (2014) as “a deal to cut tariffs and regulatory barriers to trade between the US and EU countries, making it easier for companies on both sides of the Atlantic to access each other’s markets”. The British government claims that TTIP could add billions of pounds to the economy each year and that small UK businesses could export to the US more easily (BBC News 2014).
Liberal Democrat MP Roger Williams (quoted in World Poultry 2015) underlines “that while TTIP may represent significant opportunities to the food sector we must be cautious that these opportunities do not come at the expense of the efforts that UK food businesses, particularly the poultry industry, have made”. Williams continues, “poultry meat production methods in the US are by no means equivalent to those in the UK”. For example, 70 per cent of all processed foods sold in the US contain genetically modified ingredients, whereas the EU permits essentially no GM foods (Williams 2015).
This relaxation of trade barriers and food safety standards is concerning to members of the UK poultry industry. Chicken in the US is dipped in a chlorine solution to kill bacteria, whereas the EU implements a more expensive ‘food to fork’ strategy to keep food safe (European Commission 2004). As the schemes in America are less expensive, there is a chance that UK retailers will import cheaper, less-safe chicken products from the US and leave British farmers struggling.
Unpredictable restraints on trade between countries can have an impact on the supply chain directly or indirectly. The Russian government imposed an ‘unjustified’ year-long ban on poultry meat imports and other agricultural commodities from the EU in August 2014 (DEFRA 2014). The UK exports fairly little poultry meat to Russia, less than 0.5% of the total value of the UK’s exports (NFU 2014). However, NFU Deputy Director General Martin Haworth reported how “other EU countries do export a lot and there is every likelihood that a ban could have an impact on EU prices, which will then have a knock-on effect in the UK” (NFU 2014). The impacts of this knock-on effect can be felt throughout the supply chain; UK retailers are enticed by cheap EU imports, which leads to pressure on UK growers to match unsustainable low prices.
4.3 Animal feed price volatility
The price of animal feed ingredients can be a source of weakness in the chicken supply chain. The Poultry Site (2015) reports the proportional contribution of feed in the overall cost of chicken meat production has been seen to rise by up to 70 per cent in recent years. Strain is placed upon the chicken supply chain as when animal feed prices fluctuate, it increases the pressure to reduce the costs and increase efficiency. An additional impact on the supply due to price volatility is that producers will look to find other ingredients for the feed that may be less traditional; a demand is created for a greater understanding of alternative ingredients (The Poultry Site 2015). It is essential to investigate these ingredients to determine their opportunities and limitations, as it is essential to maximize productivity.