On this week’s HotCopper Wire podcast, Isaac McIntyre and Jonathon Davidson took a closer look at the weekend’s market scare: Australia’s first detection of the H5 bird flu strain, and the hit it dealt poultry giant Inghams.
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This week’s detection, McIntyre explained, is “the nasty one that’s been tearing through flocks and wildlife on basically every other continent.” It turned up in a migratory seabird in southern Western Australia (confirmed by the CSIRO, with a second suspected case in another seabird nearby), and while no poultry has been infected, the markets moved aggressively on Monday anyway.
Inghams “took the brunt” after locking its WA operation, McIntyre pointed out, “smoked off on Monday down something like 14%,” even though its nearest farm sits “nearly 700 kilometres from where that bird was found.”
But – birds fly, he noted, so “there’s always going to be worry” – and it wasn’t something Inghams needed considering how low it already had been price-wise.
Davidson came down on the side of caution, suggesting the fall “accurately captures the caution investors ought to be practising.” The strain has run rampant through every other country it’s infected, he said, and Oz was the only major country that had gone without detecting it.” That crown now belongs to New Zealand, “but I think we all consider that a de facto Australian territory anyway.”
The numbers were not kind. Early on Thursday morning, the KFC operator’s one-week return was down nearly 10%, back to its Monday loss, with the one-year chart down just shy of 50%, with half its value lost in 12 months.
The bull case rests on Ingham’s convincing investors that it has isolated its poultry flock, the Wire pair agreed. With no obvious possibility of this transferring to humans, they argued, it’s the impact on food prices that matters, given chicken is Australia’s most widely consumed protein – and eggs too.
On the other side, the bear case was “far more obvious,” in Davidson’s eyes: The virus is a direct risk to Inghams’ existing poultry stocks. “I don’t want to be a doomsayer, but I just don’t see how we mitigate the spread of this virus in any meaningful sense,” Davidson said. “It’s hit Esperance, so once it escapes the seabirds, it’ll be in Kalgoorlie before we know it in WA. If it gets into crows, I’m pretty sure that’s game over. It’s COVID for birds basically, so not very finger-lickin’ good.”
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