February 15, 2017 / 10:31 AM / 6 months ago

UPDATE 1-China bird flu fears hit poultry prices, meat producer shares

* Bird flu death toll stokes fears about waning demand

* Slaughterhouses slow purchases after Lunar New Year holiday

* Chicken is cheap alternative to pork, China's favourite meat (Updating to add more detail, comment)

BEIJING, Feb 15 (Reuters) - Chinese chicken prices sank to their lowest level in more than a decade on Wednesday as fears grow about the spread of bird flu, hurting meat producers' share prices and deepening concerns about demand in the world's second-largest poultry consumer.

The sharp drop came as the government reported as many as 79 people died from H7N9 avian flu in January, four times higher than the same month in past years and bringing the total death toll to 100 people since October.

The larger-than-expected number alarmed the market, sending prices in the main producing regions to their lowest since 2005, according to Shanghai-based consultants JC Intelligence Co (JCI) which assesses prices.

"Now it's relatively serious. The impact was underestimated," said Alice Xuan, JCI analyst. "Lots of places have closed down live poultry markets. That has quite a big impact."

The spread of the deadly virus comes as neighbouring South Korea and Japan also battle major outbreaks among their poultry flocks.

Live poultry markets are the main sales channel for China's local chicken breed, which accounted for about a third of the poultry meat supply last year, according to estimates from the United States Department of Agriculture.

Over the past three months, many provinces have closed live poultry markets to prevent the spread of infection, hitting sales of birds, said Xuan.

The impact on local birds has dragged down the prices of white feather chickens, bred from imported stock and used by fast-food chains, that account for more than half the country's chicken supply.

The average price of live chickens in major producing areas such as Shandong, Henan, Hebei, Gansu, Anhui, and the northeast region fell to 5.28 yuan ($0.7690) per kilogram this week, down from more than 7 yuan per kg in December.

The drop shows slaughterhouses have slowed their purchases since returning to work after the Chinese Lunar New Year holiday, said Pan Chenjun, senior analyst at Rabobank.

"The slaughterhouses will be very cautious at the moment, they don't know how consumers will react to bird flu," she said.

The fallout from bird flu will add to concerns in the industry, which is already battling a domestic surplus after China ramped up output and imports rose just as the pace of demand growth has slowed.

Chicken is a popular and cheap alternative to pork, the country's best liked meat, but in recent years demand has been hit by food safety scandals and bird flu outbreaks.

Shares in major poultry meat supplier Fujian Sunner have fallen 12 percent so far this year to near one-year lows.

China's leading broiler breeder Yisheng Poultry is down 21 percent, languishing not far off 14-month lows hit last month.

The last major bird-flu outbreak in 2013 that ravaged the domestic poultry industry caused more than $6 billion in losses for the agricultural sector. ($1 = 6.8660 Chinese yuan renminbi)

Reporting by Dominique Patton and Josephine Mason; Editing by Richard Pullin and Christian Schmollinger

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