Japan has suspended imports of poultry meat from Montenegro and live poultry from Rio Grande do Sul, Brazil, following a bird flu outbreak. This ban took effect on Friday after Brazil confirmed its first outbreak of bird flu on a poultry farm, triggering trade ban protocols from China and state-wide restrictions from other major consumers.

Japan relies heavily on Brazilian chicken imports, with about 70% of its poultry meat imports (excluding processed items) coming from Brazil in the 2024 fiscal year. This reliance makes Japan vulnerable to the impact of bird flu in Brazil, potentially affecting the meat market as food prices are already rising.

Brazil's poultry industry is responding to the outbreak, hoping major consumers will soon loosen countrywide bans. Officials aim to contain the outbreak within Rio Grande do Sul, potentially leading China to follow Japan, Saudi Arabia, and the UAE in limiting bans to only that state's chicken.

Brazil's chicken exports account for over 35% of global trade, making a nationwide ban detrimental to both Brazilian farmers and major importers. Brazil supplies over half of China's chicken imports, with the remainder largely from the United States. A U.S. bird flu outbreak and trade tensions have limited China's appetite for American poultry, with China blocking poultry from over 40 U.S. states.

Brazilian farmers are optimistic that warm relations between Presidents Lula da Silva and Xi Jinping will ease the poultry trade ban. However, an analyst at S&P Global Commodity Insights suggests the outbreak could reduce Brazilian chicken exports by 10% to 20%, depending on containment speed and trade ban adjustments.

Rio Grande do Sul, the outbreak's location, is Brazil's No. 3 chicken producer and had already suspended exports to China due to a Newcastle Disease outbreak last year. The EU and South Korea are among other major importers who have banned Brazilian chicken.

A wider bird flu outbreak could worsen the outlook and raise U.S. hopes for China to ease restrictions on American poultry. Under a 2020 Phase 1 trade agreement, China should lift statewide bans on U.S. poultry 90 days after states eliminate bird flu from infected farms, but it has kept bans in place longer than agreed.

The CEO of the USA Poultry and Egg Export Council noted that China's automatic 60-day suspension of Brazil imports is more lenient than its agreement with the U.S., highlighting ongoing trade dynamics and negotiations.