China poultry duty could hurt US meat prices 

 

 

China's decision to impose duties on imports of US poultry, announced early Friday (Feb 5), could weigh on domestic chicken prices in the US and possibly put some pressure on other proteins.

 

In recent years, China has become a large buyer of US poultry, mainly the lower priced chicken cuts such as leg-quarters, "paws" or feet, and wing tips. But the Chinese government said the imports are hurting the nation's poultry industry and imposed import duties to be effective February 13. The amount of the duties will vary from 43.1% to as high as 105.4%, depending upon the supplier.

 

According to USDA export data, China/Hong Kong combined purchased about 850,000 tonnes of poultry products in January-through-November 2009. The combined China/Hong Kong market was the third largest international customer for US poultry by value.

 

The duties to be imposed on US poultry shipments to China could result in a significant decline in volume of poultry products sold there. With the current Russian ban on US poultry imports as well, more of the production will have to be sold in the domestic market. That means lower prices are likely, analysts said. In addition, the extra poultry meat available at cheaper prices could compete for shelf space and possibly weigh on domestic pork and beef prices.

 

"The US poultry industry is deeply disappointed by the decision of the China Ministry of Commerce (MOFCOM) to impose preliminary antidumping duties on imports of chicken from the United States," said Jim Sumner, president of the USA Poultry and Egg Export Council, in a release. "The US industry prices its export products to China fairly. China has, nonetheless, determined to apply very high duties that will virtually eliminate US chicken exports to China for the foreseeable future," he said.

 

"More than half of all US exports during the period of investigation were chicken paws, a product that Chinese producers do not produce in sufficient quantity to satisfy domestic demand," USAPEEC said.

 

"Paws are a product for which there is ordinarily no consumer demand in the US. When sold in the US market, they are usually sold for rendering a few cents per pound. By contrast, paws are a popular consumer product in China, and so can be sold for US$0.60 to US$0.80 per pound to Chinese importers. When a product is sold at export for prices that are many times higher than the price for the like good in the home market, that is not dumping," the release said.

 

Jim Robb, director of the Livestock Marketing Information Centre in Denver said that "especially in the current US economic environment, these trade problems will tend to spill-over rather quickly to other meats. That is, products not sold overseas must be priced to sell rather quickly in the US market, and consumers are still very price sensitive. So, increased chicken sales in the US will occur at the expense of some pork and beef items."

 

In addition, if items like chicken paws, which aren't consumed in the US, are charged higher duties by China, that would negatively affect the profits of US-based chicken companies, Robb said.

 

Rich Nelson, director of research with Allendale Inc. in McHenry, Ill., said that in the longer term, the duties and potential loss of volume of sales to China could be a problem for the domestic chicken market and prices of other proteins. "Mainland China accounted for 11% of our total chicken exports in 2009 according to my numbers, and Hong Kong was 3%," he said.

 

The latest move is unlikely to result in any shortage of poultry products in China as consumers there could easily substitute chicken with pork, and a relatively short poultry production cycle would mean supply can be ramped up quickly.

 

US exporters including Pilgrim's Pride and Tyson Foods will be required to deposit the duty with Chinese customs, pending a final decision on the matter.

 

China's Ministry of Commerce listed 35 companies, most of which will have to pay a duty of 64.5%. Pilgrim's Pride will have to pay the highest duty among named companies, of 80.5%, while Tyson Foods will pay the least, at 43.1%. All other US firms not named in the list will pay 105.4%, the ministry said. The affected companies have 20 days to appeal the decision.