March 8, 2004

 

 

US Chicken Feet Trade Affected By China Import Ban

 

China's ban on US poultry imports due to bird flu has seriously affected the trade in chicken feet. China is the largest consumer of chicken feet while the US is the world's leading supplier.

 

However, since the Chinese ban on the product a month ago, American chicken feet are fighting to keep their toehold in the market. As a consequence, about 16,000 metric tons of chicken feet from the U.S. are stranded in midshipment, mostly on vessels plying the Pacific. Importers are searching for cold-storage facilities to store the cargo until the ban is lifted. U.S. chicken processors such as Tyson Foods Inc., Springdale, Arkansas, and Perdue Farms Inc., Salisbury, Maryland, as well as Chinese importers, stand to lose out on millions of dollars in sales. And prices of White Cloud Phoenix Claws, as steamed feet are referred to on Cantonese menus, have risen 30 percent in some Hong Kong restaurants.

The taste for chicken feet helps make China the No. 2 buyer of U.S. poultry products overall, after Russia. Of the $310 million in American poultry sales to China last year, 43 percent was chicken paws, according to the USA Poultry & Egg Export Council.

The ban could persist for weeks, or longer. The influenza strains discovered in some chickens in Delaware, New Jersey and Pennsylvania are nowhere near as virulent as the flu that has killed at least 22 people and wiped out millions of chickens and ducks across Asia. But on Monday, officials in Texas confirmed the presence of still another strain - less scary than the Asian one, but insidious enough to be classified as "highly pathogenic" by the U.S. Department of Agriculture.

The threat that the American strains could jump from live birds to humans is low; cooked chicken poses virtually no risk at all. Still, Asian countries don't want to risk more infections among their flocks. And given that the U.S. is enforcing its own flu-related bans on Asian poultry - China's included - Washington isn't standing on much of a moral high-ground. An official in the Chinese Ministry of Agriculture said on Tuesday that its import restrictions would persist "until avian flu is extinguished in the United States."

Yet even before the flu troubles started, American chicken-paw exports to China were slipping. Despite reductions in poultry tariffs following Beijing's 2001 entry into the World Trade Organization, new obstacles - from Chinese import-license quotas and tougher hygiene rules, to increasingly cocky competitors like Brazil and Thailand - have pecked away at the volume of American feet in recent years.

Things used to be simpler. In 1983, a Chinese importer named Luo Jian arranged what he claims was the first truckload of American chicken feet to be driven into mainland China from the then-British colony of Hong Kong. "We started with 20 shipping containers per month, and the volume kept doubling," says Mr. Luo, who is based in the Chinese city of Shenzhen.

The Chinese market was a perfect complement to the U.S.: where Americans craved breasts and thighs, many Chinese diners preferred legs, wingtips and, of course, feet. "They don't eat 'em in Alabama; they throw 'em away," says Brant Locklier, the Shanghai-based president of Perdue China, who is from Alabama. The Chinese, he says, eat chicken feet "like onion rings."

 

The U.S. poultry industry also holds advantages over China's: American chickens are generally raised to a larger size, making for a bigger, fattier paw. And whereas Chinese chickens are traditionally sold live to restaurants and consumers, America's system of centralized slaughtering is far more efficient: A typical processing line can amputate 240 pairs of chicken feet per minute.

Best of all, the craze for chicken feet has spread over the past two decades, from southern Cantonese kitchens to all corners of the country.

"Once the thought comes to your mind, it's very hard to resist," says Trina Chen, a stock analyst, after finishing a plate of paws at the Victoria City Seafood Restaurant in Hong Kong. "I'm mentally vulnerable to chicken feet."

The rising demand makes the slide in U.S. exports to China all the harder to swallow. Around the time China joined the WTO, import licenses became harder to obtain, says Sarah Li, director of the USA Poultry & Egg Export Council's office in Hong Kong. The licenses that are issued place stricter limits on the volume of cargo, she says.

Then, in late 2002, China began requiring that the U.S. Agriculture Department inspect and approve all paws sold to China. The move has taken a big toll on exports. In many U.S. processing facilities, chickens are stunned, captured in shackles, and dangled upside down before blades slice off their heads and then their feet, which fall into a trough for freezing and shipping. This all happens at blinding speed. It is only further down the line, after the birds have been de-feathered, gutted and chilled, that U.S. inspectors look at the meat. The feet aren't inspected at all, since Americans haven't traditionally eaten them.

Reconfiguring the plants to position the inspectors at the beginning of the line would be too expensive for many plants, processors say. While the U.S. sold 283,500 metric tons of paws to China in 2001, last year it was 190,000, says Ms. Li. Chinese officials say it is entirely reasonable to demand for their citizens the same quality standards that American consumers enjoy.

The ban on American chicken feet has provided an opening for overseas competitors like Brazil, which hasn't reported any cases of avian flu.

Cristof Bender, a trader with Frangosul SA Agro Avicola Industrial in Brazil, says he has been busy all week diverting his company's chicken-paw shipments away from second-tier markets, like Gabon and Angola, and toward China. While overall demand for paws has fallen in China because of the flu, supply has fallen even more steeply as a result of the import bans. As a result, paw prices have shot up 25 percent to 30 percent, Mr. Bender says.

Some American companies are trying to weather the crisis by offloading their frozen paws in Hong Kong and keeping them in cold storage. "It's almost 100 percent occupancy, and the traders are still begging for space," says Wyllie Lam, general manager of Hong Kong Ice & Cold Storage.

Perdue's Mr. Locklier is hoping for a quick end to the impasse. "The way I see it, the USDA and China need to get together to discuss it, to find a reasonable solution," he says. "It hurts both sides when paws can't get in."