August 28, 2003



US to Gain Greater Access to Taiwan Poultry Market


A World Trade Organization mandated market opening measures have given the U.S. increasing access to Taiwan's nearly 637,000 metric ton market for chicken meat and offal, according to information from the U.S. Department of Agriculture's Foreign Agricultural Service web site, dated Aug. 22 and released Wednesday.


Executive Summary


Poultry meat and eggs are pillars of the traditional Chinese diet. From kungpao chicken, Peking duck, and stir-fries to Cantonese-style air dried duck, "1,000 year-old" eggs, and deep-fried chicken nuggets, Taiwan today consumes approximately 726,000 tons of poultry meat (about 87% of this chicken) and 7.5 billion eggs annually. This translates into around 31 kg of poultry and 330 eggs per capita. Local producers currently supply approximately 96% of this market.


International supplier access to the most lucrative segment of this market - chicken meat - remains tightly controlled by tariff rate quotas (TRQs) allowed Taiwan as part of its WTO accession agreement. Annual quota volumes (32,577 MT in 2003 and 45,900 MT in 2004) are nearly fully utilized each year. The United States is the major supplier and one of only 6 countries currently eligible to export to Taiwan based on sanitary approvals.


Thailand recently received approval for processed chicken meat. The U.S. is expected to retain its dominant position through the foreseeable future. TRQ restrictions will be eliminated on chicken meat in January 2005. Tariffs on chicken meat will be reduced to 20% in 2004 from the pre-accession level of 40%. Special Safeguard (SSG) duties of an additional 33% of the applied tariff rate will likely also be assessed on chicken meat and, possibly, certain offal imports after liberalization in 2005.


Taiwan currently exports only limited quantities of poultry products, mostly fresh/frozen meat and prepared chic ken and duck eggs, to customers in the region. Taiwan broiler producers, in particular, are hoping to see a growing market for processed broiler breast (white) meat in western markets, particularly the United States. USDA's Food Safety Inspection Service is in the midst of the fairly lengthy review process to establish the equivalency of Taiwan's poultry slaughter and processing inspection system. Two principal factors are currently at work with regard to poultry consumption in Taiwan.


The first is the health of the general economy, the recently poor state of which has put a damper on consumption. If better economic times return (largely dependent on a turnaround in the U.S. economy), market demand for poultry products, particularly chicken meat and offal, is expected to get a boost of around 7%-10%. The second factor is diversification of the Chinese diet. Staple proteins pork and chicken have seen their overall share of the "Taiwan stomach" fall over time as diet diversification has increased consumption of previously lesser consumed items such as beef and seafood.


Despite stagnation in demand for poultry, the outlook for imports is very positive in the critical category of chicken meat. With a cost structure that is highly favorable against local birds (even considering tariffs and likely SSG assessments after 2004), imported frozen chicken meat, particularly leg quarters and drumsticks, is expected to continue earning market share away from local producers through the foreseeable future. By 2006, imports of frozen chicken drumsticks and leg quarters are currently forecast to grow 250% (to around 80 MT) over 2003 levels, giving overseas suppliers around a 30% share of the broiler market in five years. Given continued favorable pricing for turkey, similar opportunities exist for exports of frozen U.S. turkey meat.
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