U.S. poultry exporters face a litany of challenges this year: Record feed grain prices; import quotas and an ever-shifting regulatory regime in Russia; and tariffs and countervailing duties totaling 104 percent in China.
The trade problems in Russia, for many years the industry’s largest export market, and China, also a former top export market, has sharpened the focus on Mexico, currently the biggest customer for U.S. poultry.
Last year, Mexico formally announced anti-dumping duties ranging from 64 to 129.5 percent for U.S. chicken entering the country. Citing inflation and food security concerns, an agency of the Mexican federal government has blocked another agency from collecting the duties, but the specter of a plummeting market hangs over the industry.
Despite all that, Jim Sumner, president of the USA Poultry & Egg Export Council, said 2013 could be a monumental year for U.S. poultry and egg exports. When final numbers are tallied, 2012 exports of poultry and egg products would set a record of more than $5 billion, he said. For chicken meat this year, exports will account for more than 21 percent of total U.S. output of ready-to-cook production. For turkey meat, the export share of production will be at a record of about 15 percent.
Sumner said a more important reason for his optimism is a diversified customer base. “With some exceptions, one or two countries are no longer as dominant as they once were. For example, as recently as 2009, Russia and China together accounted for more than 40 percent of total U.S. export quantity of chicken meat,” he said. “Through the third quarter of 2012, the top five export markets accounted for 40 percent of the total.”
As exports to Russia have declined, exports to other markets such as Mexico, Angola and Cuba have grown to make up the difference, and more, Sumner said.
“In 1996 when Russia imposed its first ban on U.S. imports, it accounted for a huge percentage of our exports,” USAPEEC Vice President Toby Moore said. “Overnight, leg quarters that were selling for 30 cents a pound dropped to 15 cents a pound. In retrospect, it was probably the best thing that happened to the industry.”
Depending heavily on one country for exports is a mistake and “a lesson the industry learned early on,” Moore said. “We’ve been trying to diversify ever since.”
Now, as the industry tries to win markets in developing countries, shippers use another lesson learned in Russia: “Now when we are trying to enter a market, or expand, we make sure we work with the local industry,” Moore said.
“One of our mantras is a rising tide lifts all boats, and we can use Mexico as an example,” he said. “Mexico is our No. 1 market now. I wouldn’t say the Mexican poultry industry is thriving right now because they are facing high feed prices like everyone else. But it is clear the Mexican industry has grown even as our exports have grown because per capita consumption has increased.”
USAPEEC’s focus is on expanding into markets where U.S. producers don’t have a big presence, Moore said. This year the group is conducting programs with local poultry producers in Ghana and Senegal.
“Smallholders, or subsistence farmers, naturally fear a situation where they see containers of product coming in,” Moore said. “What we want them to know is that we are interested in meeting growing demand there, and we are not interested in putting small producers out of business. Small producers aren’t going to be able to supply Yum or McDonald’s. We aren’t going to supply the local wet markets or other traditional markets.”
As chicken consumption grows because of quick-serve restaurants, overall demand will increase, enabling local producers to sell more as well, he said.
The export group and the industry as a whole continue to fight trade restrictions in top markets. Members of the USAPEEC plan to file a complaint within NAFTA over Mexico’s decision on countervailing duties. The U.S. Trade Representative’s Office has filed a challenge with the World Trade Organization over similar duties imposed by China.
Other trade and regulatory problems with China have settled down in the past few months. Last summer, China implemented a new regulation requiring electronic pre-notification of imports, and containers of poultry quickly stacked up in terminals from Hong Kong to northern Chinese ports. “Initially, when the electronic filing went into effect, we had problems with shipments,” said Teresa Pittillo, president of Poseidon Forwarding. “As with anything new, it was a nightmare for three months, but the bugs have been worked out and things have settled down since then.”
Poultry shipments to China also bogged down with new customs clearance procedures, leaving some shippers suddenly without buyers as boxes of frozen chicken landed in China. That also seems to be working itself out, Pittillo said. “The customs clearance process in China is still slow, but it is working,” she said. “We’re not hearing about problems clearing the shipments.”
Contact Stephanie Nall at email@example.com.