During the past 30 years, Chinese meat and poultry consumption has more than quadrupled, as economic conditions in the country have improved and the population has become increasingly urbanized.
While chicken will not soon overtake pork consumption in China, it is being eaten much more regularly, particularly as urban Chinese citizens become accustomed to availability through fast food restaurants.
For example, since opening its first Kentucky Fried Chicken (KFC) in China in 1987, YUM! Brands has built more than 5,000 KFC restaurants in 850 Chinese cities. This success has been replicated by other domestic and international fast food chicken brands, and from any perspective, this rise in availability has boosted consumption over the past several decades, as shown in the chart below.
Despite this strong growth trajectory, Chinese per capita meat consumption remains low – for example, it has only reached half that of the average American. As such, it seems likely that demand has plenty of room for future growth if consumer desires are met, but which poultry meat exporting country will be the main beneficiary if this becomes reality?
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Chinese trust in its food supply has been waning for several years, and the 2013 Chinese purchase of U.S. pork conglomerate Smithfield Foods was the clearest signal yet of the country’s reliance on foreign meat processors to safely supply rising demand. After all, China consumes nearly half of global pork production, and this acquisition solved many obvious challenges facing its ability to meet consumer demand.
Similar obstacles likely remain with respect to chicken, and there has been a notable falling off of trust in poultry meat over recent years. Yet demand for chicken is still expected to grow as total meat consumption in China is forecast to increase by 50 percent over the next decade. The manner in which China addresses a potential shortfall in chicken may not, however, involve the U.S. processing industry, as was the case with the pork sector.
There are several factors involved in this potential exclusion.
First, the U.S. poultry industry has ample opportunity for growth domestically, as chicken has far outpaced the consumption of other proteins for several years. U.S. processors are not lacking for distribution markets, in particular for higher margin cuts of white meat that are preferred by most Americans.
Additionally, politically motivated headwinds between the two countries pose yet more challenges. Moreover, the new U.S. administration may lessen any incentive for the country’s processors to press for the development of a Chinese trade channel.
What remains is a Chinese market poised for long-term consumption growth in which U.S. processors may not stand to directly benefit.
Brazil to the forefront?
Brazilian chicken processors appear to be the obvious beneficiaries of China’s growing demand for poultry meat, as a weakening real -- particularly when combined with a strengthening U.S. dollar -- has made Brazilian products more affordable, while U.S.-China trade restrictions have made availability sporadic.
While Saudi Arabia and other countries in the Middle East remain primary export markets for Brazil, China is expected to be Brazil’s leading growth poultry market for 2017. And the Brazilian chicken industry is far more dependent on trade, as more than 30 percent of Brazilian chicken is typically destined for export markets, compared with the U.S., which exports 18 percent of its chicken.
As Chinese demand for chicken continues, U.S. processors are capable of filling that need, but it is likely that Brazil will be the beneficiary of this demand growth. Time will tell if the barriers that exist to U.S.-China poultry trade will diminish, allowing them to compete for a part in this growth opportunity.
