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After focusing so resolutely on grain markets and high feed costs for much of the past year, the world’s poultry industry is now turning its attention to new trade opportunities in 2013.
With renewed poultry industry profitability visible in 2013 – and barring any immediate grain crop failures in the Americas – there’s news that U.S. and European officials are contemplating what could be the world’s largest free-trade zone. While discussions are in the preliminary stages, U.S. and European officials have said they would like to see a trade deal happen. A working group has been tasked with analyzing the prospects and making recommendations. The prospect of free trade in poultry between the U.S. and Europe is remote at this point, but shouldn’t be ruled out.
Agricultural issues, of course, are often the sticking point in trade negotiations between the U.S. and Europe, with poultry frequently being the flashpoint in rows between the two sides. U.S. producers are barred, for example, from exporting poultry to the EU due to the chlorine used in chiller rinsing operations. If the talks go forward, there is at least a new opportunity for the U.S. side to raise the issue.
New supplier in Europe: Ukrainian poultry
The trade openings are worldwide, however, and not limited to the transatlantic. The EU, for example, has opened its markets to poultry and egg products from Ukraine. The move follows years of inspections by the EU’s food safety and consumer protection bodies. While initial levels of Ukrainian poultry into the EU may be modest, the levels are expected to grow if a broader free-trade agreement is signed in the future.
The CEO of MHP, Ukraine’s largest poultry producer said in reports, “Ukraine today is still known as the breadbasket of Europe, but we hold vast potential to also become the meat basket of Europe by exporting meat and other value-added food products.”
MHP, which is said to be looking at possible acquisitions in Europe in poultry distribution, production and processing, expects to export up to 20,000 metric tons to Europe in 2013. The company is also in talks with Yum International to become a supplier to KFC restaurants in Europe. Yum, in fact, is expected to open more than 100 KFC restaurants in Ukraine within five years.
Chicken for China
China is perhaps the biggest global business opportunity for poultry producers and their customers, and they are responding.
Tyson Foods, for example, is pressing ahead with new investments in company-owned broiler housing in China. The company expects the China business to yield low double-digit returns by 2015.
Here, again, Yum International is an important player in that market. Already the biggest Western fast-food chain in China with 5,400 locations, Yum is now focusing on the country’s less urbanized areas. It opened 800 stores in China in 2012 and plans to open another 700 in 2013.
KFC’s product offering occupies the premium market segment, commanding in the neighborhood of two to three times the prices of local restaurants with similar offerings.
Russia demands testing of US beef, pork
Nonetheless, the international poultry trade can be a rough and tumble business. Latest example: Russia is now demanding that U.S. red meat coming into the country be tested and certified free of the feed additive ractopamine, despite scientific evidence that it is safe. U.S. poultry producers, seeing a continuation of Russia’s characteristic difficulty as a trading partner, must be taking a collective sigh of relief that Russia is no longer such an important market for their chicken leg quarters.