US chicken trade faces challenges and opportunities

U.S. poultry is opening up new trade markets, but the future depends upon the outcome of pending trade deals and the impact of African swine fever in China.

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(kittikorn14 | BigStock.com)
(kittikorn14 | BigStock.com)

U.S. poultry is opening up new trade markets, but the future depends upon the outcome of pending trade deals and the impact of African swine fever in China.

As part of the International Poultry Council’s First Semester Conference in New Orleans, Jim Sumner, president of the USA Poultry & Egg Export Council (USAPEEC), spoke about the trade deals, relationships and unknowns that will shape the future of U.S. exports. He spoke on April 16.

USMCA

At the end of November 2018, the United States, Mexico and Canada signed the U.S.-Mexico-Canada Agreement (USMCA), also called the new NAFTA (North American Free Trade Agreement). While the three parties signed the deal, as of press time it has yet to be ratified by all three countries.

Sumner said the deal, and the speediness of its ratification, is subject to much speculation in Washington. For now, the U.S. is imposing what are called Section 232 tariffs – on aluminum and steel – on Mexico and Canada. He said the tariffs are likely being used as negotiating leverage to motivate Mexico and Canada to ratify the deal.

jim-sumner

Jim Sumner, USA Poultry & Egg Export Council | Photo by Austin Alonzo

Mexico

As part of the USMCA, the U.S. will retain its duty-free access to the Mexican market. Mexico, the largest export destination for U.S. poultry, has been giving duty-free access to other countries for the past six years, however.

Mexico granted duty-free access for 300,000 metric tons of chicken for a six year period. This expired in March 2019. As of press time, an extension of this duty-free program is currently being considered.

During that period of access Brazil, the world’s largest exporter of chicken, took full advantage of the opportunity at the expense of the U.S., Sumner said. Between 2014 and 2017, the quantity and value of chicken exports from the U.S. to Mexico declined. Comparatively, from 2000 to 2013, the quantity and value of exports to Mexico increased steadily. In 2018 specifically, export volume increased by 6.5 percent but value dropped 1.5 percent year-over-year. Exports to Mexico were worth slightly less than $700 million in 2018.  

By comparison, Brazil had no exports to Mexico in 2013. After gaining access to the market then, the value and quantity of its exports increased sharply. According to projections, Brazil exported more than $100 million worth of chicken to Mexico in 2018. Most of the exports are higher value products, Sumner said.

Canada and the TPP

If the USMCA is ratified, the U.S. does not expect to gain significantly greater access to the Canadian market. Had the U.S. stayed in the Trans-Pacific Partnership (TPP) – it signed the deal in 2015 but withdrew in January 2017 – it would have been better off in relation to trade with both Canada and Mexico.

Sumner said USAPEEC was hopeful the TPP would also expand its access to Japan and Vietnam, too. Nevertheless, the U.S. is currently negotiating a free trade agreement with Japan in order to compete with the European Union (EU), Brazil and Thailand.

China

The Chinese market remains closed to U.S. imports, but that could change. The current import ban was imposed in January 2015 due to the outbreak of highly pathogenic avian influenza in the U.S. But, there could be movement toward more imports due to the Chinese outbreak of African swine fever (ASF).

There will be a significant deficit of protein in China, which will likely create new demand for all proteins in the world’s most populous country. Sumner said the country’s domestic poultry industry will be lifted by ASF, but it lacks access to genetics which ultimately hampers its potential. USAPEEC is hopeful the deficit of protein will add pressure on the Chinese government to reopen the market to the U.S.

Brazil

Along with Mexico, Brazil is competing with the U.S. for exports to Hong Kong, Angola, Cuba, Canada, the Philippines, Vietnam and Iraq. However, its level of exports are only close to the U.S.’s export volume in Hong Kong and Iraq.

On the other hand, the U.S. gives little competition to Brazil in its top export markets. Out of its top destinations – Saudi Arabia, China, Japan, South Africa, the United Arab Emirates (UAE), Hong Kong, the E.U., Kuwait, South Korea and Mexico – the U.S. is only exporting more than Brazil to Hong Kong and Mexico. Brazil far outpaces U.S. exports to Japan, South Africa, the UAE and Kuwait.

top-global-chicken-exporters

Brazil and the U.S. are the top chicken exporters globally, but they do not compete in many of the same global markets.

South Africa

The U.S. is back in South Africa thanks to a trade deal that restored access to that market. Sumner said the two countries have had on-again off-again trading for years and the market remains problematic. Now, the country is proposing increasing its import duties for all countries from 37 percent to as much as 82 percent for all bone-in chicken products. This would be a challenge for the U.S., he said, and all exporters if it happens.

India

The U.S. recently won access to the Indian market, but it’s moving ahead slowly due to a difficult, 100% duty on chicken parts and 30% duty on whole chicken, turkey and eggs. Sumner said that makes it hard to compete in the market and make a profit with those conditions especially when adding in transportation costs.

However, USAPEEC is launching activities in India aimed at increasing poultry consumption overall and had conducted some trade missions in the country. Some products have been shipped to India, but Sumner predicts growth will be slow as to avoid irritating India’s domestic industry. The market for frozen chicken products is small and the vast majority of chickens are sold live. For now, USAPEEC’s goal remains increasing overall poultry consumption.

Morocco

The newest market for U.S. poultry is Morocco, which opened up to U.S. exports in the middle of 2018. USAPEEC estimates Morocco is a $10 million market and the first shipment to the country are already on the way. The North African country is still predominantly a live bird market, however there is a growing opportunity for broiler, turkey and egg exports as the Moroccan government phases out live bird markets.

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