Voluntary Report - Public distribution

**Date:** 1/29/2009

**GAIN Report Number:** CH9601

CH9601

**China, Peoples Republic of**

**Poultry and Products**

**USAPEEC banquet honors Chinese poultry traders**

**2009**

**Approved by:**

![](media/image1.wmf)Joani Dong, Director

U.S. Agricultural Trade Office Guangzhou

**Prepared by:**

Ken Chen

**Report Highlights:**

On January 9, 2009, the *USA Poultry & Egg Export Council* (USAPEEC)
hosted a reception dinner in Guangzhou for invaluable Chinese traders of
U.S. poultry products from around the country. So far, Chinese imports
of U.S. poultry in 2008 have been significant, but there's more that
meets the eye. Traders are extra cautious about 2009.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Guangzhou ATO \[CH3\]

\[CH\]

**USAPEEC banquet held in Panyu to honor invaluable Chinese traders**
![](media/image2.jpeg){width="3.6347222222222224in"
height="2.701388888888889in"}

On January 9, the *USA Poultry & Egg Export Council* (USAPEEC) headed by
James Sumner, President, and

Sarah Li, Country Director, hosted a reception dinner in Guangzhou in
appreciation of the invaluable Chinese traders of U.S. poultry products
from around the country. Over 700 guests consisting of U.S. poultry
exporters and Chinese importers as well as USDA/FAS officials including
Bill Westman/OAA, Michael Woolsey/OAA, Joani Dong/ATO Guangzhou, Phil
Shull/ATO Hong Kong and David Kiefner/ATO Shanghai participated.

**Background**

**Uncertainty about 2009.** Latest *China Customs* data indicates that
from January to November 2008, China imported 761,610 tons of poultry
products valued US\$1.0 billion. The States sent over 555,703 tons or 73
percent of the total valued US\$738 million. Most U.S. products were
chicken paws, followed by leg quarters and drumsticks, wingtips, chicken
wings, turkey products and gizzards. Seventy percent of imported poultry
cleared Guangdong ports such as Shenzhen port and Guangzhou port.
Poultry imports from the state of Arkansas are still banned because of a
previous AI case in June 2008. In 2007, imports from the States were
534,284 tons valued US\$612 million. (*Note - Refer to appendix for
data*)

It is important to note insiders believe 2008 data reflects a large
percentage of imported products still in stock because of recent low
prices. Understandably, traders' lack of confidence in the 2009 market
makes them hesitant to order big quantities for the rest of the year.
According to James Sumner, the President of USAPEEC, U.S. poultry
production could decline by 6 percent for the first half of the year.

> ![](media/image3.jpeg){width="3.1006944444444446in"
> height="2.3555555555555556in"}

**A trader is a gambler.** According to interviewed Chinese importers,
most (95-98 percent) traders suffered 20-30 percent profit losses in
2008 as Chinese pork and poultry production increased in the second half
of the year so imported poultry wholesale prices plummeted. Given
increased feed costs, depressed U.S. domestic demand and low export
prices, U.S. poultry farms and exporters also suffered losses. The
largest U.S. exporter, *Pilgrim' s Pride,* has filed for bankruptcy
protection. Nevertheless, its processing plants will stay in operation.
The impact to industry and exports should be limited.

Current FOB prices (US\$ per pound)
are:![](media/image4.jpeg){width="2.39375in"
height="2.352777777777778in"}

> \- Paws (small): 0.40-0.50
>
> \- Drumsticks: 0.50-0.55
>
> \- Paws (large): 0.70
>
> \- Leg Quarters: 0.28-0.38

In 2009, traders will reduce orders. An interviewed trader claimed that
he plans to cut orders by half from 600 containers to 300 containers per
month. Many traders rely on "import declaration companies" to import and
clear customs on their behalf. There are 73 Chinese companies which have
poultry import quotas appropriated by the *Ministry of Commerce
(MOFCOM)* as a means to control competitively priced imports. However,
it is said that only 40 actually use quotas to import for themselves or
for others. The rest just sell their quotas at RMB200-250 (US\$29-37)
per ton to those without quotas. One trader said he was more concerned
about getting enough quota than about price fluctuations. Outside of
these 73, there are said to be 400-500 importers in China, 200 of which
conduct business at *Daluotang Wholesale Market* in Guangzhou, the
biggest for frozen poultry in China.

**Salmonella.** The importers claimed that only one to two percent of
imports were found with salmonella. If found, they would need to pay for
irradiation costs, said to be about US\$3,000 per container. This
percentage could increase when U.S. and Chinese governments have a sour
relationship. Some believe the Chinese government will impose stricter
grey channel controls, but the problem is China is immense and the
border, too long. China has 0 tolerance for salmonella. Cooking poultry
automatically kills the bacteria although food handlers may still
transmit.

**Competition.** There are Brazilian, Argentine and European poultry
products smuggled into China via Vietnam. Rumors suggest 23 Brazilian
plants are about to be allowed to enter China in 2009. In such case,
U.S. products will face strong competition because Brazilian ones are
preferred due to cheaper prices, equal amount of meat compared to
American product, less moisture because of air blast freezing system in
processing, better appearance, thanks to lower labor costs that enable
hand cutting. Argentine products - paws in particular - are less
competitive because they tend to be bonier.

Individual importers also face challenges when large state-owned
companies such as *COFCO,* import large amounts of frozen pork with
subsidies from the government. In 2009, prices of imports will be
squeezed as the Chinese government continues to subsidize domestic
livestock production and the meat processing industry.

**Post Contact Information:**

Agricultural Trade Office (ATO), Guangzhou

14/F, Office Tower

China Hotel, Guangzhou, China 510015

Ph: (86-20) 8667-7553

Fx: (86-20) 8666-0703

E-mail: <atoguangzhou@fas.usda.gov>

Appendix:

**China Imports Of Poultry (0207 Meat & Ed Offal Of Poultry, Fresh,
Chill Or Frozen)**

Quantity: (tons)

+-----+---------------+----------+------------+-----------+-----------+
| **  | **Country**   | **       | **CY2006** | *         | *         |
| Ran |               | CY2005** |            | *CY2007** | *CY2008** |
| k** |               |          |            |           |           |
|     |               |          |            |           | **        |
|     |               |          |            |           | Jan-Nov** |
+-----+---------------+----------+------------+-----------+-----------+
| 1   | United States | 208,299  | 407,456    | 534,284   | 555,703   |
+-----+---------------+----------+------------+-----------+-----------+
| 2   | Brazil        | 143,501  | 142,812    | 163,482   | 131       |
+-----+---------------+----------+------------+-----------+-----------+
| 3   | Argentina     | 24,188   | 27,702     | 102,090   | 179,671   |
+-----+---------------+----------+------------+-----------+-----------+
| 4   | Chile         | 2,502    | 9,116      | 4,080     | 15,956    |
+-----+---------------+----------+------------+-----------+-----------+
| 5   | France        | 2,062    | 1,260      | 0         | 10,149    |
+-----+---------------+----------+------------+-----------+-----------+
|     | **            | **3      | *          | **        | **        |
|     | \--World\--** | 83,482** | *588,496** | 803,936** | 761,610** |
+-----+---------------+----------+------------+-----------+-----------+

Value: (millions US\$)

  ---------- ----------------- ------------ ------------ ------------ ------------
  **Rank**   **Country**       **CY2005**   **CY2006**   **CY2007**   **CY2008
                                                                      Jan-Nov**

  1          United States     178.58       309.61       612.47       738.63

  2          Brazil            129.46       119.06       194.71       0.11

  3          Argentina         19.26        25.34        134.22       225.39

  4          Chile             1.97         7.22         3.48         19.83

  5          France            2.66         1.34         0.00         13.09

             **\--World\--**   **334.82**   **462.69**   **944.87**   **997.06**
  ---------- ----------------- ------------ ------------ ------------ ------------

(*Source:* *China Customs* *data)*