Required Report - Public distribution

**Date:** 9/1/2008

**GAIN Report Number:** CH8073

CH8073

**China, Peoples Republic of**

**Poultry and Products**

**Annual Report**

**2008**

**Approved by:**

![](media/image1.wmf)William Westman

AGBEIJING

**Prepared by:**

Jianping Zhang and Chanda Beckman

**Report Highlights:**

On July 1, 2008, China lifted its poultry ban on Connecticut, Rhode
Island, Pennsylvania, West Virginia, and Nebraska. Imports from these
states were suspended several years ago because of outbreaks of low
pathogenic avian influenza. The ban on New York State was officially
lifted on August 24, 2008. Lifting of these bans will provide more
opportunities for U.S. exports to China. China\'s broiler production in
2009 is forecast to increase eight percent to 13.7 MMT. Broiler imports
in 2009 are forecast at the same level as 2008. Broiler exports are
forecast to recover three percent to 283,000 MT from the previous
year\'s 23 percent decline.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Beijing \[CH1\]

\[CH\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 3](#production)

[Broiler Production Forecast to Continue to Increase in 2009
3](#broiler-production-forecast-to-continue-to-increase-in-2009)

[New Law on Corporate Income Tax Impacts Poultry Rearing
4](#new-law-on-corporate-income-tax-impacts-poultry-rearing)

[Feed Increase Benefits Broiler Production
4](#feed-increase-benefits-broiler-production)

[Prices Falling From High in April
5](#prices-falling-from-high-in-april)

[Consumption 5](#consumption)

[Trade 6](#trade)

[Poultry Ban Lifted on Six U.S. States
6](#poultry-ban-lifted-on-six-u.s.-states)

[Broiler Imports to Remain Flat in 2009
6](#broiler-imports-to-remain-flat-in-2009)

[Breeding Stock Imports Up Sharply, the United States a Dominant
Supplier
6](#breeding-stock-imports-up-sharply-the-united-states-a-dominant-supplier)

[Processing Trade to Ban Frozen Poultry Wings and Paws
7](#processing-trade-to-ban-frozen-poultry-wings-and-paws)

[Exports up Slightly After Previous 23 Percent Decrease
7](#exports-up-slightly-after-previous-23-percent-decrease)

[Live Chicken Exports Down 7](#live-chicken-exports-down)

[Poultry Eggs 8](#poultry-eggs)

[Tables 9](#tables)

[Broiler PSD Table 9](#broiler-psd-table)

[Trade Matrices 10](#trade-matrices)

[Price Tables 13](#price-tables)

[Poultry Egg Production 16](#poultry-egg-production)

# Executive Summary

On July 1, 2008, China lifted its ban on poultry exports from five U.S.
states: Connecticut, Rhode Island, Pennsylvania, West Virginia, and
Nebraska, which were suspended several years ago because of low
pathogenic avian influenza (LPAI) outbreaks in these states. Removal of
the bans will provide new opportunities for U.S. exports to China. The
New York State ban was officially lifted on August 24, 2008. It is
uncertain when the bans on Virginia and Arkansas will be lifted.

While 2009 pork production is not expected to fully recover from the
losses caused by porcine reproductive respiratory syndrome (PRRS or blue
ear disease) during latter half of 2006 and the first half of 2007, 2009
broiler meat production is forecast up at 13.7 million metric tons
(MMT), an increase of eight percent over the previous year. Production
in 2009 is expected to remain strong, because poultry meat is a
substitute for pork.

Broiler meat imports in 2009 are forecast to remain flat, at the same
level as in 2008. Domestic production increases, continued slow recovery
of pork production, and little growth in exports following the
21-percent decrease in 2008 will contribute to increased domestic
supplies. This in turn is expected to constrain China's imports of
broiler meat in 2009. Chicken paw imports will remain stable and
continue to enjoy steady consumer demand.

Broiler meat exports in 2009 are forecast to recover just five percent
over the previous year because of a predicted decrease in exports to
Japan due to stricter quarantine requirements. Japan is a traditional
export market for China.

# Production

## Broiler Production Forecast to Continue to Increase in 2009

China's broiler meat production in 2009 is forecast to increase eight
percent to 13.7 MMT over the revised 2008 estimate of 12.7 MMT, and 11
percent above the previous estimate. This increase is mainly attributed
to a sharp decline in pork production in 2006 and 2007 caused by
outbreaks of PRRS. The pace of growth in 2009 appears below that of 2008
because of slightly recovering pork production. The eventual recovery
will no doubt weaken broiler meat consumption as a substitute for pork.

The May 2008 earthquake in Sichuan Province, which resulted in about
100,000 human deaths and caused significant economic losses, did not
drastically impact China's broiler production. Sichuan Province is not
one of China's largest producing provinces.

China's 2007 poultry production is revised down to 11.4 MMT from the
previous forecast of 11.5 MMT, because imports of grandparent generation
breeding stocks in 2006 were not as high as originally expected. In
2008, production is revised up to 12.7 MMT from the previous forecast of
12.5 MMT based on China's increasing imports of breeding stock (please
refer to CH8013 for more information). Because China imports almost all
western-bred (also called white-feathered broiler) grandparent
generation breeding stocks from abroad, mainly from the United States,
import volume is an important factor used to predict China's broiler
production.

According to the Chinese poultry industry, China imported 340,000 sets
(one set = 120 birds), 410,000 sets, and 405,600 sets of grandparent
generation breeding stocks in 2004, 2005, and 2006 respectively, most
from the United States. Production growth slowed during this period due
to outbreaks of SARS in 2003, and highly pathogenic avian influenza
(HPAI) in 2004 and 2005 China. Broiler production began increasing when
mass outbreaks of PRRS occurred in China during the second half of 2006
and the first half of 2007. According to new official data from the
Second National Agriculture Census by the National Statistics Bureau
(NSB), during 2006-2007 PRRS caused a seven and eight percent decrease
in China's pork production, respectively. At the same time, HPAI
outbreaks were reduced considerably thanks to the government's free
compulsory HPAI vaccination and subsidies to farmers to cull infected
birds, which made poultry farmers more willing to cull to prevent
further spread of the disease.

As the second largest meat protein consumed and the least expensive meat
when compared with red meats[^1] in China, broiler meat has become an
important substitute for pork. However, flat imports of grandparent
generation breeding stocks at the end of 2006 constrained broiler
production in the first few months of 2007. Although breeding stock
imports increased by 39 percent to 565,700 sets in 2007, most were in
the latter half of the year, which benefited 2008 production rather than
2007. According to the China Poultry Association, China imported six
varieties of broiler grandparent generation breeding stocks in 2007, AA
(44.8 percent), Ross (27.3 percent), AB48 (4.8 percent), Bobb500 (4.7
percent), Hybro (1.3 percent), and Hubbard (0.9 percent). The market
share will not significantly change in 2008 and 2009.

## New Law on Corporate Income Tax Impacts Poultry Rearing

China's new corporate income tax policy became effective on January 1,
2008. The law exempts companies involved in animal or poultry rearing
from paying income taxes. This incentive has attracted both domestic and
foreign investments in China's poultry cultivation. For example, Tyson
Foods, a U.S. company, recently initialed a preliminary agreement with
Xinchang Group, near Qingdao in Shandong Province, to set up a
joint-venture to raise broilers. Sunner, a Chinese company in Fujian
Province, has invested in several new farms and facilities in order to
meet its slaughter capacity goal of 102 million birds per year by 2010.
China's tight monetary policy aimed at curbing inflation has made it
more difficult to obtain domestic financing for new poultry production
facilities, making foreign investment in these projects more attractive.
The broiler production cycle is also much shorter compared with that for
cattle and swine. When feed grain prices increase as they have been,
broiler rearing is more economical because the conversion rate between
feed and broiler meat is 2:1, while pork is 3:1 and beef is 8:1
according to the poultry industry.

## Feed Increase Benefits Broiler Production 

![](media/image2.wmf){width="4.666666666666667in"
height="2.28125in"}China's total feed production in 2007 reached 117
MMT. This is the 12^th^ consecutive year China has ranked second in
world feed production, behind the United States. The production from
January to June 2008 is estimated at 59 MMT, an 11-percent increase over
the same period in 2007. Out of this, compound feed increased 13 percent
to 45.5 MMT, concentrated feed increased four percent to 11.2 MMT, and
additive pre-mixed feed increased six percent to 2.4 MMT, respectively.
Broiler feed increased nearly 21 percent to 19 MMT. Broiler production
in China is the most industrialized, compared with the swine and cattle
sectors, and benefits from a reliable feed supply.

However, the price of feed grains is the major concern for China's
broiler industry in 2009. From January-June 2008, China's retail broiler
feed prices[^2] increased 23 percent to 2,730 RMB (currently about U.S.
\$420) per ton over the same period in 2007, and 31 percent over 2006.
Grain and soybean prices on the international market are expected to
remain at high levels through at least the end of 2008. China is a net
importer of soybeans and soybean meal products for feed production. This
heavy dependence on imports, combined with overall price increases in
oil, energy, water, and labor supplies domestically, will put more
pressure on China's domestic poultry production.

## Prices Falling From High in April

Strong domestic demand began pushing up China's broiler meat prices in
July 2007. The chart below demonstrates the increase in retail broiler
meat prices from January to June 2008. Prices increased by 20 percent on
average to \$214 per MT (1,470 RMB) per MT over the same period in 2007.
Prices dropped from a high of \$374 per MT (2,574 RMB) in April to \$163
per MT (1,119 RMB) in June 2008 because of increased broiler production
and higher broiler imports. Summer tends to be a low meat consumption
season in China, and contributed to the deflation of prices. NSB
indicates that the growth of China's Consumer Price Index (CPI) dropped
to 6.3 percent in July, the lowest since September 2007, thanks to a
good summer grain harvest and government steps to boost China's meat
production. Policies such as corporate income tax exemption and breeding
sector subsidies are paying off. Average meat prices rose by 16 percent
in July, compared with increases of 27.3 percent in June and 30.7
percent in May 2008. Broiler prices are expected to continue falling
during the remainder of 2008.

![](media/image3.wmf){width="4.179861111111111in" height="2.0125in"}

# Consumption

China's broiler meat consumption in 2009 is forecast to increase by
eight percent to 13.9 MMT, following an estimated 12-percent increase to
12.8 MMT in 2008. Both increases are the result of broiler substitution
for pork, following the 2006 and 2007 decline in pork production due to
disease outbreaks. Out-of-home dining also contributes significantly to
this change in consumption. In January 2008, China changed its May Day
holiday from three days to one day, and created an additional three long
weekend holidays combined with traditional Chinese festivals (no days
off were granted for these holidays in the past). One "golden-week
holiday" was replaced by four long-weekend holidays. As a result of
these additional days off of work, consumers have more chances to gather
together with friends and family and eat at restaurants. Members of
China's busy younger generation love western fast food like Kentucky
Fried Chicken or McDonalds. Although KFC raised its prices in March and
August 2008 because of increased labor, packaging, and transportation
costs, members of this generation are largely not price-sensitive and
sales have remained stable.

# Trade

## Poultry Ban Lifted on Six U.S. States

China suspended exports from a total of eight U.S. States due to
outbreaks of low pathogenic avian influenza (LPAI). On July 1, 2008,
AQSIQ notified FAS/Beijing the ban would be lifted on five U.S. States:
Connecticut, Rhode Island, Pennsylvania, West Virginia, and Nebraska.
The ban on Virginia remains in place and a ban on Arkansas was announced
on July 1, 2008, also triggered by an LPAI outbreak. The New York ban
was officially lifted on August 24, 2008, following an internal letter
from AQSIQ to the local Entry-Exit Inspection and Quarantine Bureau
(CIQ) offices without notification to FAS/Beijing or USDA. Removal of
these bans will provide more opportunities for U.S. plants to export
poultry products to China.

The bans were lifted largely as a result of strengthened communication
and exchanges between USDA, FAS/Beijing, and the USA Poultry and Egg
Export Council (USAPEEC) with AQSIQ and the Chinese poultry industry.
USDA and AQSIQ are working on a bilateral Memorandum of Understanding
(MOU) on food safety cooperation and continue to hold a food safety
bilateral meeting once a year. USAPEEC also regularly hosts a seminar on
heath management during processing with AQSIQ/CIQ officials. After the
Sichuan earthquake, USAPEEC and some U.S. poultry companies donated over
\$230,000 to China to aid in disaster relief.

## Broiler Imports to Remain Flat in 2009

The estimated increase of domestic broiler production, combined with
continued recovery of pork production and a slow recovery of cooked
poultry exports to Japan will likely result in flat broiler imports in
2009. In addition, China temporarily reduced import tariff rates from
June 1 to December 31, 2008 to increase supply and alleviate high meat
prices in China. As China's CPI decreases, import tariff rates may
return to normal levels. The expected increase in import costs and
decrease in sales are likely to constrain imports in 2009.

Although China's total broiler imports from January to June 2009
increased over the same period in 2007, the largest increase is in
chicken paw imports. Frozen cut parts decreased by seven percent, mainly
due to a decline in imports from Brazil. China suspended imports from
Brazil out of concern exports were originating from plants not
registered by AQSIQ. Currently, only one Brazilian plant is eligible to
export to China, but its export volume far exceeds its production
ability. As a result of Brazil's suspension, the United States has
capitalized on a portion of Brazil's lost market share. U.S. exports of
meat and chicken paws to China during the first half of 2008 increased
by 19 percent to 280,008 MT, valued at \$359.9 million, and account for
72 percent of China's total imports via direct shipments. Hong Kong
re-exports to China during the first half of 2008 increased by 114
percent, valued at \$25.8 million (HK\$201 million) and account for 18
percent of Hong Kong's total re-exports to China. However, U.S. exports
were unable to fill the gap left by fewer Brazilian exports of cut
parts, Brazil's manual cut and soldier layer packing of whole chicken
wings are very competitive in the market. The United States is expected
to continue to be the largest supplier of China's imports in 2009.

## Breeding Stock Imports Up Sharply, the United States a Dominant Supplier

From January to June 2008, China's imports of grandparent generation
breeding broilers increased 67-percent to 941,091 birds over the same
period in 2007. This sharp increase is proportionate to the decline of
China's pork production, reflecting the inverse relationship between
broiler and pork production. As pork production is not expected to fully
recover to pre-PRRS levels in 2009, imports will continue. This will
benefit U.S. exports to China because the United States is a dominant
supplier, accounting for 87 percent and 95 percent market share in 2007
and in the first six months in 2008.

## Processing Trade to Ban Frozen Poultry Wings and Paws

China prohibits imports of frozen chicken wings, paws, offal, as well as
frozen turkey segments and offal to be used for processing and
re-export, according to the 2008 catalogue of banned commodities for the
processing trade. Processing these products for re-export is prohibited
because the profit margin is low when high energy and water costs for
processing are taken into account. The publication was issued in 2008 by
the Ministry of Commerce and the General Administration of Customs
([www.mofcom.gov.cn](http://www.mofcom.gov.cn/)). This does not impact
the United States because it does not export these products for
processing and re-export.

## Exports up Slightly After Previous 23 Percent Decrease 

China's 2009 broiler exports are forecast to increase by five percent to
288,000 MT, a slight recovery from the 23-percent decrease in total
exports in 2008. China's cooked broiler exports to Japan in 2009 are
expected to recover only two percent from the 33 percent decrease in
2008. Japan is traditionally China's largest export market, accounting
for 61 and 57 percent, respectively of China's total broiler exports in
2006 and 2007. In early spring 2008, Japan changed its import testing
policy and now applies more strict testing for nitro furans on imported
broiler products, employing a near zero tolerance policy. This new
policy has limited China's exports over the short-term. It is unclear
whether this policy will persist and how much it will impact China's
exports to Japan over the long term.

On May 8, 2008, Japan confirmed registration of 35 eligible Chinese
plants to export cooked meat from even-toed animals to Japan. Currently,
Japan has registered a total of 114 Chinese plants for export of cooked
meat, 91 plants solely export cooked poultry. This is not expected to
change the trade pattern considerably because Japan's stricter
inspection and quarantine, combined with RMB appreciation, will continue
to constrain China's exports.

China's broiler meat exports to Hong Kong in 2009 are forecast to
increase by two to three percent to supplement the estimated decrease in
live chicken exports (Please see below explanation). Export increases
may come from non-traditional export markets. According to CIQ Shandong,
the South African Ministry of Agriculture has approved and registered a
total of 57 eligible Chinese cooked poultry plants for exports to South
Africa, 25 in Shandong Province. On May 26, 2008, Kyrgyzstan resumed
frozen broiler imports from Xinjiang, West China. It suspended imports
after an HPAI outbreak in March 2008. These non-traditional markets are
much smaller compared with exports to Japan and Hong Kong.

## Live Chicken Exports Down

Live chicken exports to Hong Kong are expected to be adversely impacted
by Hong Kong's new policy on live chicken slaughter in wet markets. The
Hong Kong Government now mandates a maximum of fifty live broiler
selling booths at street wet markets, a ninety percent reduction.
Sellers must also complete live chicken sales each day and can no longer
keep live chickens at wet markets after the markets closes. This "daily
finish-up" practice will be fully replaced by central slaughter in 2012.
This policy will mainly impact China's local bred (yellow-feathered)
chicken exports from Guangdong Province.

# Poultry Eggs 

![](media/image4.wmf){width="4.71875in"
height="2.7395833333333335in"}China's total poultry egg production in
2009 is forecast to increase five percent to 28 MMT, one percent below
the growth rate in 2008. Egg prices have fluctuated since the last
quarter of 2007 due to over-supply. According to the Chinese Poultry
Industry, China imported 23,787 sets of grandparent generation breeding
stocks, a 16-percent increase from the previous year. Increased imports
and domestically produced grandparent generation breeding stocks totaled
36,787 sets in 2007, which could provide 26.7 million sets of parent
generation breeding stocks to produce 1.88 billion commercial chicks.
Higher inventory of supplies pushed egg prices down to \$1,137 per MT
(7,840 RMB) in June 2008, down from a high of \$1,205 per MT (8,310 RMB)
in August 2007. As prices continue to fall and production costs continue
to rise, the profit for the egg industry will narrow in the remainder of
2008. However, the average price from January to June 2008 was four
percent higher over the same period in 2007. Since there are few
substitutes for chicken eggs, egg production will continue to grow at a
rate of about five percent despite low profits.

China is a net fresh egg exporting country. In the first half of 2008,
exports to Hong Kong and Macau accounted for 89 percent of China's total
exports, and exports to the

United States accounted for eight percent. Kuwait is a newly discovered
market and accounted for two percent of China's total exports. Spring
2008 also marked the first time China exported breeding eggs to
Mongolia, which totaled 180,000 pieces.

# Tables

### Broiler PSD Table

  -------------- ------------- ------- ---------- ------------- ------- ---------- ------------- ------- ---------- -----------
  **Poultry,     **2007**                         **2008**                         **2009**                         
  Meat, Broiler                                                                                                     
  China**                                                                                                           

                 **2007**                         **2008**                         **2009**                         

                 **Market Year                    **Market Year                    **Market Year                    
                 Begin: Jan                       Begin: Jan                       Begin: Jan                       
                 2007**                           2008**                           2009**                           

                 **Annual Data         **New      **Annual Data         **New      **Annual Data         **Jan**    
                 Displayed**           Post**     Displayed**           Post**     Displayed**                      

                 　            　      **Data**   　            　      **Data**   　            　      **Data**   

  Inventory      0             0       0          0             0       0          　            0       0          (MIL HEAD)
  (Reference)                                                                                                       

  Slaughter      8519          8519    8600       9259          9259    9459       　            0       10110      (MIL HEAD)
  (Reference)                                                                                                       

  Beginning      0             0       0          0             0       0          　            0       0          (1000 MT)
  Stocks                                                                                                            

  Production     11500         11500   11354      12500         12500   12650      　            0       13700      (1000 MT)

  Whole, Imports 0             0       0          0             0       0          　            0       0          (1000 MT)

  Parts, Imports 482           482     482        600           600     450        　            0       450        (1000 MT)

  Intra-EU       0             0       0          0             0       0          　            0       0          (1000 MT)
  Imports                                                                                                           

  Other Imports  0             0       　         0             0       0          　            0       0          (1000 MT)

  Total Imports  482           482     482        600           600     450        　            0       450        (1000 MT)

  Total Supply   11982         11982   11836      13100         13100   13100      　            0       14150      (1000 MT)

  Whole, Exports 0             0       0          0             0       0          　            0       　         (1000 MT)

  Parts, Exports 358           358     358        400           400     275        　            0       283        (1000 MT)

  Intra EU       0             0       0          0             0       0          　            0       0          (1000 MT)
  Exports                                                                                                           

  Other Exports  0             0       0          0             0       0          　            0       0          (1000 MT)

  Total Exports  358           358     358        400           400     275        　            0       283        (1000 MT)

  Human          11624         11624   11478      12700         12700   12825      　            0       13867      (1000 MT)
  Consumption                                                                                                       

  Other Use,     0             0       0          0             0       　         　            0       　         (1000 MT)
  Losses                                                                                                            

  Total Dom.     11624         11624   11478      12700         12700   12825      　            0       13867      (1000 MT)
  Consumption                                                                                                       

  Total Use      11982         11982   11836      13100         13100   13100      　            0       14150      (1000 MT)

  Ending Stocks  0             0       0          0             0       0          　            0       0          (1000 MT)

  Total          11982         11982   11836      13100         13100   13100      　            0       14150      (1000 MT)
  Distribution                                                                                                      

  CY Imp. from   343           297     343        403           340     315        　            0       315        (1000 MT)
  U.S.                                                                                                              

  CY Exp. to     0             0       0          0             0       　         　            0       　         (1000 MT)
  U.S.                                                                                                              

  Balance        0.0           0.0     0.0        0.0           0.0     0.0        　            　      0.0        (1000 MT)

  Inventory      0             0       0          0             0       0          　            　      0          (1000 MT)
  Balance                                                                                                           

  Production     11            11      10         10            9       11         　            　      8          (PERCENT)
  Change                                                                                                            

  Import Change  41            41      41         7             24      -7         　            　      0          (PERCENT)

  Export Change  11            11      0          3             12      0          　            　      0          (PERCENT)

  Trade Balance  -124          -124    -124       -200          -200    -175       　            　      -167       (1000 MT)

  Consumption    12            12      0          10            9       12         　            　      8          (PERCENT)
  Change                                                                                                            
  -------------- ------------- ------- ---------- ------------- ------- ---------- ------------- ------- ---------- -----------

### Trade Matrices

+----------------+----------+----------+---------+----------+--------+
| China Broiler  |          |          |         |          |        |
| Meat Direct    |          |          |         |          |        |
| Imports,       |          |          |         |          |        |
| 2006-2008      |          |          |         |          |        |
| (Metric Tons)  |          |          |         |          |        |
+----------------+----------+----------+---------+----------+--------+
|                | Jan-Dec  | Jan-Dec  | Jan -   |          | Jan -  |
|                |          |          | Jun     |          | Jun    |
+----------------+----------+----------+---------+----------+--------+
| Origin         | Quantity | Quantity | Q       |          | \%     |
|                |          |          | uantity |          | Change |
|                |          |          | Com     |          |        |
|                |          |          | parison |          |        |
+----------------+----------+----------+---------+----------+--------+
|                | 2006     | 2007     | 2007    | 2008     | 2      |
|                |          |          |         |          | 008/07 |
+----------------+----------+----------+---------+----------+--------+
| World          | 572,218  | 773,639  | 379,137 | 395,839  | 4.41   |
+----------------+----------+----------+---------+----------+--------+
| United States  | 390,748  | 508,143  | 235,784 | 280,008  | 18.76  |
+----------------+----------+----------+---------+----------+--------+
| Brazil         | 142,812  | 163,388  | 124,671 | 131      | -99.89 |
+----------------+----------+----------+---------+----------+--------+
| Argentina      | 27,702   | 102,090  | 18,676  | 112,571  | 502.76 |
+----------------+----------+----------+---------+----------+--------+
| Chile          | 9,044    | 0        | 0       | 1184     | 0.00   |
+----------------+----------+----------+---------+----------+--------+
| France         | 1,266    | 3        | 0       | 1941     | 0.00   |
+----------------+----------+----------+---------+----------+--------+
| Philippines    | 488      | 0        | 0       | 0        | 0.00   |
+----------------+----------+----------+---------+----------+--------+
| Canada         | 150      | 0        | 0       | 0        | 0.00   |
+----------------+----------+----------+---------+----------+--------+
| Other          | 8        | 15       | 6       | 4        | -33.33 |
+----------------+----------+----------+---------+----------+--------+
| HS Code:       |          |          |         |          |        |
| 020711,        |          |          |         |          |        |
| 020712,        |          |          |         |          |        |
| 020713, 020714 |          |          |         |          |        |
| & 160232       |          |          |         |          |        |
|                |          |          |         |          |        |
| Note: China    |          |          |         |          |        |
| chicken paw    |          |          |         |          |        |
| imports under  |          |          |         |          |        |
| HS Code        |          |          |         |          |        |
| 02071422 are   |          |          |         |          |        |
| included in    |          |          |         |          |        |
| this table,    |          |          |         |          |        |
| but excluded   |          |          |         |          |        |
| in the broiler |          |          |         |          |        |
| meat PS&D      |          |          |         |          |        |
| table.         |          |          |         |          |        |
|                |          |          |         |          |        |
| Source: GTA    |          |          |         |          |        |
| from China     |          |          |         |          |        |
| Customs        |          |          |         |          |        |
| Statistics     |          |          |         |          |        |
+----------------+----------+----------+---------+----------+--------+

  ----------------- ----------- ----------- ------------ ----------- ---------
  China Chicken Paw                                                  
  Direct Imports,                                                    
  2006-2008 (Metric                                                  
  Tons)                                                              

                    Jan-Dec     Jan-Dec     Jan - Jun                Jan - Jun

                    Quantity    Quantity    Quantity                 \% Change
                                            Comparison               

  Origin            2006        2007        2007         2008        2008/07

  World             289,171     396,331     190,831      215,882     13.13

  United States     156,974     221,373     101,169      119,299     17.92

  Argentina         26,907      80,972      16,782       94,919      465.60

  Chile             6,439       0           0            646         0.00

  Brazil            98,851      93,986      72,879       106         -99.85

  Other             0           0           1            912         0.00

  HS Code:                                                           
  020714.22                                                          

  Source: GTA China                                                  
  Customs                                                            
  Statistics                                                         
  ----------------- ----------- ----------- ------------ ----------- ---------

+----------------+----------+----------+---------+----------+--------+
| Hong Kong      |          |          |         |          |        |
| Re-Exports of  |          |          |         |          |        |
| Broiler Meat   |          |          |         |          |        |
| to China,      |          |          |         |          |        |
| 2006-2008      |          |          |         |          |        |
| (Metric Tons)  |          |          |         |          |        |
+----------------+----------+----------+---------+----------+--------+
|                | Jan-Dec  | Jan-Dec  | Jan -   |          | Jan -  |
|                |          |          | Jun     |          | Jun    |
+----------------+----------+----------+---------+----------+--------+
|                | Quantity | Quantity | Q       |          | \%     |
|                |          |          | uantity |          | Change |
|                |          |          | Com     |          |        |
|                |          |          | parison |          |        |
+----------------+----------+----------+---------+----------+--------+
| Origin         | 2006     | 2007     | 2007    | 2008     | 2      |
|                |          |          |         |          | 008/07 |
+----------------+----------+----------+---------+----------+--------+
| World          | 177,296  | 252,647  | 127,007 | 121,166  | -4.60  |
+----------------+----------+----------+---------+----------+--------+
| Brazil         | 113,297  | 184,184  | 98,924  | 76,733   | -22.43 |
+----------------+----------+----------+---------+----------+--------+
| United States  | 38,731   | 29,219   | 11,147  | 23,841   | 113.88 |
+----------------+----------+----------+---------+----------+--------+
| Argentina      | 11,454   | 13,996   | 6,336   | 6,430    | 1.48   |
+----------------+----------+----------+---------+----------+--------+
| Netherlands    | 445      | 3,386    | 1,574   | 3,076    | 95.43  |
+----------------+----------+----------+---------+----------+--------+
| France         | 932      | 3,734    | 1,638   | 2,079    | 26.92  |
+----------------+----------+----------+---------+----------+--------+
| Canada         | 250      | 4,392    | 1,719   | 1,940    | 12.86  |
+----------------+----------+----------+---------+----------+--------+
| Chile          | 7,720    | 2,385    | 817     | 1,858    | 127.42 |
+----------------+----------+----------+---------+----------+--------+
| Spain          | 0        | 340      | 161     | 659      | 309.32 |
+----------------+----------+----------+---------+----------+--------+
| Belgium        | 253      | 375      | 105     | 532      | 406.67 |
+----------------+----------+----------+---------+----------+--------+
| Germany        | 126      | 1,003    | 618     | 488      | -21.04 |
+----------------+----------+----------+---------+----------+--------+
| Denmark        | 0        | 880      | 391     | 431      | 10.23  |
+----------------+----------+----------+---------+----------+--------+
| Poland         | 96       | 2,515    | 937     | 332      | -64.57 |
+----------------+----------+----------+---------+----------+--------+
| United Kingdom | 199      | 1,175    | 287     | 190      | -33.80 |
+----------------+----------+----------+---------+----------+--------+
| Iran           | 2,352    | 1,294    | 675     | 146      | -78.37 |
+----------------+----------+----------+---------+----------+--------+
| Other          | 1,441    | 3,769    | 1,678   | 2,431    | 44.87  |
+----------------+----------+----------+---------+----------+--------+
| HS Code:       |          |          |         |          |        |
| 020711,        |          |          |         |          |        |
| 020712,        |          |          |         |          |        |
| 020713, 020714 |          |          |         |          |        |
| & 160232       |          |          |         |          |        |
|                |          |          |         |          |        |
| Note: China    |          |          |         |          |        |
| chicken paw    |          |          |         |          |        |
| imports under  |          |          |         |          |        |
| HS Code        |          |          |         |          |        |
| 02071410 are   |          |          |         |          |        |
| included in    |          |          |         |          |        |
| this table,    |          |          |         |          |        |
| but excluded   |          |          |         |          |        |
| in the broiler |          |          |         |          |        |
| PS&D table.    |          |          |         |          |        |
|                |          |          |         |          |        |
| Source: WTA    |          |          |         |          |        |
| from Hong Kong |          |          |         |          |        |
| Census and     |          |          |         |          |        |
| Statistics     |          |          |         |          |        |
| Department     |          |          |         |          |        |
+----------------+----------+----------+---------+----------+--------+

  ----------------- ----------- ----------- ------------ ----------- ---------
  Hong Kong Chicken                                                  
  Paw Re-Exports to                                                  
  China, 2006-2008                                                   
  (Metric Tons)                                                      

                    Jan-Dec     Jan-Dec     Jan - Jun                Jan - Jun

                    Quantity    Quantity    Quantity                 \% Change
                                            Comparison               

  Origin            2006        2007        2007         2008        2008/07

  World             117,068     147,859     68,270       93,103      36.37

  Brazil            74,274      107,173     53,359       63,623      19.24

  United States     23,734      19,067      5,923        17,861      201.55

  Argentina         11,112      12,751      5,646        5,665       0.34

  Chile             4,737       1,717       505          1,472       191.49

  France            0           1281        545          766         40.55

  Australia         48          1016        557          763         36.98

  Netherland        76          532         214          657         207.01

  Canada            0           270         51           604         1084.31

  Denmark           0           419         157          376         139.49

  Germany           51          286         156          312         100.00

  Iran              1,947       972         378          146         -61.38

  Poland            72          1228        511          141         -72.41

  United Kingdom    77          223         49           47          -4.08

  Other             940         924         219          670         205.94

  HS Code:                                                           
  020714.22                                                          

  Source: WTA from                                                   
  Hong Kong Census                                                   
  and Statistics                                                     
  Department                                                         
  ----------------- ----------- ----------- ------------ ----------- ---------

  ----------------- ----------- ----------- ------------ ----------- ---------
  China Broiler                                                      
  Meat Exports,                                                      
  2006-2008 (Metric                                                  
  Tons)                                                              

                    Jan-Dec     Jan-Dec     Jan - Jun                Jan - Jun

  Destination       Quantity    Quantity    Quantity                 \% Change
                                            Comparison               

                    2006        2007        2007         2008        2008/07

  World             321,761     358,053     173,368      136,104     -21.49

  Japan             196,282     204,384     100,339      66,287      -33.94

  Hong Kong         91,892      106,871     52,389       51,064      -2.53

  Malaysia          201         9,870       1,590        5,837       267.11

  Korea South       12,320      11,767      6,223        5,165       -17.00

  Bahrain           4,821       4,078       2,930        2,423       -17.30

  Macau             2,001       2,848       1,359        1,363       0.29

  Iraq              1,593       3,716       804          990         23.13

  Kyrgyzstan        0           1,650       339          778         129.50

  Azerbaijan        0           2,371       1,005        546         -45.67

  South Africa      235         1,643       841          196         -76.69

  Georgia           406         362         52           179         244.23

  Armenia           1,409       329         446          110         -75.34

  Aruba             933         986         680          106         -84.41

  United States     3,027       476         409          12          -97.07

  Somalia           1,323       778         1,175        0           -100.00

  Kenya             1,171       579         866          0           -100.00

  Maldives          1,021       0           0            0           0.00

  Other             1,437       3,103       1,921        1,048       -45.45

  HS Code: 020711,                                                   
  020712, 020713,                                                    
  020714 & 160232                                                    

  Note: China has                                                    
  no exports of                                                      
  chicken paws                                                       

  Source: GTA from                                                   
  China Customs                                                      
  Statistics                                                         
  ----------------- ----------- ----------- ------------ ----------- ---------

### Price Tables 

+---------------+---------+---------+---------+--------+--------------+
| China Retail  |         |         |         |        |              |
| Broiler Meat  |         |         |         |        |              |
| Prices On     |         |         |         |        |              |
| Average       |         |         |         |        |              |
| 2005-2008     |         |         |         |        |              |
|               |         |         |         |        |              |
| (RMB/KG, \$1  |         |         |         |        |              |
| = RMB 6.9)    |         |         |         |        |              |
+---------------+---------+---------+---------+--------+--------------+
|               |         |         |         |        | \% Change    |
+---------------+---------+---------+---------+--------+--------------+
| MONTH         | 2005    | 2006    | 2007    | 2008   | 2008/07      |
+---------------+---------+---------+---------+--------+--------------+
| January       | 11.01   | 9.99    | 11.89   | 14.90  | 25.32        |
+---------------+---------+---------+---------+--------+--------------+
| February      | 11.51   | 9.78    | 12.26   | 14.69  | 19.82        |
+---------------+---------+---------+---------+--------+--------------+
| March         | 11.17   | 9.62    | 11.87   | 14.51  | 22.24        |
+---------------+---------+---------+---------+--------+--------------+
| April         | 11.14   | 9.58    | 11.77   | 14.80  | 25.74        |
+---------------+---------+---------+---------+--------+--------------+
| May           | 11.12   | 9.45    | 12.32   | 14.72  | 19.48        |
+---------------+---------+---------+---------+--------+--------------+
| June          | 11.15   | 9.52    | 13.05   | 14.51  | 11.19        |
+---------------+---------+---------+---------+--------+--------------+
| July          | 11.02   | 9.82    | 13.47   |        |              |
+---------------+---------+---------+---------+--------+--------------+
| August        | 10.95   | 10.50   | 14.14   |        |              |
+---------------+---------+---------+---------+--------+--------------+
| September     | 10.92   | 10.87   | 14.01   |        |              |
+---------------+---------+---------+---------+--------+--------------+
| October       | 10.49   | 11.14   | 13.60   |        |              |
+---------------+---------+---------+---------+--------+--------------+
| November      | 9.58    | 11.28   | 13.23   |        |              |
+---------------+---------+---------+---------+--------+--------------+
| December      | 9.25    | 11.64   | 13.46   |        |              |
+---------------+---------+---------+---------+--------+--------------+
| Source: The   |         |         |         |        |              |
| Ministry of   |         |         |         |        |              |
| Agriculture   |         |         |         |        |              |
+---------------+---------+---------+---------+--------+--------------+

+--------------+---------+---------+----------+--------+-------------+
| China Retail |         |         |          |        |             |
| Live Chicken |         |         |          |        |             |
| Prices On    |         |         |          |        |             |
| Average      |         |         |          |        |             |
| 2005-2008    |         |         |          |        |             |
|              |         |         |          |        |             |
| (RMB/KG, \$1 |         |         |          |        |             |
| = RMB 6.9)   |         |         |          |        |             |
+--------------+---------+---------+----------+--------+-------------+
|              |         |         |          |        | \% Change   |
+--------------+---------+---------+----------+--------+-------------+
| MONTH        | 2005    | 2006    | 2007     | 2008   | 2008/07     |
+--------------+---------+---------+----------+--------+-------------+
| January      | 10.96   | 9.76    | 11.95    | 13.97  | 16.90       |
+--------------+---------+---------+----------+--------+-------------+
| February     | 11.83   | 9.86    | 12.65    | 14.53  | 14.86       |
+--------------+---------+---------+----------+--------+-------------+
| March        | 11.29   | 9.62    | 12.12    | 14.31  | 18.07       |
+--------------+---------+---------+----------+--------+-------------+
| April        | 11.22   | 9.31    | 12.03    | 14.59  | 21.28       |
+--------------+---------+---------+----------+--------+-------------+
| May          | 11.17   | 9.49    | 12.51    | 14.42  | 15.27       |
+--------------+---------+---------+----------+--------+-------------+
| June         | 11.24   | 9.57    | 13.30    | 14.13  | 6.24        |
+--------------+---------+---------+----------+--------+-------------+
| July         | 10.97   | 9.83    | 13.59    |        |             |
+--------------+---------+---------+----------+--------+-------------+
| August       | 11.05   | 10.42   | 14.51    |        |             |
+--------------+---------+---------+----------+--------+-------------+
| September    | 11.06   | 10.85   | 14.35    |        |             |
+--------------+---------+---------+----------+--------+-------------+
| October      | 10.64   | 11.24   | 13.73    |        |             |
+--------------+---------+---------+----------+--------+-------------+
| November     | 9.49    | 11.36   | 13.46    |        |             |
+--------------+---------+---------+----------+--------+-------------+
| December     | 9.09    | 11.68   | 13.57    |        |             |
+--------------+---------+---------+----------+--------+-------------+
| Source: The  |         |         |          |        |             |
| Ministry of  |         |         |          |        |             |
| Agriculture  |         |         |          |        |             |
+--------------+---------+---------+----------+--------+-------------+

+--------------+---------+---------+----------+--------+-------------+
| China        |         |         |          |        |             |
| Industry     |         |         |          |        |             |
| Feed Prices  |         |         |          |        |             |
| for Broilers |         |         |          |        |             |
| On Average   |         |         |          |        |             |
| 2005-2008    |         |         |          |        |             |
|              |         |         |          |        |             |
| (RMB/KG, \$1 |         |         |          |        |             |
| = RMB 6.9)   |         |         |          |        |             |
+--------------+---------+---------+----------+--------+-------------+
|              |         |         |          |        | \% Change   |
+--------------+---------+---------+----------+--------+-------------+
|              | 2005    | 2006    | 2007     | 2008   | 2008/07     |
+--------------+---------+---------+----------+--------+-------------+
| January      | 2.14    | 2.12    | 2.18     | 2.66   | 22.02       |
+--------------+---------+---------+----------+--------+-------------+
| February     | 2.21    | 2.09    | 2.21     | 2.69   | 21.72       |
+--------------+---------+---------+----------+--------+-------------+
| March        | 2.18    | 2.09    | 2.22     | 2.70   | 21.62       |
+--------------+---------+---------+----------+--------+-------------+
| April        | 2.17    | 2.06    | 2.21     | 2.75   | 24.43       |
+--------------+---------+---------+----------+--------+-------------+
| May          | 2.17    | 2.07    | 2.25     | 2.76   | 22.67       |
+--------------+---------+---------+----------+--------+-------------+
| June         | 2.16    | 2.09    | 2.28     | 2.82   | 23.68       |
+--------------+---------+---------+----------+--------+-------------+
| July         | 2.15    | 2.11    | 2.31     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| August       | 2.15    | 2.09    | 2.36     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| September    | 2.13    | 2.11    | 2.42     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| October      | 2.13    | 2.10    | 2.44     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| November     | 2.11    | 2.11    | 2.53     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| December     | 2.08    | 2.16    | 2.58     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| Source: The  |         |         |          |        |             |
| Ministry of  |         |         |          |        |             |
| Agriculture  |         |         |          |        |             |
+--------------+---------+---------+----------+--------+-------------+

#  

+--------------+---------+---------+----------+--------+-------------+
| China Retail |         |         |          |        |             |
| Chicken Egg  |         |         |          |        |             |
| Prices On    |         |         |          |        |             |
| Average      |         |         |          |        |             |
| 2005-2008    |         |         |          |        |             |
|              |         |         |          |        |             |
| (RMB/KG, \$1 |         |         |          |        |             |
| = RMB 6.9)   |         |         |          |        |             |
+--------------+---------+---------+----------+--------+-------------+
|              |         |         |          |        | \% Change   |
+--------------+---------+---------+----------+--------+-------------+
| MONTH        | 2005    | 2006    | 2007     | 2008   | 2008/07     |
+--------------+---------+---------+----------+--------+-------------+
| January      | 7.01    | 6.28    | 7.31     | 7.92   | 8.34        |
+--------------+---------+---------+----------+--------+-------------+
| February     | 7.21    | 5.83    | 7.59     | 7.98   | 5.14        |
+--------------+---------+---------+----------+--------+-------------+
| March        | 6.56    | 5.68    | 7.25     | 7.64   | 5.38        |
+--------------+---------+---------+----------+--------+-------------+
| April        | 6.32    | 5.54    | 7.25     | 7.52   | 3.72        |
+--------------+---------+---------+----------+--------+-------------+
| May          | 6.56    | 5.55    | 7.58     | 7.66   | 1.06        |
+--------------+---------+---------+----------+--------+-------------+
| June         | 6.75    | 5.65    | 7.91     | 7.84   | -0.88       |
+--------------+---------+---------+----------+--------+-------------+
| July         | 6.64    | 5.72    | 7.59     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| August       | 6.80    | 6.41    | 8.26     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| September    | 7.08    | 7.00    | 8.31     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| October      | 6.71    | 6.99    | 8.14     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| November     | 6.41    | 6.93    | 7.98     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| December     | 6.18    | 7.26    | 7.94     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| Source: The  |         |         |          |        |             |
| Ministry of  |         |         |          |        |             |
| Agriculture  |         |         |          |        |             |
+--------------+---------+---------+----------+--------+-------------+

+--------------+---------+---------+----------+--------+-------------+
| China        |         |         |          |        |             |
| Industry     |         |         |          |        |             |
| Feed Prices  |         |         |          |        |             |
| for Egg      |         |         |          |        |             |
| Layers On    |         |         |          |        |             |
| Average      |         |         |          |        |             |
| 2005-2008    |         |         |          |        |             |
|              |         |         |          |        |             |
| (RMB/KG, \$1 |         |         |          |        |             |
| = RMB 6.9)   |         |         |          |        |             |
+--------------+---------+---------+----------+--------+-------------+
|              |         |         |          |        | \% Change   |
+--------------+---------+---------+----------+--------+-------------+
| MONTH        | 2005    | 2006    | 2007     | 2008   | 2008/07     |
+--------------+---------+---------+----------+--------+-------------+
| January      | 1.96    | 1.89    | 1.97     | 2.41   | 22.34       |
+--------------+---------+---------+----------+--------+-------------+
| February     | 1.98    | 1.88    | 1.98     | 2.44   | 23.23       |
+--------------+---------+---------+----------+--------+-------------+
| March        | 1.95    | 1.87    | 2.02     | 2.44   | 20.79       |
+--------------+---------+---------+----------+--------+-------------+
| April        | 1.96    | 1.86    | 2.01     | 2.47   | 22.89       |
+--------------+---------+---------+----------+--------+-------------+
| May          | 1.94    | 1.87    | 2.03     | 2.48   | 22.17       |
+--------------+---------+---------+----------+--------+-------------+
| June         | 1.93    | 1.88    | 2.06     | 2.54   | 23.30       |
+--------------+---------+---------+----------+--------+-------------+
| July         | 1.93    | 1.89    | 2.09     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| August       | 1.95    | 1.89    | 2.13     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| September    | 1.92    | 1.91    | 2.18     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| October      | 1.99    | 1.91    | 2.19     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| November     | 1.91    | 1.91    | 2.27     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| December     | 1.88    | 1.95    | 2.33     |        |             |
+--------------+---------+---------+----------+--------+-------------+
| Source: The  |         |         |          |        |             |
| Ministry of  |         |         |          |        |             |
| Agriculture  |         |         |          |        |             |
+--------------+---------+---------+----------+--------+-------------+

### Poultry Egg Production

  ------------- -------- -------- -------- -------- -------- ---------- ----------
  China Total                                                           
  Poultry Egg                                                           
  production,                                                           
  2003-2008                                                             
  (1,000 Metric                                                         
  Tons)                                                                 

                                                             Forecast   \% Change

                2003     2004     2005     2006     2007     2008       2008/07

  Poultry Egg   26,067   27,237   28,795   24,088   25,134   26,750     6.43

  Source:                                                               
  National                                                              
  Statistics                                                            
  Bureau                                                                
  ------------- -------- -------- -------- -------- -------- ---------- ----------

[^1]: For purposes of this report, red meat is defined as beef, pork,
    sheep, and goat meat.

[^2]: For this report, RMB has been used to track poultry and feed
    product prices. Exchange rate fluctuations between the dollar and
    the RMB make feed price quotes in dollars less accurate.