Required Report - public distribution

**Date:** 2/1/2006

**GAIN Report Number:** CH6004

CH6004

**China, Peoples Republic of**

**Poultry and Products**

**Semi-Annual Report**

**2006**

**Approved by:**

![](media/image1.wmf)Maurice House

U.S. Embassy Beijing, Office of Agricultural Affairs

**Prepared by:**

Casey Bean/Zhang Jianping

**Report Highlights:**

During 2006, China\'s broiler production is forecast at 10.4 MMT, lower
than the previous estimate due to the impact of HPAI on poultry
consumption and production. On January 1, 2006, China implemented a new
national standard that reiterates a \"0\" tolerance for the pathogens
salmonella and Ecoli O-157:H7 on raw poultry products. As the result of
this regulation and increased quarantine inspections, during December
and January AQSIQ suspended shipments from a number of U.S. poultry and
pork plants. China\'s broiler meat imports for 2006 are still forecast
to increase 25 percent to 275,000 MT, below the pre-HPAI levels of 2003.
China\'s broiler exports are forecast to increase 31 percent to 470,000
MT due to strong demand in Japan and Hong Kong.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Beijing \[CH1\]

\[CH\]

Table of Contents

[Situation and Outlook 3](#situation-and-outlook)

[Despite the challenges of HPAI, China's broiler production forecast to
grow 1.5 percent during 2006; exports also forecast to increase
4](#despite-the-challenges-of-hpai-chinas-broiler-production-forecast-to-grow-1.5-percent-during-2006-exports-also-forecast-to-increase)

[Broiler consumption for 2006 forecast at 10.2 MMT, a slight increase
from last year
5](#broiler-consumption-for-2006-forecast-at-10.2-mmt-a-slight-increase-from-last-year)

[New standard effective on January 1, 2006, "0" tolerance on pathogens
remains
5](#new-standard-effective-on-january-1-2006-0-tolerance-on-pathogens-remains)

[Broiler meat imports in 2006 forecast to increase 25 percent to 275,000
MT
6](#broiler-meat-imports-in-2006-forecast-to-increase-25-percent-to-275000-mt)

[Market access update for U.S. broiler products to China
6](#market-access-update-for-u.s.-broiler-products-to-china)

[Broiler exports in 2006 forecast to increase 31 percent to 470,000 MT
6](#broiler-exports-in-2006-forecast-to-increase-31-percent-to-470000-mt)

[Poultry egg production and trade 7](#poultry-egg-production-and-trade)

[Ps&D Tables 8](#psd-tables)

[Trade Tables 9](#trade-tables)

# Situation and Outlook

China's broiler meat production in 2006 is forecast to increase 1.5
percent to 10.4 MMT. The pace of growth is below last year due to the
HPAI impact in China. During 2005, domestic wholesale prices fell 15.8
percent for live chickens and 10 percent for broiler meat. Despite this
challenge, the Chinese broiler industry benefited from low feed prices,
favorable policies supporting production and expanding exports.

China's broiler consumption growth in 2006 is also forecast to be
sluggish. The slight rebound in domestic broiler production will be
partly channeled to the export markets, and an increase in imports will
not fill the supply shortfall left by slow production increases.

On January 1, 2006, China implemented a new national standard (see FAS
Beijing's translation in CH6001, dated January 17, 2006) for fresh and
frozen poultry products. The standard reinforces a "0" tolerance for the
pathogens salmonella and Ecoli O-157:H7 on fresh and frozen poultry
products. Other tolerances, such as moisture and lead levels, are lower.

As the result of increased import quarantine inspections during the
later part of 2005 and early 2006 and the reported detection of
pathogens and residues, China's General Administration of Quality
Supervision Inspection and Quarantine (AQSIQ) suspended poultry and pork
shipments from 13 U.S. meat establishments. USDA is continuing efforts
to resolve the situation.

China's broiler imports in 2006 are forecast to increase 25 percent to
275,000 MT due to tariff reductions on popular chicken wings, the
sluggish slow increase of domestic production and a favorable U.S.
Dollar exchange rate. Despite the impact of U.S. plant suspensions, U.S.
broiler exports to China in 2006 are forecast to gain market share on
Argentina.

China's broiler exports in 2006 are forecast to increase 31 percent to
470,000 MT due to strong demand in Japan. China's exporters are
dependent on the Japan and Hong Kong markets. Japan and China reached a
consensus that if the 35 plants registered by Japan for eligible exports
are free of HPAI, Japan would not stop imports. In the past, when HPAI
occurred in China, Japan suspended imports from the entire country.

A proposed rule, entitled "Addition of the People\'s Republic of China
To the List of Countries Eligible To Export Processed Poultry and
Poultry Products to the U.S.", is in the final stages of public comment.
If the proposed rule is approved, China would be eligible to ship
processed (cooked) poultry products to the United States from imported
raw materials originating from approved countries (currently Canada and
the United States).

## Despite the challenges of HPAI, China's broiler production forecast to grow 1.5 percent during 2006; exports also forecast to increase

FAS Beijing forecasts China's broiler production in 2006 at 10.4 MMT, a
1.5 percent increase from the estimated production of 10.2 MMT in 2005.
This new forecast for growth is below post's previous forecast in the
last annual poultry report (CH5064) due to the HPAI impact in China.
According to trade contacts, the sluggish recovery in poultry
production, coupled with further Chinese tariff reductions in 2006 and a
favorable U.S. Dollar exchange rate, will provide market opportunities
for U.S. broiler exports to China in 2006. Based on past trade figures
and future trends, the value of U.S. poultry exports to China has the
potential to reach \$300 million annually.

China's reported HPAI situation in 2005 has had a greater impact on
poultry and human health than in 2004. As the result of the impact on
poultry production and consumption, domestic wholesale prices fell 15
percent for live chickens and 10 percent for broiler meat in the last
quarter of 2005. During 2005, there were also 10 human infections due to
HPAI, including 6 deaths (in 2004 both the figures were reported as
zero), and 32 HPAI outbreaks with 154,600 dead birds and 22.5 million
culled (destroyed) birds. During all of 2004, China culled only 9
million birds. Further, since the outbreaks started in 2005, HPAI has
lasted 6 months, compared with only 3 months in 2004.

HPAI outbreaks in China have mostly occurred on small or backyard farms.
As a result, the disease is changing China's production pattern by
speeding the formation of larger-sized commercials farms and integrated
farm/processing plants in the advantageous production areas like
Shandong Province. China slaughters over 9 billion birds of all poultry
a year, and Shandong Province accounts for 1.5 billion birds. Most of
Shandong's broiler farms are large-sized with effective bio-safety
control measures.

  ------------------------------------ ------------- --------------------
  Size of China Commercial Broiler                   
  Farms in 2004                                      

  Annual Slaughtered                   No. Of Farms  Total Slaughtered

  (Bird)                               　            (1,000 Bird)

  2,000 - 9,999                        338,597       1,640,755

  10,000 - 49,999                      85,340        1,510,601

  59,000 - 99, 999                     5,752         363,775

  100,000 - 499,999                    1,514         297,367

  500,000 - 999,999                    116           89,973

  1,000,000 and above                  85            224,364

  Total                                431,404       4,126,835

  Source: China Livestock Association  　            　
  ------------------------------------ ------------- --------------------

The increase in imports of breeding chickens during late 2005 reflects
the Chinese broiler industry's efforts to boost first quarter production
in 2006. China imports grandparent generation breeds, and total imports
in 2005 increased 33.7 percent over 2004, with fourth quarter 2005
imports at the highest level.

According to trade sources, China's improved disease reporting system
(i.e., to the International Organization of Animal Health, or OIE) has
helped sustain China's broiler meat exports---particularly to the
largest export destination, Japan---in the midst of HPAI outbreaks.

Despite the HPAI situation in China, several factors are at play to
improve China's poultry industry situation. Since the outbreaks of HPAI
began last year, the Chinese Government provided subsidies worth about
\$31 million to farmers for culled birds. The Government also exempted
poultry processing plants from paying any value added tax (VAT) on
imported poultry parts until the end of June 2006. Further, although
some consumers have shifted from poultry to red meat due to HPAI, stable
sales continued at supermarkets for well-known brands of broiler
products, and sales are expected to rise in 2006. Finally, increased
domestic grain and feed production, coupled with a decline in feed
exports, will lead to lower feed prices in China and help producers'
profit margins.

During 2006, China's broiler industry will continue to expand, though
the growth rate may not be as significant. China has about 127
grandparent generation broiler breeding farms, and import demand from
these operations will provide market opportunities for U.S. breeding
chicken exports to China. According to trade sources, the market
potential for the U.S. breeding stock is about \$13 million, accounting
for over 70 percent of China's total imports.

## Broiler consumption for 2006 forecast at 10.2 MMT, a slight increase from last year

FAS Beijing's reduced broiler consumption forecast during 2006---driven
by HPAI concerns---is one percent below the last forecast in the Annual
Poultry Report (CH5064). The decline in "wet market", live chicken sales
is the main cause for slower consumption growth in 2006. Red meat
supplies and availability can only substitute a portion of broiler meat
consumption, while the level of pork consumption is basically saturated.
Because the export markets will absorb most of the increase in China's
broiler production, the forecast 25 percent increase in imports will not
be enough to offset the supply gap. As a result, China's overall broiler
consumption in 2006 is forecast to increase by a smaller margin.

## New standard effective on January 1, 2006, "0" tolerance on pathogens remains

On January 1, 2006, China implemented a new national standard, GB
16869-2005, for fresh and frozen poultry products (see CH6001),
replacing the GB 16869-2000 standard. The standard reinforces a "0"
tolerance for the pathogens salmonella and Ecoli O-157:H7 on fresh and
frozen poultry products. The following chart is a translation of the
microbial requirements. Under Salmonella and 0157:H7, "0/25g" means no
pathogens detected in five, 25-gram samples.

Microbial Test Requirement

  -------------------------- ---------------------- ----------------------
  Items                      Index                  

                             Fresh Poultry Products Frozen Poultry
                                                    Products

  Total number of bacteria   1 x 10^6^              5 x 10^5^

  Coliform (MPN/100 g)       1 x 10^4^              5 x 10^3^

  Salmonella                 0/25 g^a^              

  O157:H7                    0/25 g^a^              

  "a" means 5 samples                               
  -------------------------- ---------------------- ----------------------

## 

Other changes include: 1) no longer regulating the tolerance of
methamidophos and clenbuterol hydrochloride, 2) a stasis of blood less
than 0.5 cm^2^ can be ignored, 3) allowing 1 detection of hard feather
per 10 kg (feather exceeding 12 mm or root feather exceeding 2 mm), 4)
the center temperature of frozen poultry products shall not exceed --18
ºC., 5) the moisture shall not exceed 6 percent (8 percent in the past),
6) lead residue shall not exceed 0.2 mg/kg (0.5 mg in the past), 7) the
benzene hexachloride (BHC) residue shall not exceed 0.1 mg/kg (whole
sample) and not exceed 1 mg/kg (fat sample), 8) the test method for
diethylstilbestrol is changed to SN 0672. The rest of the requirements
in the new standard remain the same as GB 16869-2000 (please refer to
CH1060).

The "0" tolerance standard for pathogens on raw poultry will impact all
imported products. But according to the trade, the lower moisture
tolerance will impact U.S. products more than Brazilian products,
because most U.S. plants use ice for cooling during processing and U.S.
moisture tolerance is reported as higher than the Chinese tolerance.
Brazilian plants apparently use air-cooling. As a result, their poultry
products more easily meet the Chinese specifications.

As the result of increased import quarantine inspections during the
later part of 2005 and early 2006 and the reported detection of
pathogens and residues, China's General Administration of Quality
Supervision Inspection and Quarantine (AQSIQ) suspended poultry and pork
shipments from 13 U.S. meat establishments. USDA is continuing efforts
to resolve the situation.

## Broiler meat imports in 2006 forecast to increase 25 percent to 275,000 MT 

Post estimates that China's broiler meat imports will increase 26
percent to 220,000 MT in 2005 and are forecast to increase another 25
percent to 265,000 MT in 2006.

China's tariff reductions (i.e., the specific duty) on imported broiler
wings fell from \$0.9/kg in 2005 to \$0.8/kg in 2006. Also, the
favorable U.S. Dollar exchange rate, coupled with the sluggish domestic
production increases, will drive increased import levels. However, the
import number in this report's broiler PS&D table for 2006 is smaller
than FAS Beijing's previous estimation in the annual poultry report
(CH5064) due to China's tightened quarantine inspections.

Currently, China's poultry import tonnage---regulated by China's
issuance of Automatic Registration Form (ARF) through the Ministry of
Commerce (MOFCOM)---is sufficient for 2006 import needs (according to
the industry). The market potential for imported poultry parts remains
large. During 2003---pre-HPAI---China's total poultry imports reached
almost \$500 million, including direct imports and HK re-exports.
However, during 2006 the reported increase in quarantine
inspections---and the resulting claims that pathogens and residues are
being found---could put a damper on trade.

## Market access update for U.S. broiler products to China

China closed its market for U.S. poultry products during the first 9
months of 2004 due to an outbreak of low pathogenic avian influenza
(LPAI) in the United States. After China lifted the ban on U.S. poultry
at the end of 2004, U.S. exports to China rebounded. The U.S. market
share in 2005 increased about 15 percent, cutting in to Argentina's
share. This trend is expected to continue in 2006, and the United States
will maintain its position as the largest supplier in 2006, accounting
for estimated 63.6 percent of China's total imports. The market
potential for U.S. exports is about \$400 million---assuming trade
levels pre-AI level 2003 could be achieved.

The "0" tolerance pathogen standard, coupled with strict surveillance of
residues, continue to pose challenges for all poultry suppliers to
China, particularly the United States. During December and January,
AQSIQ suspended poultry and pork shipments from 13 U.S. meat
establishments. USDA is continuing efforts to resolve the situation.

## Broiler exports in 2006 forecast to increase 31 percent to 470,000 MT

China is extremely dependent the Japan and Hong Kong markets for
exports. Its export volume to the two markets accounted for 81 percent
(292,000 MT) in volume and 86.5 percent (\$755 million) in value in
2005. According to the quarantine protocol between Japan and China,
Japan applies a policy of regionalization on broiler imports from
China's 35 eligible export plants (most in Shandong Province). Japanese
officials also regularly check the plants to be sure Chinese broiler
exports comply with the requirements, according to trade contacts.

Cooked poultry is the focus of China's export strategy since most
overseas markets remain closed for China's raw products. Cooked poultry
exports increased from 37.8 percent (153,000 MT) in 2003 to 56.9 percent
(203,847 MT) in volume and 57.6 percent (\$447 million) in 2003 to 73.4
percent (\$640 million) in 2005 respectively. This pattern will continue
in 2006. China's boiler exports to Russia in 2006 is not promising
because of HPAI in China and because Russia's import quota for China is
very small. China's exports do not threaten U.S. broiler exports to
Japan due to the product difference and levels of processing.

## Poultry egg production and trade

FAS Beijing forecast that China's poultry egg production for 2006 will
increase 4 percent to 29.8 MMT. The new forecast, one percent below
post's previous forecast in the last annual poultry report CH5064,
reflects the HPAI impact in China. The six largest egg producing
provinces\--Hebei, Shandong, Henan, Liaoning, Jiangsu and
Sichuan---account for nearly 65 percent of China's total production.
HPAI pushed fresh chicken egg price down about 34 percent from September
to December 2005 over the same months of 2004. Egg prices are forecast
to rise a bit during the January/February Spring Festival period, but on
a whole it is forecast to stay low due to increased grain and feed
production in 2005. Poultry egg consumption will grow steadily as there
is little substitute for it.

China is self-reliant on poultry eggs. Fresh egg imports in 2006 are
insignificant.

China's fresh egg exports account for about 90 percent of total exports.
Hong Kong and Macau are the key markets, with Hong Kong alone accounting
for 81 percent of China's total exports. The frontier autonomous region,
Xingjiang---for the first time---successfully got approved and
registered by the local quarantine agency, CIQ Xinjiang, to export
poultry eggs to Asian countries such as Kazakhstan due to quality
improvements and geographical convenience.

China started implementing two new national standards on December 1,
2005. GB 2748-2003 is Hygienic Standard for Fresh Eggs and GB 2749-2003
is Hygienic Standard to Egg Products. Since China's imports of fresh
eggs and egg products are very small. FAS Beijing has not heard any
problems.

China's egg exports in 2006 are forecast to remain flat at 985 million
pieces due to impact of HPAI in China. Given that China's market share
in Hong Kong and Macau is already very high, fresh egg exports cannot
grow by large margin, unless new markets were developed successfully.

# Ps&D Tables

  ---------------- ------------ ----------------- ---------- ----------------- ---------- ----------------- --------- -------
  **PSD Table**                                                                                                       

  **Country**      **China,                                                                                           
                   Peoples                                                                                            
                   Republic                                                                                           
                   of**                                                                                               

  **Commodity**    **Poultry,                                                  (1000                                  
                   Meat,                                                       MT)(MIL                                
                   Broiler**                                                   HEAD)                                  

                   2004         Revised           2005       Estimate          2006       Forecast          UOM       

                   USDA         Post              USDA       Post              USDA       Post                        
                   Official     Estimate\[New\]   Official   Estimate\[New\]   Official   Estimate\[New\]             
                   \[Old\]                        \[Old\]                      \[Old\]                                

  **Market Year                 01-2004                      01-2005                      01-2006           MM/YYYY   
  Begin**                                                                                                             

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

  Slaughter        7400         7400              7550       7550              7770       7620              (MIL      
  (Reference)                                                                                               HEAD)     

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

  Production       9998         9998              10200      10200             10500      10350             (1000 MT) 

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

  Parts, Imports   174          174               250        220               300        275               (1000 MT) 

  Intra EC Imports 0            0                 0          0                 0          0                 (1000 MT) 

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

  TOTAL Imports    174          174               250        220               300        275               (1000 MT) 

  TOTAL SUPPLY     10172        10172             10450      10420             10800      10625             (1000 MT) 

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

  Parts, Exports   241          262               300        358               360        470               (1000 MT) 

  Intra EC Exports 0            0                 0          0                 0          0                 (1000 MT) 

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

  TOTAL Exports    241          262               300        358               360        470               (1000 MT) 

  Human            9931         9910              10150      10062             10440      10155             (1000 MT) 
  Consumption                                                                                                         

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

  Total Dom.       9931         9910              10150      10062             10440      10155             (1000 MT) 
  Consumption                                                                                                         

  TOTAL Use        10172        10172             10450      10420             10800      10625             (1000 MT) 

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

  TOTAL            10172        10172             10450      10420             10800      10625             (1000 MT) 
  DISTRIBUTION                                                                                                        

  Calendar Yr.     90           90                166        147               190        175               (1000 MT) 
  Imp. from U.S.                                                                                                      
  ---------------- ------------ ----------------- ---------- ----------------- ---------- ----------------- --------- -------

# Trade Tables

  ---------------- ----------- --------- ------------ --------- ----------------
  CHINA BOILER                           　           　        　
  MEAT IMPORTS,                                                 
  2003-2005                                                     

  (Metric Tons)                          　           　        　

  　               January -             January -              January -
                   December              November               November

  　               Quantity    　        Quantity               \% Change
                                         Comparison             

  Origin           2003        2004      2004         2005      2005/04

  World            566,394     180,342   168,596      332,299     97.10

  United States    546,261     75,871    75,857       172,074     126.84

  Brazil           8,397       60,810    49,816       132,663     166.31

  Argentina        4,236       42,587    41,849       21,907      -47.65

  Canada           4,576       798       798          2,556       220.22

  Chile            48          0         \-           1,678       0.00

  France           \-          1         1            1,203     ∞

  Thailand         2,535       173       173          122         -29.63

  Other            341         102       102          96        -5.88

  HS Codes:                                           　        　
  020711, 020712,                                               
  020713, 020714                                                
  and 160232                                                    

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

  ---------------- ----------- --------- ------------ --------- ----------------
  CHINA CHICKEN                                       　        　
  PAW IMPORTS,                                                  
  2005 (Metric                                                  
  Tons)                                                         

  HS Code:         　          　        　           　        　
  02071422                                                      

  　               January -             January -              January -
                   December              November               November

  　               Quantity    　        Quantity               \% Change
                                         Comparison             

  Origin           2003        2004      2004         2005      2005/04

  World            n/a         n/a       n/a          167,600     0.00

  United States    n/a         n/a       n/a          89,998      0.00

  Brazil           n/a         n/a       n/a          55,331      0.00

  Argentina        n/a         n/a       n/a          20,883      0.00

  Chile            n/a         n/a       n/a          1,318       0.00

  Canada           n/a         n/a       n/a          47          0.00

  Thailand         n/a         n/a       n/a          23          0.00

  Note: Chicken                                                 　
  paw imports are                                               
  excluded in the                                               
  broiler meat                                                  
  PS&D table.                                                   

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

  ------------ ----------- ---------- ------------ ---------- ---------------
  HONG KONG                                                    
  RE-EXPORTS                                                  
  OF BROILER                                                  
  MEAT TO                                                     
  CHINA,                                                      
  2003-2005                                                   

  (Metric                                                      
  Tons)                                                       

               January -              January -               January -
               December               November                November

               Quantity               Quantity                \% Change
                                      Comparison              

  Origin       2003        2004       2004         2005       2005/04

  -The World-  503,313     104,653    102,141      96,047     -5.97

  Brazil       117,356     32,506     30,446       40,718     33.74

  United       281,923     44,638     44,473       37,613     -15.42
  States                                                      

  Argentina    4,885       7,371      7,290        4,738      -35.01

  Chile        7,497       3,304      3,232        4,343      34.37

  Turkey       15,322      3,843      3,760        3,752      -0.2

  Iran         9,641       2,260      2,234        2,657      18.91

  France       8,483       2,067      2,067        605        -70.71

  Canada       9,092       2,274      2,249        379        -83.14

  Other        49,114      6,390      6,390        1,242      -80.65

  HS Codes:                                                    
  020711,                                                     
  020712,                                                     
  020713,                                                     
  020714 and                                                  
  160232                                                      

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

  ------------ ----------- ---------- ------------ ---------- ---------------
  HONG KONG                                                    
  RE-EXPORTS                                                  
  OF CHICKEN                                                  
  PAWS TO                                                     
  CHINA,                                                      
  2003-2005                                                   

  (Metric                                                      
  Tons)                                                       

               January -              January -               January -
               December               November                November

               Quantity               Quantity                \% Change
                                      Comparison              

  Origin       2003        2004       2004         2005       2005/04

  -The World-  260,845     54,515     53,137       61,484     15.71

  United       170,187     23,327     23,208       24,995     7.7
  States                                                      

  Brazil       42,484      15,518     14,415       22,390     55.32

  Argentina    3,046       6,234      6,153        4,466      -27.41

  Turkey       11,501      3,096      3,071        3,215      4.69

  Chile        4,560       1,213      1,189        2,999      152.22

  Iran         9,641       2,233      2,207        2,657      20.36

  Canada       2,118       828        828          176        -78.78

  France       96          21         21           131        511.01

  Total        17,213      2,044      2,044        455        -77.72

  HS Codes:                                                    
  02071410                                                    
  (excluded                                                   
  from the                                                    
  broiler meat                                                
  PS&D table)                                                 

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

  ---------------- ----------- --------- ------------ --------- ----------------
  CHINA BOILER                           　           　        　
  MEAT EXPORTS,                                                 
  2003-2005                                                     

  (Metric Tons)    　          　        　           　        　

  　               January -             January -              January -
                   December              November               November

  　               Quantity    　        Comparison   　        \% Change

  Destination      2003        2004      2004         2005      2005/04

  World            404,895     262,105   228,561      326,567     42.88

  Japan            223,130     148,027   127,523      174,923     37.17

  Hong Kong        56,143      70,523    61,631       88,954      44.33

  Moldova          478         1,029     1,003        8,066       703.88

  Korea South      1,450       2,110     1,813        7,721       325.90

  Korea North      5,984       4,560     4,405        5,871       33.28

  Albania          223         4,273     3,213        5,352       66.57

  Bahrain          2,586       2,825     2,695        4,247       57.59

  United States    151         1,197     965          3,816       295.49

  Somalia          \-          3,680     2,978        3,772       26.68

  Azerbaijan       50          739       662          2,847       330.25

  Mozambique       150         204       204          2,520       1135.36

  Iraq             50          1,465     1,414        2,015       42.46

  Armenia          223         4,273     25           1,825       7200.00

  Georgia          577         835       835          1,717       105.65

  Macau            689         1,165     1,047        1,707       63.07

  Singapore        6,669       1,442     1,358        1,351       -0.52

  Uzbekistan       18          200       100          1,267       1166.66

  Netherlands      195         642       513          1,200       133.90
  Antilles                                                      

  Lithuania        25          75        75           918         1124.12

  Other            106,104     12,841    16,102       6,478     -71.88

  HS Codes:                                           　        　
  020711, 020712,                                               
  020713, 020714                                                
  and 160232                                                    

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

+---------+-------------------------+---+---+---+---+---+----+------+
| CHINA   |                         |   |   |   |   |   |    |      |
| M.F.N   |                         |   |   |   |   |   |    |      |
| TARIFF  |                         |   |   |   |   |   |    |      |
| RATE ON |                         |   |   |   |   |   |    |      |
| FROZEN  |                         |   |   |   |   |   |    |      |
| CHICKEN |                         |   |   |   |   |   |    |      |
| PR      |                         |   |   |   |   |   |    |      |
| ODUCTS, |                         |   |   |   |   |   |    |      |
| 20      |                         |   |   |   |   |   |    |      |
| 01-2006 |                         |   |   |   |   |   |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| Based   |                         |   |   |   |   |   |    |      |
| on      |                         |   |   |   |   |   |    |      |
| Weight, |                         |   |   |   |   |   |    |      |
| Unit:   |                         |   |   |   |   |   |    |      |
| RMB/KG  |                         |   |   |   |   |   |    |      |
| (       |                         |   |   |   |   |   |    |      |
| US\$1=R |                         |   |   |   |   |   |    |      |
| MB8.07) |                         |   |   |   |   |   |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
|         |                         |   |   |   |   |   |    | \%   |
|         |                         |   |   |   |   |   |    | Ch   |
|         |                         |   |   |   |   |   |    | ange |
+---------+-------------------------+---+---+---+---+---+----+------+
| HS Code |                         | 2 | 2 | 2 | 2 | 2 | 20 | 200  |
|         |                         | 0 | 0 | 0 | 0 | 0 | 06 | 5/04 |
|         |                         | 0 | 0 | 0 | 0 | 0 |    |      |
|         |                         | 1 | 2 | 3 | 4 | 5 |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| 20      | Frozen whole broiler    | 1 | 1 | 1 | 1 | 1 | 1  | 0.00 |
| 07.1200 |                         | . | . | . | . | . | .3 |      |
|         |                         | 6 | 6 | 3 | 3 | 3 |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| 02      | Frozen broiler cuts     | 1 | 1 | 0 | 0 | 0 | 0  | 0.00 |
| 07.1411 | with bones              | . | . | . | . | . | .6 |      |
|         |                         | 2 | 0 | 8 | 6 | 6 |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| 02      | Frozen broiler cuts,    | 2 | 1 | 1 | 1 | 1 | 1  | 0.00 |
| 07.1419 | boneless                | . | . | . | . | . | .0 |      |
|         |                         | 7 | 5 | 2 | 0 | 0 |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| 02      | Frozen broiler wings    | 2 | 1 | 1 | 0 | 0 | 0  | -1   |
| 07.1421 |                         | . | . | . | . | . | .8 | 1.11 |
|         |                         | 3 | 2 | 0 | 9 | 9 |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| 02      | Frozen chicken paws     | 1 | 0 | 0 | 0 | 0 | 0  | 0.00 |
| 07.1422 |                         |   | . | . | . | . | .5 |      |
|         |                         |   | 8 | 6 | 5 | 5 |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| 02      | Frozen chicken          |   |   |   |   | 0 | 0  | \-   |
| 07.1429 | wingtips, livers        |   |   |   |   | . | .5 |      |
|         |                         |   |   |   |   | 5 |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| \*      | Frozen wingtips, paws,  | 1 | 0 | 0 | 0 | n | n  | \-   |
| 02      | liver                   |   | . | . | . | / | /a |      |
| 07.2900 |                         |   | 8 | 6 | 5 | a |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| 05      | Broiler gizzard         | 1 | 1 | 1 | 1 | 1 | 1  | -    |
| 04.0021 |                         | . | . | . | . | . | .3 | 7.14 |
|         |                         | 7 | 7 | 4 | 4 | 4 |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| Note:   |                         |   |   |   |   |   |    |      |
| As of   |                         |   |   |   |   |   |    |      |
| January |                         |   |   |   |   |   |    |      |
| 1,      |                         |   |   |   |   |   |    |      |
| 2005,   |                         |   |   |   |   |   |    |      |
| China   |                         |   |   |   |   |   |    |      |
| Customs |                         |   |   |   |   |   |    |      |
| created |                         |   |   |   |   |   |    |      |
| a new   |                         |   |   |   |   |   |    |      |
| HS Code |                         |   |   |   |   |   |    |      |
| (020    |                         |   |   |   |   |   |    |      |
| 7.1422) |                         |   |   |   |   |   |    |      |
| for     |                         |   |   |   |   |   |    |      |
| chicken |                         |   |   |   |   |   |    |      |
| paws    |                         |   |   |   |   |   |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| and a   |                         |   |   |   |   |   |    |      |
| new HS  |                         |   |   |   |   |   |    |      |
| Code    |                         |   |   |   |   |   |    |      |
| (020    |                         |   |   |   |   |   |    |      |
| 7.1429) |                         |   |   |   |   |   |    |      |
| for     |                         |   |   |   |   |   |    |      |
| chicken |                         |   |   |   |   |   |    |      |
| w       |                         |   |   |   |   |   |    |      |
| ingtips |                         |   |   |   |   |   |    |      |
| and     |                         |   |   |   |   |   |    |      |
| livers  |                         |   |   |   |   |   |    |      |
| instead |                         |   |   |   |   |   |    |      |
| of HS   |                         |   |   |   |   |   |    |      |
| Code    |                         |   |   |   |   |   |    |      |
| 0       |                         |   |   |   |   |   |    |      |
| 2072900 |                         |   |   |   |   |   |    |      |
| which   |                         |   |   |   |   |   |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+
| co      |                         |   |   |   |   |   |    |      |
| ntained |                         |   |   |   |   |   |    |      |
| all the |                         |   |   |   |   |   |    |      |
| three   |                         |   |   |   |   |   |    |      |
| p       |                         |   |   |   |   |   |    |      |
| roducts |                         |   |   |   |   |   |    |      |
| in the  |                         |   |   |   |   |   |    |      |
| past.   |                         |   |   |   |   |   |    |      |
|         |                         |   |   |   |   |   |    |      |
| Source: |                         |   |   |   |   |   |    |      |
| China   |                         |   |   |   |   |   |    |      |
| Customs |                         |   |   |   |   |   |    |      |
+---------+-------------------------+---+---+---+---+---+----+------+

  ---------------------- ---------- ---------- ---------- ---------------
  CHINA WHOLESALE PRICES                                  
  F0R LIVE CHICKEN ON                                     
  AVERAGE                                                 

  2003-2005 (US\$/KG)                                     

                                                          \% Change

                         2003       2004       2005       2005/04

  January                1.05       1.10       1.13       2.73

  February               0.98       1.02       1.17       14.71

  March                  0.92       0.98       1.21       23.47

  April                  0.94       1.07       1.28       19.63

  May                    0.98       1.13       1.33       17.70

  June                   9.00       1.18       1.2        1.69

  July                   0.99       1.21       1.16       -4.13

  August                 0.99       1.24       1.18       -4.84

  September              1.02       1.22       1.22       0.00

  October                1.02       1.21       1.08       -10.74

  November               1.07       1.17       0.98       -16.24

  December               1.14       1.22       0.97       -20.49

  Source: The Ministry                                    
  of Agriculture                                          
  ---------------------- ---------- ---------- ---------- ---------------

  ---------------------- ---------- ---------- ---------- ---------------
  CHINA WHOLESALE PRICES                                  
  FOR BROILER MEAT ON                                     
  AVERAGE                                                 

  2003-2005 (US\$/KG)                                     

                                                          \% Change

                         2003       2004       2005       2005/04

  January                0.88       1.01       1.03       1.98

  February               0.83       0.92       1.03       11.96

  March                  0.84       0.97       1.11       14.43

  April                  0.80       0.96       1.10       14.58

  May                    0.79       0.95       1.12       17.89

  June                   0.80       0.98       1.11       13.27

  July                   0.82       1.05       1.05       0.00

  August                 0.87       1.09       1.06       -2.75

  September              0.89       1.12       1.09       -2.68

  October                0.90       1.13       1.01       -10.62

  November               0.96       1.06       0.92       -13.21

  December               0.96       0.97       0.91       -6.19

  Source: The Ministry                                    
  of Agriculture                                          
  ---------------------- ---------- ---------- ---------- ---------------

  ---------------------- ---------- ---------- ---------- ---------------
  CHINA\'S WHOLESALE                                      
  PRICES FOR CHICKEN                                      
  EGGS ON AVERAGE                                         

  2003-2005 (US\$/KG)                                     

                                                          \% Change

                         2003       2004       2005       2005/04

  January                0.52       0.63       0.69       9.52

  February               0.51       0.55       0.68       23.64

  March                  0.48       0.60       0.64       6.67

  April                  0.46       0.58       0.64       10.34

  May                    0.50       0.59       0.72       22.03

  June                   0.48       0.66       0.71       7.58

  July                   0.49       0.67       0.71       5.97

  August                 0.54       0.74       0.74       0.00

  September              0.56       1.92       0.72       -62.50

  October                0.61       0.71       0.67       -5.63

  November               0.64       0.68       0.62       -8.82

  December               0.61       0.68       0.61       -10.29

  Source: The Ministry                                    
  of Agriculture                                          
  ---------------------- ---------- ---------- ---------- ---------------