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How Big of a Deal is China’s Ban on Imports of US Poultry and Egg Products? 

19 January 2015

CHINA & US - The initial reaction to about any problem with exports in general and exports to China in particular is “The sky is falling!  The sky is falling!”, writes Steve Meyer & Len Steiner.

There’s a good reason for that:  China has 1.3 billion people and thus is usually a big player in any market in which it participates based on the fact that 1.3 billion times any number is a very large number!  

But how critical are they in this one?   

First, let’s review. China banned imports of US chicken, turkey and eggs, effective January 8, due to the presence of a strain of highly pathogenic avian influenza (HPAI) in  the Pacific Northwest.   

HPAI is a bad disease but these cases are occurring in wild birds and small domestic flocks hundreds of miles from any primary US commercial production.  

In addition, China’s ban on all US products is unusual (and industry experts say unnecessary) because OIE, the world animal health organization allows and encourages a regional approach which has been used on a number of occasions when HPAI has reared its ugly head in the US Korea imposed a similar all?country ban on US products in December.   

Hong Kong imposed a ban on products from Oregon but, as far as we can determine, is still taking product from the remainder of the US That is important given the ties between Hong Kong and China. So where do US chicken exports go?  

The chart at right indicates that Mexico is by far the most important single destination and that exports to “Other” countries (ie. those not listed here) is by far the largest destination for US chicken export shipments.  Note that among these eight destinations, China and Hong Kong are the smallest except for Russia which is currently not taking US products due to its retaliatory embargo over our Ukraine?related sanctions.    

We have separated China and Hong Kong in the chart since they have, at least for now, taken different approaches to this situation.  How much of a back door will Hong Kong be for US chicken since it has not banned product from anywhere other than Oregon?  

If product moves through Hong Kong, this may not be a big deal at all.  If not, then what? In 2013, China accounted for 3.9 per cent or US chicken exports and Hong Kong accounted for 2.2 per cent.  Through November, those figures for 2014 were 3.6 per cent and 3.2 per cent.   

The US chicken industry exported roughly 19 per cent of total production in 2013 so those 2013 export shares to China and Hong Kong represented 0.7 per cent and 0.4 per cent of total US production. Through November, 2014 US broiler exports were virtually unchanged form one year ago.  

It appears that 19 per cent will be very close to the export share for 2014 so the shares of US production for China and Hong Kong will be about 0.7 per cent and 0.6 per cent, respectively.   

Those are not insignificant numbers but do they constitute a large weight on the market? There is a product, though, that this impacts dramatically — chicken paws or feet. China and Hong Kong took 251.3 million pounds of chicken paws in 2013. Those were valued at $314.5 million. China accounted for about 60 per cent of both totals.  

Through November 2014, the two destinations accounted for 271.8 million pounds of paws valued at $387.6 million. Interestingly, Hong Kong has accounted for roughly 75 per cent of the 2014 volume and value. Perhaps more important is that China and Hong Kong are the market for chicken paws.  Those volume and value figures accounted for 84 per cent of 2013 paws exports and an astounding 97 per cent of our paws shipments in 2014.  

A reduction in paws exports will negatively impact the financial performance of chicken companies and thus force the muscle products to carry more of the economic load. That’s the bad news.  

The good news is that most of the paws for these markets have been flowing through Hong Kong already and there doesn’t seem to be a reason for that to change given Hong Kong’s announced regional approach to the HPAI situation.   

Bottom Line: The actual numbers do not suggest a dramatic impact. Is China’ whole?country ban wrong? Absolutely. Does it have negative impacts? Yes again. Will they be large?  In our opinion, they should not unless it adds significant weight to what seems to be a growing general neg? ative sentiment for commodities and meat/poultry proteins.   


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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