That chicken legs shipped from the US have been widely sold at less than $1 a kilogram in Vietnam has sent a shockwave through the local poultry and livestock industries, reported IntellAsia.net.

Vietnam imported nearly $54 million worth of chicken products in the first five months of this year, equalling 52 per cent of the full-year imports in 2014, according to the latest customs data.

The US market accounted for 65 per cent of the five-month import value, or $34.8 million, and American chicken is the cheapest among Vietnam’s poultry meat suppliers.

While frozen chicken wings from Brazil and Argentina are imported at $1.9 and $2.1 a kilogram, respectively, the rate is only $1 a kilogram for the US products, according to customs figures.

Chicken legs are shipped from the US at only $0.9 a kilogram, compared to $2.1 a kilogram from Lithuania.

The price of the US chicken legs is as cheap as vegetables, which no local meat suppliers are able to compete with, the director of a poultry company in the southern province of Dong Nai told Tuoi Tre (Youth) newspaper last week.

This emphasises a previous forecast that the poultry and livestock sectors will struggle to survive when dirt-cheap imported pork, beef and chicken are the top choice for local consumers as soon as many free trade agreements Vietnam has signed or is about to reach take full effect.

This reminds both those operating in the local sector and consumers that all pork, beef and chicken imports are cheaper than domestic products.

Short-term benefits

In the short term, imported chicken, of which the retail price is around 50 per cent cheaper than the local rival, is beneficial to both consumers and the poultry industry, in general.

The same story applies to imported pork and beef.

With abundant and cheap supply overseas, imported pork, beef and chicken meat will create pressure to partially help increase the efficiency of the domestic industries, and will make the prices of local products decrease significantly.

Meanwhile, local consumers, including poor people, have the opportunity to eat more meat.

A new report released late last week by the Organisation for Economic Cooperation and Development (OECD) and the UN’s Food and Agriculture Organisation (FAO) forecast that global food prices will continue to decline over the next decade as more food is produced than the world needs.

Higher productivity and lower costs mean supply will keep growing, but with global economic growth stumbling, demand will not keep pace, according to the Agricultural Outlook prepared by the OECD and FAO.

There is less demand for traditional food staples, such as wheat and rice, and more demand for higher-priced proteins like meat, fish and dairy products, the report said.

That in turn means there will be more demand for grains to be used as feed for livestock, the report said.

Over the next 10 years, feed demand will constitute almost 70 per cent of the consumption of coarse grain, which is predominantly corn, according to the report.

Long-term anxiety

The forecast leads to a dimmer long-term prospect though, for if the current situation continues, the domestic poultry and livestock industries will gradually shrink in scale due to falling demand for locally produced meat, which will eventually be replaced by imported meat.

The question raised in this circumstance is if imports continue to stay as cheap as the current rate, or if exporters will begin to raise prices when the local poultry and livestock industries are eliminated.

The worst-case scenario will likely follow this course, especially in a country of nearly 100 million people which cannot be self-sufficient when it comes to local poultry and livestock products.

When Vietnam is totally dependent on imports, just one fluctuation in corn and soybean prices, or an outbreak of avian flu in the US or Europe, which will be the main suppliers of poultry and livestock products once the free trade pacts with them are in effect, will cause a sudden shock on imported meat, a crucial part of the Vietnamese diet by then.

Cheap imported meat is a real test for the local poultry and livestock sectors before Vietnam officially signs the free trade agreements with the EU and US, exposing the Southeast Asian country’s poultry and livestock sectors to direct competition with powerful foreign rivals.

To face such a bitter reality, local firms are trying to cut costs to the rates applied in Asean countries, which include Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam.

But to move from an import-dependent country to an export-led nation with billions of US dollars in revenue annually, like Thailand, the two sectors need more support from the Vietnamese government.

In the near future, the preparation of technical barriers, including launching anti-dumping probes into imported meat, is what government agencies need to do to protect the poultry and livestock industries.

In a workshop in HCM City in May, many local and foreign experts said Vietnamese firms must be ready to face more trade remedies at home and abroad as the Southeast Asian country integrates further into the global economy, with numerous trade deals with foreign trade partners already signed or about to be clinched.

While trade liberalisation has opened up world trade to freer competition, more measures blocking market access on the grounds of unfair pricing by exporters have appeared recently, the experts said, further explaining these are called trade remedy actions, part of a series of trade barriers erected to protect a specific industry of a country from dying out due to cheaper imported goods.

Those trade barriers will be a challenge for Vietnamese firms when they export their products to many markets worldwide, especially the EU and US, they said.