LONDON (Reuters) - The U.S. agriculture industry has been hoping to reignite trade with China ever since the trade war between the two countries began 16 months ago. Either Beijing’s lift of the U.S. poultry ban on Thursday is a refreshing step toward that goal, or China is extremely short on meat.
U.S. poultry trade pales in comparison to that of top export soybeans, and chicken is not traditionally China’s top protein of choice. Chinese poultry consumption is on the rise amid the domestic pork shortage, however, so there is reason to be optimistic about the U.S. prospects.
China had banned all U.S. poultry and eggs starting in January 2015 due to an avian influenza outbreak, but that restriction was officially cancelled as of Thursday. U.S. officials responded by saying that exporters of poultry and poultry products would now be able to do more than $1 billion worth of business annually with China, a never-before-seen level.
In 2018, total U.S. agricultural exports were valued at close to $140 billion, so it is important to understand the potential Chinese gains in historical context. China’s recent and expected consumption patterns are also necessary to consider.
The country’s recent outbreak of African swine fever in its hog herd has encouraged the Chinese to seek alternative protein sources to pork, and the lifting of the ban certainly suggests that the pork shortage lives on.
China is No. 2 to the United States in chicken meat consumption with a recent five-year average of 12.4 million tonnes versus the U.S. average of 15.4 million. By comparison, Chinese pork consumption has been near 57 million tonnes, by far the world leader.
But the U.S. Department of Agriculture sees Chinese chicken meat consumption in 2020 jumping 15% on the year to a record 16.1 million tonnes, largely driven by huge declines for pork. Globally, that number is set to surpass the 100 million-tonne mark next year for the first time.
China’s chicken meat imports are very small compared with its demand, which is nearly equal to its production. USDA projects China’s imports at a record 750,000 tonnes next year, up 20% from 2018 and more than double the previous five-year average. Brazil has been overwhelmingly China’s largest supplier.
But when it comes to U.S. poultry and products, China’s top item of interest was chicken paws, or the feet. A decade ago, paws accounted for about 40% of the value of U.S. poultry product exports to China. Paws are only about 8% of the total value of U.S. poultry exports to all destinations.
China also buys a lot of wings and other various chicken products, though it has not imported nearly as much of the traditional cuts of meat that the United States most commonly exports to other destinations.
Beef consumption in China is also projected to rise significantly as a result of the pork shortage, and USDA sees that number at an all-time high of 9.5 million tonnes next year. That is up substantially from the 2014-2018 average of 7.1 million.
China’s own beef production is not sufficient to cover that degree of demand, and USDA sees imports hitting 2.9 million tonnes in 2020, up 21% from this year. Beef and veal imports reached 1.5 million tonnes last year, which was easily a record.
The United States is the leading producer of chicken meat, and USDA has output topping 20 million tonnes next year for the first time. About 83% will be dedicated to domestic use, leaving about 3.3 million tonnes for export. That would be the largest since 2014.
Last year, exports of all U.S. poultry and products, excluding eggs, reached 3.8 million tonnes, and about 85% of that was meat. Total exports were valued at about $4.3 billion in each of the past two years. By comparison, soybean business was worth $21.5 billion in 2017.
Even though the United States exports more chicken meat by volume than pork or beef, the latter two bring in a higher dollar value. In 2018, beef and beef product exports brought in $8.4 billion, and pork added $6.4 billion.
Mexico is by far the largest destination for U.S. poultry products, followed by Hong Kong and Canada. Those three countries account for a little under half of the annual exported volume, and business to Mexico last year was worth $956 million.
The biggest year for U.S. exports to China was 2008 at a value of $722 billion. China occupied 16% of annual U.S. poultry and product exports between 2007 and 2009, second only to Russia, which has since enacted a ban of its own. Values to China were significantly lower after 2009.
Compared with 2008, USDA’s 2020 forecast for Chinese chicken meat consumption is up by a similar magnitude that $1 billion in exports would be over the 2008 record. While that makes $1 billion seem like a feasible target, it is unclear whether those levels would be sustainable should China’s pork production stabilize in the next year or so.
But even though China’s No. 1 meat is pork, the people do have a knack for chicken. American chain Kentucky Fried Chicken is easily the top fast-food restaurant in the country with more than 6,000 stores, nearly double the number of McDonald’s establishments. By comparison, KFC is about 4,000-strong in the United States.
The opinions expressed here are those of the author, a market analyst for Reuters.
Editing by Lisa Shumaker