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Diversity Is Key to Continued Success of U.S. Poultry Exports
By John Reddington
U.S. poultry exports continue to demonstrate strong growth in export markets across the globe. Poultry meat exports swelled from $630.7 million at the beginning of the decade to $2.4 billion in fiscal 1996 -- a hefty 278-percent increase. Nearly 20 percent of U.S. production now goes to satisfy export demand.
U.S. poultry meat exports turned in a stellar performance last year, setting new records for total value and for 8 of our top 10 markets. In fiscal 1997, exports are forecast to climb still higher to $2.6 billion.
U.S. Chickens Mainly in Two Pots
Despite the phenomenal success the U.S. poultry industry has achieved in overseas markets, a few clouds hover on the export horizon. For one thing, poultry meat sales remain concentrated in two countries -- Russia and China (with much of its imports transhipped through Hong Kong). In fiscal 1997, the Russian and China/Hong Kong markets are projected to purchase nearly two-thirds of the world's poultry exports.
In Russia, imports now make up almost 60 percent of total consumption, and the United States supplies more than 70 percent of those imports. Any disruption in Russia's market could prevent many U.S. suppliers from recovering even break-even costs.
The Russian and Chinese markets have also displayed considerable volatility, arising from economic shifts and import access issues. Moreover, neither nation has yet attained membership in the World Trade Organization (WTO).
Price swings occurred in March-April 1996, when U.S. poultry exports to Russia slowed due to disputes over health and sanitation issues. (A 10,000-ton drop in leg quarter imports can precipitate nearly a 1.6-cent-per-pound drop in the f.o.b. Arkansas price.) Significant price shifts in chicken paws (feet) ensued when a Chinese crackdown on illegal imports shipped through Hong Kong cut U.S. broiler exports to this market by 7 percent in January-March 1996. These events sent shock waves through the U.S. poultry industry, affecting its short-term profits and demonstrating its vulnerability in having most of its eggs in two volatile baskets.
More recently, U.S. poultry exports to China were temporarily suspended because of fears that they carried highly pathogenic avian influenza. Although the impasse was resolved when U.S. officials were able to show Chinese authorities that the poultry was free of the virus, it reveals how suddenly issues with enormous trade impact potential can arise.
A Quick Market Tour
The U.S. poultry industry can build on its successes and safeguard its future by diversifying both country and product markets. The more country markets the industry establishes for a wide variety of products, the more insulated it will be from a downturn in any particular area or for any particular product.
Which markets offer the best prospects for U.S. poultry meat producers and exporters?
Russia and China, with their large populations and growing demand, will remain important markets with substantial short-term potential. China has diverse market segments for wings, paws, leg quarters and high-value products. Exporters that concentrate on maintaining market share through competitive prices, quality and service will likely secure a market presence.
Ukraine, Estonia and Latvia are small to medium markets in their own right that also transship products to Russia. If Russia closes its market to U.S. poultry for some reason, it might also halt U.S. products shipped through other points. Should that occur, U.S. poultry exporters could minimize their investment in the Baltics and divert their resources to attractive market segments in Ukraine.
Mexico and Canada are our third- and fifth-largest poultry meat markets, respectively. Some trade issues curtail sales in these markets, and sales will likely rise slowly in the next few years. Mexico's imports will likely grow in spurts corresponding to its economic advances.
South Korea, Singapore, Poland and the Caribbean represent small- to medium-size markets. South Korea and Poland are erratic markets where import access issues could impede U.S. sales.
The European Union (EU) is an attractive market, but the United States has carved out only a small share of it. Here again, import access looms as a major obstacle to expansion of U.S. poultry exports; but suppliers and exporters may be able to surmount it by developing niche markets for high-value products.
Japan, with its high-income population and steady demand growth, stands out as a promising market for U.S. poultry meats. Unlike some other markets where trade barriers constitute the major constraint to imports, less expensive products from China and Thailand offer the stiffest competition to U.S. poultry meat in Japan.
Japanese poultry imports will likely increase, but exporters may need to make some changes to capitalize on the growth. U.S. exporters that focus on developing products specifically for Japanese palates -- such as flavored yakitori chicken, seasoned leg sticks, breaded and pre-fried nuggets and fried chicken -- could find it well worth the trouble.
U.S. Poultry Exports to the Year 2000
By the year 2000, world poultry meat trade is projected to reach 6 million tons. U.S. exports could exceed 3 million tons that year, more than half of all shipments.
Future growth in U.S. poultry meat trade will likely come from Asia's Pacific Rim. The region has the world's fastest-growing economies; large, rising populations; and increasingly Western supermarkets, restaurants and dietary habits.
Over the next several years, competitors and customers alike in the world's poultry meat market will reshape trade policies and practices to fulfill WTO commitments. The U.S. poultry industry, with its reliable supplies of affordable, high-quality products, stands well positioned to make the most of increasing worldwide demand and trade liberalization.
The author is the director of FAS' Dairy, Livestock and Poultry Division.
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