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INTERVIEW - US Poultry Exports To Drive US Poultry Production As Domestic Consumption Declines.

16 November 2009 - The USA Poultry and Egg Export Council (USAPEEC) closely monitors poultry consumption, production as well as the international poultry trade. Feedinfo News Service interviewed Dr Renan Zhuang, director of economic analysis at the USAPEEC, to find out where he sees the main challenges facing his association's membership.

Could you begin by outlining the work of the US Poultry and Egg Export Council and your role within the organisation?

The USA Poultry & Egg Export Council (USAPEEC) is a non-profit trade association whose members account for more than 95 percent of all U.S. poultry and egg exports. Based in Stone Mountain, Georgia, USAPEEC has 13 international offices in major export markets including China, Russia, and Mexico, etc. USAPEEC is dedicated to increasing U.S. poultry and egg exports by protecting, opening and developing markets throughout the world and by serving as the industry's voice on trade policy issues.

As a director of economic analysis at USAPEEC, I focus mainly on economic analysis projects related to U.S. trade in poultry and egg products.

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It has been reported that poultry consumption in the food service industry in the US is declining while exports are increasing. Is this a trend you have noticed? What are your thoughts on this development?

Yes, this trend is what I have expected. While sales in the quick food services such as McDonald's and Burger King have increased, sales in the casual and upscale food services such as Ruby Tuesday and Ruth's Chris have decreased significantly due to economic downturn.

Note that the United States is not only the top poultry producer but also the largest poultry consumer in the world. The U.S. per capita consumption of poultry meat is the highest in the world. But per capita consumption has tended to decrease slightly since 2007 due in part to the economic downturn. As U.S. domestic consumption of poultry meat levels off, exports are expected to play a more important role in driving poultry production in the future.

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Another big challenge is the trade protectionism that arises in some major importing countries. For example, Russia has continued to cut its poultry import quota to pursue self-sufficiency policy in poultry production. Ukraine has conducted anti-dumping investigation against U.S. chicken products since March of 2009. China has also recently initiated anti-dumping (AD) and countervailing duty (CVD) investigations against U.S. chicken products.

The U.S. government can do a good job in promoting U.S. poultry exports by making sure that trade in poultry and all other goods is fair and based on sound science, not politics. As long as the trade competition is fair and based on sound science, U.S. poultry exports are going to be thriving since the U.S. is very competitive in the world poultry market, particularly in the long run.

To what extent is the current weakness of the US dollar proving beneficial to exports of poultry meat?

The exchange rate between U.S. dollar and other currencies has played an important role in U.S. poultry trade. In other words, weak U.S. dollar is conducive to U.S. poultry exports, all other things being equal.

But currently U.S. poultry export prices are already relatively low as compared to before, weak U.S. dollar may also encourage discontent among the domestic poultry industries in our major export markets such as Russia and Mexico.

Corn prices are a key factor in dictating costs of poultry production. What are your short and mid-term expectations for the price of this commodity?

While U.S. corn production is expected to increase constantly over time thanks to advanced technology, corn used for ethanol production as well as for exports are also expected to increase. As a result, corn prices are expected to remain high throughout the next decade.

As the world recovers from recession how will US poultry producers ensure their products remain competitive compared to other countries?

Brazil is the major competitor in U.S. poultry exports. In the foreseeable future, Brazilian exports are expected to remain very competitive in some markets such as Japan and Hong Kong due mainly to: (1) Brazil has benefited from its AI-free status, (2) Brazilian producers are more willing to meet importers' tight specifications for cuts, and (3) Brazilian packing merits are highly recognized by importers.

By contrast, U.S. poultry is machine-cut, not hand trimmed. Quality complaints such as hair, random weight and pieces, more fat and water, etc. are sometimes heard from importers. As living standard increases, consumers' requirement for quality is also going to increase. Hence, it is imperative to improve the quality as so to keep competitive in the world poultry market.

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On October 11, 2009 -- Leaders of the poultry industries of the United States and Brazil signed a historic Memorandum of Understanding (MOU), pledging to work cooperatively on common issues while at the same time remaining staunch competitors. Can you tell us more about this and the impacts it will have on US poultry exporters?

This MOU signifies only that Brazil and the U.S. will cooperate on common issues, but that the industries will continue to do business as global competitors. The MOU is in keeping with the spirit of cooperation exemplified by the International Poultry Council, of which both countries were founding members. Under terms of the MOU, the industries pledge to work together on issues such as the environment, animal welfare and trade barriers around the world to improve the business climate for the industries of both countries.

We have seen that chick placements are down in the US. Why is this happening and is this trend going to continue? How will export growth be affected by falling chick placements?

High feed grain prices and energy cost have added tremendous stress on U.S. poultry producers in recent years. U.S. poultry producers are forced to reduce chick placements and cut production in an attempt to return to profitability. While this trend is expected to continue throughout this year, the reduction in chick placement is expected to be smaller.

Falling chick placements imply lower poultry meat production, which translates into higher prices. And higher prices of U.S. poultry meat imply less competitiveness in the world market, or lower poultry exports, all other things being equal.

In your view what is the 2010 outlook like for US poultry producers and exporters?

The world demand for poultry meat in 2010 is expected to remain strong and increase modestly from 2009 thanks in part to the increased GDP for most countries. And in the long run, more people will eat more poultry meat. U.S. poultry production and exports are expected to increase constantly in over the next decade.
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Publication:Feedinfo News Service
Date:Nov 16, 2009
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