Editorial

Uncertainty Over Future Exports

The September USDA-ERS projection for the export of U.S. broiler products in 2024 was 6,776 million lbs. (3.075 million metric tons), down 6.8 percent from 2023.  The forecast for 2025 is for 6,875 million lbs. (3.125 million metric tons) equivalent to 14.5 percent of production.  For the first eight months of 2024, Mexico represented 22.2 percent of export volume followed by Cuba with 7.8 percent and Taiwan 6.1 percent.

 

The forecast for 2025 may however be influenced by factors beyond the control of the industry.

 

China, previously the principal importer ranked highly in both volume and especially value, has declined in importance and for the first eight months of 2024 was ranked fifth in volume with five percent of exports but was still the second largest importer by value.  It is clear that this nation may play a significant role in future exports depending on the outcome of the 2024 Presidential election and developing global events.  Should a new administration intensify tariffs on China, exports amounting to 405,313 metric tons valued at $711,172 in 2023 and 108,502 metric tons valued at $247 million for the first eight months of 2024 may be sharply lower.  China has in any event reduced imports due to over production of domestic pork and attaining self-sufficiency in broiler meat derived from white-feathered birds and hybrids.  Although there will be a demand for feet, it appears that there is a trend to diverting imports through Hong Kong to the mainland.  If it is politically expedient, as a countervailing action to U.S. tariffs, consumers in China may have to do without their U.S.-origin feet if the Central Party so decrees.

 

China may also play a role in constraining exports to Taiwan.  During mid-October the greatly expanded navy of the Peoples Liberation Force conducted a mock embargo of Taiwan that would effectively have prevented imports of oil required to generate power and to receive food shipments.  Third ranked Taiwan over the first eight months of 2024 imported 131,229 metric tons and represented 6.3 percent of our export volume. This would be placed in jeopardy in the event of a confrontation with China over the independence of the island Nation.

 

Conflict between Israel, and our adversary Iran and its terrorist surrogates in Gaza, Lebanon, Syria and Yemen might broaden into an international conflict impacting exports to the Middle East and other nations especially if there are additional restrictions on shipping over and above the present situation in the southern Red Sea and Gulf of Aden.  Any major conflict in the Mideast involving hostilities between Saudi Arabia and the Gulf states on the one hand and Iran backed by China and the Russian Federation would inevitably drive up the price of crude.  Current production costs are in part restrained by the prevailing low price of crude that has ranged from $70 to $80 per barrel in 2024.  Escalation in the price of WTI with a $100+ handle would increase costs and shrink margins as energy-driven inflation returns.

 

The potential emergence of HPAI in Brazil could also affect exports of U.S. broiler products. During 2023 Brazil recorded 166 cases of H5 N1 HPAI in wild birds along the eastern coast and three reported cases in backyard flocks but miraculously, no commercial farms.  In addition, authorities in Brazil reported a case of “Newcastle disease” in mid-July in the State of Rio Grande do Sul.  Whether this was in fact END or a cover-up for an isolated HPAI break in a small broiler unit will probably never be determined.  Based on the previous reluctance of Brazil to disclose outbreaks of spontaneous bovine spongiform encephalopathy (BSE), and the implications of an HPAI diagnosis on exports, the true diagnosis remains a speculation.

 

Broiler exports over the first eight months of 2024 were over 10.7 percent lower than for the corresponding period during the previous year.  Exports in 2023 were four percent lower than in 2022 principally due to reduced shipments to China although there is a general trend for traditional importers, with the exclusion of Mexico and Canada, to have lowered imports from the U.S. This is based on increasing self-sufficiency, decreased demand attributed to deteriorating economies and greater competition from Brazil, Eastern Europe and Russia.

 

Our USMCA partners represent 27 percent of exports.  This quantity might be at risk in the event of imposition of punitive duties on automobiles and parts produced in Mexico, as hinted in pre-election political rhetoric. This would require re-negotiation or worse still a precipitous cancellation of the USMCA by any future Administration.

 

Given uncertainties and faced with declining exports, the broiler industry should look within the U.S. and establish a wider domestic market for leg quarters.  This will require development of new products incorporating dark meat favored among the nations receiving broiler leg quarters. This category comprised 96 percent of export volume for RTC broiler products and 89.8 percent of value ($2.81 billion) over the first eight months of 2024.

 

While there will always be a demand for low-priced leg quarters, ($1,327 per metric ton 2024   Y-T-D), unit value and margin could be enhanced by further processing and incorporation into high value protein products that could displace pork and beef.

 

The U.S. broiler industry cannot assume continued profitable exports of broiler leg quarters.  Geopolitical factors may impact both demand and logistics requiring long-term alternatives to exporting what is effectively a commodity, susceptible to embargos, higher shipping costs and lacking in pricing power.

 

Poultry Industry News

Expansion of Saudi Investments in Broiler Production

The Saudi Agriculture and Livestock Investment Company (SALIC) has acquired a 13 percent stake in MHP SE of Ukraine.  The holding company of MHP operates Perutnina Ptuj that process meat and poultry in Slovenia, Croatia, Serbia and Bosnia.  Perutnina Ptuj also distributes through subsidiaries in 15 EU nations. 

 

This investment by SALIC adds to their broiler-production portfolio which includes an investment in BRF S.A. with 11 percent of the equity allowing transfer of technology and expanding domestic production in addition to importation from Brazil.  The investment in MHP will generate synergy since the company will cooperate with Tanmiah Food Company in existing facilities and a proposed joint venture in Saudi Arabia.

 


 

USDA Approves Importation of Turkey Rhinotracheitis Vaccine

Turkey producers in the U.S. will now be able to administer an imported Boehringer Ingelheim vaccine against turkey rhinotracheitis.

 

The inactivated TUR-3 product is licensed for use against avian metapneumovirus in the E.U.

 

Permission to import the vaccine was supported by the National Turkey Federation to protect flocks against an emerging and widespread erosive infection.

 


 

Economic Impact of U.S. Broiler Industry

USPOULTRY in collaboration with the National Chicken Council funded an economic impact study conducted by John Dunham and Associates. Using data from 2024, it was calculated that the broiler industry is responsible for 1.4 million jobs, $90.9 million in wages, $450 million in economic activity and $36.7 billion in government revenue.

In commenting on the release of the study Gary Kushner Interim president of NCC stated, “We know that chicken is nutritious, affordable and versatile but chicken also means jobs – whether i on the farm in the processing plant, the transportation sector, manufacturing, or retail restaurants.”  He added, “This data will prove extremely helpful as we welcome a new Congress to Washington next year.”


 

Boar’s Head Recall Impacts Volume and Value of Deli Meat

For the month of July prior to the July 26th Boar’s Head recall that grew to 7 million lbs. of product, deli meat sales attained 69.1 million lbs. with a value of $732.7 million similar to the preceding month.  During August, deli meat sales were down 11 percent from July and 9.3 percent from August 2023.  The greatest loss was in deli-service lunchmeat, down 17 percent.  The situation continued through September with deli meat sales at a 13-week low attaining 60.8 million lb. down 12 percent from July with sales attaining $626.4 million down 15 percent.

 

In contrast, packaged sandwich meat was generally unaffected and in September sale of pre-sliced lunchmeat was up 4.9 percent on a volume basis.

 

Concern over the extent of the Listeria outbreak and revelations of improper production and handling has obviously diverted demand from deli-service meat to pre-sliced packaged product benefiting the turkey and chicken industries.


 

E.U. Parliamentarians Oppose JBS Listing on NYSE

Members of the European Parliament have addressed a letter to Gary Gensler, Chairman of the U.S. Securities and Exchange Commission, urging rejection of the application by JBS S.A. to be listed on the New York Stock Exchange.

The action by the legislators reflected concern over environmental issues with JBS contributing to deforestation of the Amazon rainforest and noting the history of the company as led by the Batista brothers involving alleged unethical and illegal activities in Brazil.


 

Shane Commentary

Congress Questioning Loans to Pure Prairie Poultry

Following the bankruptcy of Pure Prairie Poultry, concerned members of Congress are questioning loans and grants to the bankrupt company amounting to $45 million.

 

In a letter addressed to Secretary of Agriculture, Tom Vilsack, the legislators are questioning the basis for financial support and evaluation of the enterprise with respect to both collateral and capacity to repay the principle.  Failure of the company left 50 contractors in three states without income and 1.3 million broilers had to be euthanized since there were no funds available for feed or care.

 

The failure of Pure Prairie Poultry raises the question of numerous loans made to aspirant and small-scale livestock producers under various rural development programs. Since 2001, the Department of Agriculture under the current Secretary has attempted to restructure meat and poultry production by supporting and creating alternatives to existing packers and integrators.  The USDA refers to loans and grants as “investments”.  This presumes a return on the public funds assigned with eventual repayment and with interest on loans. Since public funds are involved, USDA administrators should exercise competent and diligent oversight as would be conducted by a financial institution.  The USDA in its futile efforts to encourage competition with established packers and processors has been effective in developing programs to disperse public funds but has been abysmally incompetent at quantifying the outcomes including repayment.

 

The intervention of the Inspector General of the USDA or relevant federal agency is clearly indicated given the magnitude and extent of loans and grants made during the past three years.

 

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