Ongoing issues between the United States and major trading partners are likely to limit U.S. poultry exports in the near future.  Poultry exports to both Russia and China are under pressure largely due to political rather than market issues.

“When trading partners want to retaliate against U.S. trade policies, they often focus on agriculture products.  The agriculture industry is at the mercy of policies we have no control over,” said Tony Burnes, managing director for DGM Commodities, a global exporter of beef, pork and poultry.

According to Burnes, about 20 percent of U.S. poultry production is exported annually.  The biggest markets for U.S. poultry include China, Russia and Mexico.  Burnes believes “the next few years will be tricky for moving poultry.”

“Producers are beginning to open new plants and reopen closed plants, but with ongoing trade issues in Russia and China our largest export markets are limited.”

Tariffs in China
In February, China announced stiff new tariffs ranging from 40 percent up to 105 percent on U.S. chicken parts.  According to Burnes, the China announcement came after the Obama administration announced a new duty on tires imported from China.

“Trade with China through Hong Kong is at a standstill right now and I think that is unlikely to change over the next two or three months,” Burnes said.

One of the biggest poultry exports to China is chicken feet and wing tips.  Considered a delicacy in China, these products can sell for as much as $1 per lb. compared to 2 cents per lb rendering value in the U.S.  That makes this export particularly valuable to producers.  The loss of this market alone could cost U.S. poultry farmers more than $360 million in annual sales.

Many of the trade issues between the U.S. and China are the result of ongoing tensions between the two countries.  U.S. support of Taiwan, censorship concerns with Google and the yuan exchange rate are among the areas of ongoing tension.

Technical issues in Russia
In January, Russia banned all U.S. poultry shipments, claiming chlorine disinfectant treatments used in processing the meat were not in compliance with its food safety policies.  In a deal reached six months later, U.S. producers agreed to use non-chlorine treatments on all chicken exports to Russia.

“Unfortunately Russia still has technical issues related to the new agreement and shipments are still limited,” Burnes said.

In 2009, U.S. poultry exports to Russia were valued at $767 million according to the U.S. Department of Agriculture (USDA), making it the single largest export market for poultry.  Regaining access to Russia for poultry producers has been a top USDA priority in 2010.

Risk management requires diversified approach
With little or no control over the multiple trade issues affecting poultry exports, Burnes believes diversification is the best approach.

“Three years ago, our business was strictly focused on Russia.  Since then, we’ve diversified into central and southeast Asia, the Middle East and western Africa,” Burnes said.

With diversified operations in many markets around the world, DGM Commodities is better positioned to secure the best possible pricing for its suppliers.  The company also diversified from strictly poultry into pork and beef.

For more information on DGM Commodities, visit www.dgmcommodities.com

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