»POULTRY PERSPECTIVE ❱❱Poultry Perspective BY PAUL AHO
The Importance of
arlier this year, the two most important
export markets for the U.S., Russia and
The U.S. produces about 35 billion
pounds of chicken meat and exports 20% or
about 7 billion pounds. Most exports are leg
quarters and paws. Russia imports 1. 5 billion
pounds of leg quarters, while China imports
a billion pounds of paws and a half a billion
pounds of leg quarters. Together, the two
countries took 40% of U.S. exports and 8% of
total U.S. chicken production last year.
Russia and China
With the value of paws and legs falling,
breast meat would have to assume more of
the burden of the cost of producing chicken.
Break-Even Prices 2010
have to assume more of
the burden of the cost of
producing chicken. The
price of deboned breast
meat therefore, one way
or another, would have
If leg quarter prices were to average 30
cents this year instead of 40 cents because
of trade problems, deboned breast meat
would have to be 28 cents higher to break
even (assuming wings at $1.50, corn at $4
per bushel in Chicago and SBM at $275 per
short metric ton and the 12 City price at 75
cents). The break-even price of DBB is $1.14
with 40 cent leg quarters and $1.42 with 30
cent leg quarters.
Scale of business
Given the surging domestic Russian
production of chicken, U.S. exports to Russia
are likely to diminish in the coming years.
However, it is improbable that exports fall
from 1. 5 billion pounds to zero in just one
year. A more likely scenario is one of a phase-
down over the next two to four years.
The zero scenario
In the unlikely scenario
where Russia and China eliminate U.S. chicken leg quarters
and paws, “cold turkey,” the
effect on the U.S. chicken
industry would be profound.
The price of leg quarters would
fall and paws would become
virtually valueless in the U.S.
Although chicken breast meat
would not be directly affected.
With the value of paws and
legs falling, breast meat would
Chicken production in Russia Ready-to-cook thousands of metric tons
Given the surging domestic Russian production of chicken, U.S.
exports to Russia are likely to diminish in the next several years
even without a trade dispute.
Current production levels combined with
reduced exports would soon lead the industry
into losses. The end result would be a drop
in production by approximately 4%. In other
words, the loss of Russia and China would
have an effect on the U.S. chicken industry
roughly similar to that of the 2009 recession,
the worst recession since World War II.
Alternative markets are the solution to this
scenario. Another possibility is that through
diplomatic channels the real causes are resolved. Since chicken is a particularly visible
manifestation of the U.S. (who would have
guessed?), it is a preferred target of retaliation
for slights real and imagined. The crisis may
blow over given the dif;culty of alternative
procurement on the part of Russia and China.
Finally, in some cases, U.S. chicken can ;ll
in for chicken which would now go to Russia
or China. In other words, some chicken may
follow a circuitous route to its destination. ■