U.S. Poultry Trade: Opportunities and Challenges

Governor’s Conference on Agricultural Trade

Richmond, Virginia March 7, 2014

Jim Sumner, President USA Poultry & Egg Export Council

U.S. Poultry Trade: Opportunities and Challenges

Topics in today’s presentation:

USAPEEC, IPC, UIPDP, and their Missions

An Overview of U.S. Poultry Exports

Challenges and opportunities facing U.S. poultry

exports

USAPEEC, IPC, UIPDP, and their missions

USAPEEC and its Mission

The USA Poultry & Egg Export Council (USAPEEC) is a non-profit trade association whose members account for more than 95% of all U.S. poultry and egg exports. USAPEEC exists for the purpose of increasing U.S. poultry & egg exports by protecting, opening and developing markets throughout the world and by serving as the industry’s voice on trade policy issues.

USAPEEC Locations

Mexico City

Monterrey

Hong Kong

Singapore

Moscow

Beijing

Central Asia

Shanghai

Tokyo

Seoul

Middle East

South Africa

Europe

Based in Stone Mountain, Georgia, USAPEEC has 13 international offices in major export markets:

USAPEEC Membership

Processors 48

Trading Companies 89

Commodity Groups (corn, soybean groups)

15

Associate Members (shipping, cold storage, port authorities, etc.)

71

Total 223

The International Poultry Council

IPC was formed in October 2005 to bring together poultry industry leaders from around the world to address issues of trade, science, and improved relations among nations.

Recognized by OIE, FAO, and CODEX.

Address: 184, rue du Luxembourg 47-51 bte 2

1050 Brussels, Belgium

IPC Mission

To strengthen communication between countries, develop and implement policy for international organizations affecting the world’s poultry industry and to promote a common understanding of and confidence in poultry products throughout the world.

IPC Current Membership

Argentina*

Australia

Brazil*

Canada*

Caribbean

Chile*

China*

Colombia

Denmark

Egypt*

EU*

Germany

Honduras

Italy

Mexico*

New Zealand

Nicaragua

Nigeria

Panama

Russia

South Africa

Thailand*

Turkey *

United Kingdom

United States*

Currently 25 members, accounting for about 90 percent of world poultry production.

* Founding charter members

IPC Member Benefits

IPC provides a forum for countries to work together on common issues.

IPC is the global poultry industry’s only voice before the OIE, FAS, WHO and CODEX

IPC promotes the benefits of free and open trade.

UIPDP (U.S Poultry Foundation)

Utilizing proceeds of an industry-supported joint venture to keep the Russian market open, we have established a $20 million charitable foundation.

UIPDP Mission

UIPDP works with poultry and egg producers, processors and regulators in emerging nations to enhance food safety, sustainability and promote economic development and consumer acceptance of poultry products.

UIPDP Focus

Healthy and safe poultry benefits the entire world’s poultry industry and promotes trade. We see opportunities through education in:

Animal disease prevention

Food safety standards

Bio-security practices

Best management practices

“A rising tide floats all boats.”

Current Focus of Activities

China

Ghana

India

Myanmar

Vietnam

Haiti

An Overview of U.S. Poultry Exports

U.S. Poultry & Egg Export Value (In million U.S. dollars)

Source: USDA/FAS

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,00019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

13

Table egg & egg productsOther poultryTurkey ValueBroiler Value

Total export value in 2013 was $5.9 billion, up 2.5% from 2012

U.S. and Brazil: Top Broiler Exporters (In 1,000 metric tons)

3,741 3,690

1,131

538 411 330 140 93

1,366

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Braz

il

USA

EU-2

7

Thail

and

China

Arge

ntina

Cana

da

Chile

ROW

2008 2009 2010 2011 2012

Source: Global Trade Atlas

About 2/3 of World Broiler Exports are from Brazil & USA

Canada

1.3%Chile0.8%

Argentina2.6% ROW

12.3%

Thailand4.3%

EU-279.8% USA

31.9%

Brazil33.4%

China3.6%

Source: Global Trade Atlas

Average Share in 2010-2012

Globalization of the Industry: U.S. Broiler Production Share Decreasing

16.4%

3.5%

29.8%

21.6%

11.9%

2.8%

15.0%

28.9%

20.0%15.9% 15.1%

11.5%

4.0% 3.6%

0%

5%

10%

15%20%

25%

30%

35%

40%

USA China Brazil EU Mexico India ROW

20092010201120122013

Source: USDA/FAS

Nearly ¼ of U.S. broiler production now owned by foreign companies. 22% owned by Brazilian companies (Pilgrim’s Pride and Keystone)

U.S. Broiler Exports-A Changing Landscape

China19.9%

Russia20.5%

Mexico10.4%

ROW36.1%

Cuba4.1%

Hong Kong4.6%

Iraq 4.5%

=

Hong Kong4.7%

Angola5.7%

Canada4.6%

ROW52.2%

Russia7.6%

Mexico17.5%

China7.7%

2013 2009

Broiler exports in Jan-Oct 2013 up slightly year over year. In 2009, top two markets comprised over 40% of total exports; now the top 4 markets comprise less than 40%

Share of U.S. Broiler Production Exported

20.8%21.4%

20.4%

21.7%

3.1%6.0%

0%

5%

10%

15%

20%

25%

30%

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: USDA/FAS

Percentage of Production Exported

1990 2000 2010 2013

Broiler 6.0% 17.3% 19.8% 20.8%

Turkey 1.6% 8.4% 10.5% 13.1%

Eggs 1.5% 2.5% 3.1% 5.1%

Poultry & Egg Exports in Corn and Soybean Equivalents

328

161

050

100150200250300350400450500550

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

mill

ion

bush

els

Corn Soybean

An equivalent of 330 million bushels of corn and over 160 million bushels of soybean in 2013, greater than corn production in Michigan and soybean production in South Dakota, respectively.

U.S. Broiler Export Markets: Developing vs Developed Economies

0500

1,0001,5002,0002,5003,0003,5004,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

1,00

0 m

etri

c to

ns

Developing Economies Developed Economies

U.S. Broiler Export Markets by Region (In 1,000 metric tons)

407 341 336168 118 85 41

149

521669

806

0

200

400

600

800

1,000

1,200

1,400

North A

merica

East A

sia

Former S

oviet U

nion

Sub-Sah

aran A

frica

Caribbea

nMiddle

East

Southeast

AsiaCen

tral A

merica

South Ameri

caOce

ania

ROW

20092010201120122013

Source: USDA/FAS

02468

10121416

1960

1965

1970

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

(p)

mill

ion

tons

pork Broiler beef

Source: USDA/FAS

U.S. Consumption: Broiler vs. Beef and Pork

02468

101214161820

1960

1965

1970

1975

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

(p)

mill

ion

tons

pork broiler beefSource: USDA/FAS

U.S. Production: Broiler vs. Beef and Pork

Top U.S. Broiler Export Markets (In 1,000 metric tons)

282 276 207 172 169 165 139 129 86

1379

637

0

200

400

600800

1,000

1,200

1,400

1,600

Mex

ico

Chi

na

Rus

sia

Ang

ola

Hon

g K

ong

Can

ada

Iraq

Cub

a

Taiw

an

Geo

rgia

RO

W

20092010201120122013

Source: USDA/FAS

Source: USDA/FAS

USA and China: Top Chicken Consumers (2013)

13.7 13.4

9.3

1.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

mil

lion

ton

s

USAChinaEUBrazilMexicoRussiaIndiaJapanSouth AfricaArgentinaIndonesiaTurkey

Source: USDA

Opportunities for Increased per capita Broiler Consumption (2013)

44.2 42.5

26.0

18.7 17.0

9.96.17

2.80

10

20

30

40

50

Kil

ogra

ms

BrazilUSAArgentinaSouth AfricaMexicoColombiaRussiaGuatemalaEUJapanChinaIndonesiaIndia

Note: USA has highest per capita poultry consumption (including turkey).

USA & EU: Top Turkey Producers

ROW2.3%

USA48.7%

EU-2736.7%

Brazil9.4%

Canada3.0%

Source: USDA/FAS

Average in 2011 -2013

USA is Top Turkey Exporter in the World

362

172 159

25 26 130

50

100

150200

250

300

350

400

USA Brazil EU-27 Chile Canada ROW

1,00

0 M

T

2008 2009 2010 2011 2012

Source: Global Trade Atlas

2013 Turkey Exports Set Record in Value

0100200300400500600700800

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

1,00

0 M

T

$0$100$200$300$400$500$600$700$800

mill

ion

US$

Quantity (left axis)Value (right axis)

Source: USDA/FAS An average annual growth of 6.2% in volume and 9.7% in value in the past decade ending in 2013.

Share of Turkey Production Exported

13.1%

0.9%

10.6%

1.6%

12.3%

13.5%

0%2%4%6%8%

10%12%14%16%

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: USDA/FAS

Top U.S. Turkey Export Markets (share of export quantity)

26.0%

54.1%

12.6%

3.1% 2.2% 2.1%0%

10%20%30%40%50%60%70%80%

Mexico China Canada Philippines Japan ROW

2009

2010

2011

2012

2013

Source: USDA/FAS

Challenges and opportunities facing

U.S. poultry Exports

USAPEEC’s Focus Has Changed Over Time

In 1990, USAPEE’s primary function was promoting US poultry and eggs around the world

Today, our major focus is addressing unfair trade restrictions around the world.

While many are protectionist in nature; we see a growing number targeting poultry in retaliation for US government policies

Major Issues Addressed - 2013

Mexico: AI crisis, MSP, anti-dumping case

China AD/CVD Duty issue, delisted status

Russia: actopamine issue, Plant audits

Canada: TPP

Central America: Purge issue with leg quarters, random Salmonella testing

Philippines: high safeguard duties

South Africa: Antidumping (AD) Case

Australia/ New Zealand: Limited access

Malaysia: Halal

Egypt: Halal, chicken Parts not allowed

Saudi Arabia: all-vegetable feed certification

EU: anti-microbial treatments

Egg Products: Certificate for cooked products

Anti-Dumping Cases have been our industry’s biggest nightmare

South Africa launched AD investigation against U.S. bone-in chicken cuts in 1999. Despite absence from market, every 5 yrs since, SA has renewed prohibitive margins. Challenging under AGOA.

Because US didn’t challenge S. Africa, we feel all the other cases followed:

Ukraine brought AD case against US in March, 2009, at request of MHP. After USAPEEC visit, in Oct. 2010, Ukraine dropped the case.

China launched AD/CVD investigations in Sept. 2009. (Based primarily in retaliation for tires and cooked poultry access)

Mexico’s Bachoco brought case in February 2011. USAPEEC has appealed to NAFTA panel and is awaiting review.

WTO’s Ruling on China’s AD/CVD Case

At our request, US took this case to WTO and in August, 2013, the WTO dispute settlement panel found in favor of our industry on nearly all U.S. claims.

China is now conducting a re-investigation and has promised to render its disposition on July 9, 2014.

While the decision will hopefully result in some reduction of the near-prohibitive duties, it may not totally eliminate the AD duties.

WTO outcome against China should strongly influence the Mexican NAFTA panel. Subsidization.

U.S. Broiler Exports to China

708

96

0

200

400

600

800

1,00020

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

13

1,00

0 M

T

$0

$200

$400

$600

$800

$1,000

mill

ion

USD

Quantity (left axis) Value (right axis)

Source: USDA/FAS

Exports to China in 2009 accounted for 20% of U.S. total exports, but due to the AD/CVD duties, the share was 8% in 2013.

In 2007, China imposed ban on poultry imports from Virginia due to a finding of LPAI. Bans also exist for Arkansas, Wisconsin and New York.

This ban, which also includes shipments of poultry

transiting Virginia, has lingered for years and industry sources feel this is likely related to other trade issues between the two countries.

MOA requested samples of the AI virus for further analysis

in China, but until recently USDA has been reluctant to share the samples.

Chinese Ban On Virginia Poultry

USDA’s stance changed last year after China successfully battled several local incidents of AI. Subsequently, USDA did provide samples of the Virginia virus to MOA, but not until last fall after various complications.

In March 2012, USAPEEC and APHIS co-hosted a Chinese gov’t delegation to Virginia, in cooperation with Virginia Department of Agriculture and Consumer Services (VDACS).

Additionally, thru efforts of Virginia Poultry Assn., former Gov. McDonnel, VA congressional delegation, Secretary Haymore and many others have been fully engaged.

Unfortunately, no known action by US or state government entities can

be counted on to expedite this process. The decision lies solely within the Chinese political process.

Chinese Ban On Virginia Poultry

U.S poultry not allowed to enter the European Union since 1996, due to use of antimicrobial treatments in processing.

Russia has put in place numerous non-science based restrictions on US poultry through the years.

Many countries ban imports based on zero tolerance policy for Salmonella and other pathogens.

India bans US poultry due to Low Path AI while India has

High Path AI Some countries, such as Indonesia, Egypt, Nigeria, don’t

even use an excuse, they just don’t allow

Numerous trade restrictions aginst US poultry

When actually it’s the rest of the world with all the Food Safety Issues

Animal diseases such as AI impact trade

While earlier AI consumer scares have subsided, incidents of HPAI are on the rise….Asia, Africa, India and Europe.

U.S., South America, Australia remain free of HPAI.

In Asia and Africa, the prevalence of backyard flocks and the inability of governments to implement appropriate control measures could spell a major production disaster.

Even though OIE says trade should not be restricted on basis of LPAI ….many countries still restrict trade……China, Taiwan, Philippines, Kuwait, Cuba, Russia and India…….

Source: FAO/Global Animal Disease Information System

HPAI Outbreaks in the last 12 Months (from March 2013 to February 2014)

Source: FAO/Global Animal Disease Information System

NAFTA, CAFTA, Panama and Colombia FTA’s have been a major benefit.

TTIP would be great, but with all the SPS issues, we have low expectations

TPP’s biggest benefit would be Canada

We have our concerns with TPA approval

U.S. Trade Policy Has Certainly

Benefited U.S. Poultry Exports

World Poultry Exports in the Next Decade

468

101214161820

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

mil

lion

ton

s

World poultry exports in the next decade are predicted to increase at an average annual growth rate of about 3 percent.

Positive Outlook for US Poultry Exports U.S. (and Brazil) is in key position to continue to

dominate global exports.

We have: • Lowest cost/ highest quality feed supply

• Best Bio-Security practices

• Most reputable government bodies

• Growing global demand for low cost protein

• A crop of well-educated and enthusiastic number of college graduates anxious to make a difference

Thank you