China's chicken imports to drop, thanks to fallout from Brazil food safety probe

30.03.2018

China’s poultry imports will fall in 2018 for a second successive year, rather than setting an 11-year high, thanks to the setback from the scandal at Brazil’s BRF, the world’s largest poultry exporter.

The US Department of Agriculture’s Beijing bureau slashed to a three-year low of 300,000 tonnes its forecast for China’s chicken imports this year.

The downgrade took the estimate well below the USDA’s official forecast of 480,000 tonnes, which would be the highest since 2007.

And it reflected in part improved ideas for China’s output, seen showing a small increase, to 11.7m tonnes, rather than the fall to 11.0m tonnes the USDA has pencilled in, as the success of a vaccination programme against bird flu encourages domestic producers.

‘Cheating operation’

However, the bureau highlighted that its reduced import estimate was “largely due to limited supply”, thanks to a potential squeeze on shipments from Brazil, where BRF has become embroiled in the scandal over fraud in food safety checks.

BRF, Brazil’s largest chicken producer, this week put a further 3,000 workers on 30-day leave “due to the need to adjust production planning”, in the fallout from the arrest earlier this month of former chief executive Pedro Faria on charges that he and other executives knew of the food safety check evasion.

After being “caught up in a cheating operation… BRF has suspended operations at three of its large poultry meat export plants,” the USDA bureau said.

The outcome will be that China’s imports from Brazil “will drop this year.

“Since Brazil held an 85% market share in 2017, other major trading partners have limited production capability to fill the gap.”
 
Chile was the second-ranked origin for Chinese broiler meat imports last year, with a market share of 12%, with Argentina and Poland next on 3% apiece.

Prices rise

The cloud over BRF has come at a time when Brazil’s poultry exports to China were already overshadowed by Beijing’s launch of an antidumping probe into broiler meat imports from the South American country.

China accounts for 9.2% of Brazil’s chicken exports, according to Brazilian trade group ABPA.

Chinese authorities have this year approved seven Thai poultry plants for exports of frozen poultry products to the country, with several South Korean plants approved for shipment of chilled poultry meat.

Meanwhile, with demand for chicken reviving in China thanks to the apparent success of the vaccination programme in seeing off avian flu, prices of chicken have risen in the country to reach 8 yuan per kilogramme in January, according to Rabobank.

“Although prices dropped to 7.5 yuan per kilogramme in February, they were still 40% higher than the same period last year,” the major agricultural lender said in a briefing on Wednesday.

“Day-old chick prices increased to 3 yuan per bid, a huge jump from the level of below 1 yuan per bird seen in the same period last year.”

‘Doesn’t help too much’

In Brazil, by contrast, “in February, wholesale chicken prices were 14% below levels seen in February 2017,” Rabobank said, putting the price at R$3.22 per kilogramme.

“Meanwhile, on average, feed prices were 10% higher” year on year, dynamics boding ill for producer margins.

Martin Secco Arias, chief executive at Brazilian beef producer Marfrig Global Foods, on Wednesday, termed domestic chicken values “very cheap”, saying that “the situation at BRF… doesn’t help too much” in terms of price support.

“I imagine that most of the volume that they intended for Europe, for example, stays in Brazil,” he said, noting that weak prices of one protein, in attracting demand, tend to knock-on to values of rival meats too.

Marfrig itself has “a very good alternative” for its beef supplies, and that is “to go to the export” market, he added.


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