Business Strategies / Proteins

China Trade Reversal to Spike Poultry Prices

By Pan Demetrakakes, Senior Editor

Nov 01, 2019

U.S. poultry processors are poised to take advantage of a potential surge in purchases by China, which is ending a four-year-old ban on American chicken imports.

Negotiators announced on the last weekend of October that China had agreed to allow U.S. poultry into the country in return for the U.S. accepting cooked chicken and seafood products from China. It was a rare lull in the ongoing trade war between China and the Trump administration.

China instituted a ban on U.S.-sourced chicken in 2015 after an outbreak of avian flu. Now, however, China is being gripped by an epidemic of African swine fever. The disease, which has yet to appear in North America, has wiped out an estimated 40% of China’s hogs. China is casting around for replacements for pork, its most popular source of protein.

Stock prices of the three largest U.S. poultry processors rose between 4.6% and 16% on Oct. 28, the first business day after the agreement was announced.

If China does start importing American chicken, overall U.S. chicken exports are not expected to rise, since shipments to China probably will be diverted from smaller markets. But chicken prices, which dropped roughly 20% worldwide in 2015 after the Chinese ban, would undoubtedly go up, with most of that increase going to poultry processors.

“Whether the United States is a direct supplier to China or whether they source from other countries to the extent that they can…that creates backfill opportunities for us,” Tyson Foods CEO Noel White said in remarks quoted in the Wall Street Journal.