Disease, not trade agreements, alters market
STATE COLLEGE, Pa. — Global poultry markets change mostly because of disease, not trade agreements or other provisions, according to James Sumner, president and CEO of the USA Poultry & Egg Export Council in Atlanta.
Sumner deliverd a presentation during a Reshaping Global Trade Via Diseases webinar as part of the 2020 Pennsylvania Poultry Sales and Service Conference on Sept. 15.
COVID-19 was both a blessing and a curse in how it influenced markets.
It created more demand for poultry from the U.S., even though big importers such as China delisted plants as part of their regional approach to dealing with COVID-19.
Back in November, U.S. Secretary of Agriculture Sonny Perdue signed a rule that had been on his predecessor’s desk for several years regarding cooked Chinese poultry, Sumner said. The China ban was not really based on high-pathological avian influenza but was “more politically based,” he said. When this agreement was signed, China immediately lifted its five-year ban on U.S. poultry.
China went toward regionalization. If another avian influenza, or A.I. outbreak would occur in the U.S., it would result in only a regional ban, not countrywide.
In July, U.S. boiler exports to China reached 241,000 metric tons.
“That was really beyond most of our imagination,” Sumner said. “It was 12 percent of the whole of our total broiler exports and 17 percent of the value.”
The COVID-19 pandemic severely impacted industry access into China markets.
“Back in June, we had the first U.S. broiler company banned from China and then, just this week, we had the second broiler company,” Sumner said. “China wanted our government to sign a self-suspension agreement. If any workers in any plants tested positively, we would voluntarily agree to stop shipment to China. Well, our government did not sign it; we didn’t want them to sign it. But it looks like China may be delisting some plants to punish us for not signing that agreement. We hope this does not continue.”
Jonathan Alexander Campbell, assistant professor, animal science at Penn State, noted that the parallel between what was happening with shutdowns because of a tuberculosis scare in the Chicago meat processing facilities in 1904 and COVID-19 today.
The concerns back then, as with a coronavirus today, centered on (now disproved) transmission of the tuberculosis bacteria into the food supply.
“The parallel of what happened 116 years ago and now is quite scary,” Campbell said.
There are 13 poultry plants around the world that have been delisted by China. Fortunately, only two in the United States were delisted (even though both have carefully instituted COVID-19 control measures with their employees). Plants included Tyson and OK Foods, both in Arkansas. It is uncertain why China is singling these out.
Sumner said: “We’re not sure exactly what to expect in the future.”
For broilers, Taiwan is the 3rd largest market in volume, an all-time high this year. U.S. has a 93-percent market share in Taiwan.
According to the USDA/Foreign Agricultural Service data, in 2013-14, the industry reached about $6 billion in U.S. poultry and egg export value.
“The greatest value of our exports is in broilers along with turkeys, eggs and other products,” Sumner said. “Broilers are our most valuable export.”
From 2018 to 2019, turkey exports in 2019 were up 4.6 percent in volume and 8.8 percent in value from 2018.
Broiler exports rose 0.5 percent in both volume and value. Exports of broilers continues to skyrocket.
“We are very close right now to our projected value for volume this year,” Sumner said.
Exports in 2019 were 3.4 million metric tons, up 5.6 percent from 2018, close to the record of 3.6 million metric tons in 2008.
“Depending on how China goes, we could actually come very close to that level,” Sumner said. “For a while we thought we were going to beat it.”
For the last several years, he said, Mexico has been the United States’ predominant broiler buyer (composing 19.1 percent of the market).
Because of A.I., “we have been banned from China for the last five years,” Sumner said. “That’s one of the reasons it’s particularly beneficial for our industry to be back in that market.
“We’re shipping about 19 percent of our volume to Mexico. From January to July, about 12 percent of our volume went to China.”
The export market got a little bit of a late start in China.
“We were dealing with the coronavirus there,” Sumner said. The first three months created a lot of problems.
“Had we had seven full months of exports to China, it is quite likely that China would be our No. 1 market, nosing out Mexico,” Sumner said.
Taiwan is another very important market and set a record this year. Export volume rose to Taiwan (7.9 percent of market) followed by Vietnam, which will also set a record (5.3 percent), according to Sumner.
“That comes despite the fact that those markets have been hindered by the same issues that we’re facing here in the United States with the coronavirus,” Sumner said. “But it’s been aided by the fact that they have not been able to consume the volumes of pork they’re accustomed to because of African Swine Fever.”
Cuba is the fifth largest market.
“We are basically the only U.S. agriculture that is being shipped to Cuba,” Sumner said. “They can buy chicken from us cheaper than they can any other place in the world, including producing it themselves.”
U.S. turkey exports increased 4.7 percentin volume and 8.8 percent in value from 2018.
“This year we’ve seen a bit of a drop-off,” Sumner said.
Part of that is due to a current drop-off in U.S. production capacities, some problems at plants and economic issues in our key markets, he said.
Sumner said that 65 percent of all U.S. turkey exports go to Mexico.
“That’s pretty much the market right there,” Sumner said. “China is coming on pretty strong for having the market a few months, followed by Canada, the Dominican Republic, South Africa and Jamaica. The Caribbean is one of the markets where we are promoting U.S. turkey.”
Disease losses taken in the last six years have still been costly to the industry, according to Sumner.
High-pathology A.I. affected prices starting in 2014.
“Overall, if you add together the export losses for broilers, turkeys, and eggs, it costs our industry over $4 billion in lost sales,” he said. “And that’s on top of more than $1 billion that our government spent trying to control and rid ourselves of avian influenza. That was just catastrophic for our industry.”
Sumner spoke about issues that remain with A.I., including small incidents in Indiana and in Tennessee.
“We thought we were pretty much rid of it until March and April of this year,” Sumner said. “It reared its ugly head again in South Carolina and North Carolina. North Carolina was low-path, South Carolina was high-path, and it caused real problems for our industry. As a result of the problems with South Carolina high-path, we lost markets to 49 different countries.
Most of these, about 39 of them, have been restored. About 10 are still in the process of being lifted. It’s been devastating to our industry.”
The concerns include the amount of time to clean and disinfect correctly, and it takes time, according to USDA’s Animal and Plant Health Inspection Service, or APHIS, protocols.
He said when the pandemic hit — as in the United States, cartons of eggs went flying off the shelves in Mexico, — it spurred consumer demand for U.S. eggs in Mexico and other countries.
Egg exports were up 2.4 percent in volume but down 10.2 percent in value. For January through July this year, egg exports were up 20 percent in volume and 12 percent in value.
“In all of my years, I’ve never seen egg exports take such a jump,” Sumner said.
The U.S. exports two types of eggs: shell eggs and processed egg products, including frozen liquid and powdered eggs.
Much of the increase can be credited to Mexico.
He said 37 percent of U.S. table egg exports are going to Mexico and “our organization, our staff down in Mexico, have really been working. It’s been pretty impressive. Table egg exports to Mexico for the first seven months this year actually reached 29 million dozen valued at more than $20 million, up 152 percent. A lot of that was actually because of coronavirus.”
Most ways the coronavirus has hurt us, but this way it’s helped us, Sumner said.
“Eggs started flying off the Mexican store shelves like they were here in the United States,” he said. “It was just very impressive. “Hong Kong has been up and doing well. Of course, China — with coronavirus and African Swine Fever — has been shipping less protein to Hong Kong. Normally China is the primary provider of eggs to the Hong Kong market.”
Unfortunately, he said, Canada is not going to be much of a growth market in the future. According to the USDA Food Safety and Inspection Service, currently, Canada and the Netherlands are the only countries where plants are eligible to export egg products to the United States.
We have seen a tremendous increase in exports to Japan, Sumner said, primarily due to the revised pre-trade agreement with that country, which has lowered the duties and made the industry more competitive. Exports January through July are $3 million, up 30 percent in value, thanks primarily to this free-trade agreement.
What affects export markets the most?
“It’s not trade agreements (and) it’s not the World Trade Organization,” Sumner said. “It’s actually animal disease that has the most impact on trade. And that’s not just this year; it’s been as long as I can remember.”
Swine fever impact
When African swine fever broke out four years ago in many Asian countries, and China instituted bans on pork exported from other countries, demand for poultry skyrocketed as consumer’s need for protein was met by international poultry producers.
“You cannot open these export markets until (about) 90 days after cleaning and disinfecting,” he said. “We found, for example, in North Carolina, where we had the low-path, it took several extra months to get those premises clean. We’re working and encouraging APHIS to take another look at this.”
The other disease that has had a huge impact on the poultry industry is African Swine Fever, or ASF, in Africa, Asia and Eastern Europe. There is no indication this disease is going to go away soon, Sumner said. There is no effective vaccine.
The total number of pigs lost to ASF worldwide since 2016 stands at more than 8.2 million head in 60 countries. Since August 2018, when ASF was first detected, China’s pork production dropped by 21% from 54 million tons to 43 million tons in 2019. In the first half of 2020, it fell again by 29% year-on-year to 10 million tons.
This has caused pork prices to rise by more than 100 percent in the past two years, creating opportunity for poultry consumption to rise as an economic alternative. China has banned all pork from Germany, the third largest pork producer, because of a positive ASF finding in a wild boar.
AFS has been very detrimental to the pork industry globally, but it created an amazing shortage of protein, Sumner said. Many countries were dramatically affected, especially China, which the United States was able to take advantage of with the pork and poultry industries.
“As long as I’ve been around, pork has been the most consumed meat protein in the world,” Sumner said. “Thanks to ASF, poultry has now surpassed pork consumption. We hope that poultry can remain the No. 1 consumed protein around the world.”
Regarding Virulent Newcastle Disease, or vND, between May 2018 and May 2020, the USDA confirmed that 476 premises in California were infected, including four commercial plants.
“This has been another disease that has been a problem for us, (but is) pretty much restricted to California,” Sumner said. “We were pleased to be able to announce we have eradicated vND from California, which will permit more trade in the future.”
Another concern for the industry is egg-drop syndrome, or EDS. According to poultryhub.org, EDS is caused by a viral infection in laying hens, characterized by production of soft-shelled and shell-less eggs in apparently healthy birds. EDS leads to a sudden drop (10-40 percent) in recorded egg production or a failure to achieve a normal peak in production.
Pennsylvania was identified with cases of egg-drop syndrome, detected back in July.
APHIS experts realized a little-known agreement that we had with Cuba, which prevents the U.S. from shipping to Cuba if there is any sign of EDS in the U.S., Sumner said.
“This detection here in Pennsylvania disrupted U.S. exports to Cuba for at least two weeks,” he said. “When you ship $10 million a month to Cuba, which is about our average, it was costly to our industry. We’re hoping that we can deal more effectively with EDS in the future. We’ve worked out an agreement with the Agricultural Research Service. They are doing research to demonstrate that EDS is not transmissible in frozen poultry. We hope that we can use that information to prevent Cuba from imposing any bans in the future. The only way we could get around this problem was to agree not to ship any poultry from Pennsylvania to Cuba for the foreseeable future.”
The United States-Mexico-Canada Agreement, or USMCA, a successor to the North American Free Trade Agreement, became effective this summer.
“We were glad to see it resolved,” Sumner said. “It had no implications for U.S. poultry or egg exports into Mexico. We had already had a free and open market.
“It did have an impact on our exports to Canada. We ended up changing the type of agreement that we have with Canada. Unfortunately, it’s going to result in a very slight reduction in exports of broilers and turkeys to Canada. We don’t think it will affect eggs much.”
The U.S. Poultry & Egg Export Council, a nonprofit trade association, has a staff of 15 in Atlanta with about 14 different offices around the world. USAPEEC members account for more than 95 percent of all U.S. poultry and egg exports. For more information, visit www.usapeec.org.