Poultry Market Update for the week of 9/26

· WOW! white meat is STINKY with a capital ‘S’.

· Breast meat and somewhat tenders are very weak this week’s ship.

· Wings are the ONLY item that is good, and good is an understatement. They are actually HOT!

· Dark meat seems steady, but hard to believe that thigh meat can stay that way considering breast meat is so weak? Most likely going into October, thigh meat should back off some.

· Although some interesting news is surfacing with China, and how the U.S. is seeking a fair trade with US exports into China. This will take a few months to resolve, but should help dark meat immensely.

· Corn is still relatively high and loses continue to mount the poultry industry, something will give in the next couple of months, most likely more sustained cutbacks and more bankruptcies should control the supply chain for higher prices soon…the sooner the better.

China to the US Chicken Industry: Pay Taxes on Your Chicken

Today China made an official ruling that for the next five years, US chicken producers can expect anywhere from a 4-30% tax on any chicken parts or uncooked birds they expect to import into China. Here is a list of the major US producers and the tariffs the Chinese government has imposed:

• Tyson Foods Inc. 12.5 percent duty
• Pilgrim's Pride Corp. 5.1 percent
• Perdue Farms Inc. 7.4 percent

While China claims that U.S. producers benefit from government subsidies that disadvantage Chinese competitors, analysts are just calling this another shot in the ongoing trade war between the US and China. Currently the US is responsible for about 70% of China's imports.

Why are the rates different for each company? The "official" reason, given by China's Commerce Ministry, is that the duties were based on alleged US subsidy rates- meaning how ever much money the Chinese government thinks the US is giving each chicken company to help cover the costs of producing and exporting chicken, the Chinese government will charge that company in taxes.

Further Reading:
The AP release on the situation
The Times of India has an in depth report

China To buy More Corn

In a decision that is being heralded as "a new era", Shanghai JC Intelligence Co's chairman Hanver Li announced that China intends to import as much as 15 million tons of corn by 2015. The nation, who has not imported a significant amount since 1996, sites cultural changes such as higher incomes and a larger demand for milk, meat, and eggs, as the reason for this policy change.

BlogginsStocks.com expands on the possibilities this announcement opens for the US and for the world grain market:

The logical place for China to turn to for its corn purchasing would be the U.S. We have an oversupply this year. Exports to China will help stabilize prices, not only for this year, but for the next five years.

Currently, about 20% of the U.S. corn crop goes into the production of ethanol. If we combine China's buying and the growing need to use corn for ethanol, we can look for higher prices. So far, corn has rallied 8.4% since April 27 when the United States Department of Agriculture (USDA) announced China's first purchases.

Further Reading:
Sf Gate: Corn May Gain on Speculation China's Import Demand Will Surge
Bloomberg on The New Era