Chicken war with US – prelude to new era of free trade

Chicken war with US – prelude to new era of free trade

Vietnamese farmers are crying foul now that the nation’s markets are inundated with cheap US chicken and they fear that not only the industry but their way of life are threatened.

So far this year, the nation’s retailers and wholesalers have imported about 70,000 metric tons of chicken parts consisting mainly of thighs (55.9%), wings (22.7%), feet (5.7%), and breasts (0.3%).

Huge losses

Over half of the imports originated in the US for which prices are 30%-50% lower than domestic farm raised chicken. For example, US chicken wings have been reported as selling for just US$1 per kg (equivalent to VND22,543).

For comparison purposes, the price of wings from Brazil and Argentina are selling in Vietnam at US$1.9 and US$2.1 per kg, respectively, which are significantly higher than the US prices and more in line with the domestic market.

The lower US prices have forced domestic farmers to drop their selling prices and since early this year, the price of whole chickens has been hovering around just US$1.06 (VND24,000) per kg, far below the cost to raise them.

In many cases farmers are losing as much as US$.53-.67 (VND12,000-15,000) per whole chicken and the full-fledged chicken war has caused as many as half the farmers in the industry to cut back production.

Some estimates put the total loss to the industry collectively for the past year in the tens of millions of US dollars with losses continuing to mount at the rate of US$3.7- US$4.2 million per month.

A representative from the Vietnam Poultry Association said its analysis shows that US producers are dumping chicken parts in the market at essentially breakeven prices for which Vietnamese farmers can’t compete.

Anti-dumping investigation of US chicken

The Animal Livestock Association of the southeast has performed preliminary investigations into the sales prices of chicken in the US market, noting chicken prices generally range from US$3.5-4 per kg, though some less preferred cuts have sold for as little as US$1 per kilo.

If one were to factor in shipping costs from the US to Vietnam and other ancillary costs related to packing and transport it would appear that the sales prices in Vietnam are much too low, a spokesperson for the association said.

The association, which represents more than 3,000 farmers in Ho Chi Minh City and nearby provinces like Binh Duong and Dong Nai, announced last week that it was preparing to file an anti-dumping lawsuit against US exporters of frozen chicken and chicken parts.

Dubious quality

Asked for other possible reasons why the US chickens are so cheap, the spokesperson said it could be related to their quality or the proximity to their expiry dates and thus the price has been reduced.

Another scenario is that distributors may have had large inventories of chicken in stock related to the bird flu outbreaks and decided to sell their products at cheaper than usual prices to reduce the huge inventory.

It should also be noted that many chicken farms in the US are not just huge; they are massive, many producing tens of thousands of chickens per year. Thighs, for example, are abundant and cheap in in the US where consumers prefer breasts.

No one seems to be quite certain what has caused the cheap US chicken to flood the Vietnam market.

However in this new era of free trade one thing that for certain— is that the Vietnam agriculture group of industries as a whole should brace for frequent trade disputes and be prepared to defend their turf.

vietnamnet