U.S. chicken company Sanderson Farms Inc. kicked off shipments to China after lifting last month's ban on American poultry supplies. The company sent its first crate of chicken feet to the mainland earlier since the ban in 2015.
Sanderson Farms is packing another 12 boxes this week, said, Joe Sanderson, Chief Executive. That's because the Asian nation still has American supply duties in place.
The third-largest U.S. chicken producer plans to abolish the 35 percent tariffs next year, which will help accelerate exports. Last month, China lifted its ban on U.S. poultry and subsequently authorized imports from 172 American plants.
Billion-Dollar Business
After an outbreak of highly pathogenic avian influenza, the Asian nation instituted the embargo in 2015 and retained the prohibition even after almost all other national prohibitions had been lifted. In fact, on November 25 the company started packing paws and on December 5 its Moltrie facility filled the first container for the month's delivery.
Sanderson said it hoped that Chinese tariffs would be lifted within 60 to 90 days following the signing in January of the Phase-One contract. That will help boost the sales of the product, the company said.
"I'd say they're making money on it," said Mike Cockrell, Chief Financial Officer of Sanderson. According to U.S. trade official Robert Lighthizer, poultry exports to China are expected to reach $1 billion a year.
Sanderson is offering chicken paws to China's private buyers and is already in negotiations on other cut-offs, the chief executive officer said. In the interview, he added that the company received inquiries about parts including whole legs, leg quarters and wings.
Chicken is the Answer
Sanderson will generate about 87 million pounds of chicken feet a year at full capacity, with exports to China taking advantage of the company's operating income at current prices by $71 million a year. When tariffs are abolished, which could be even higher.
"We are excited to be able to ship the commodity to China again and expect the material to benefit from the open market," Sanderson said in a call with analysts.
Chinese approval of cold storage facilities would rely on improving paw exports and selling other cuts, a change Sanderson expects to take place on December 25. While the company has so far avoided using cold storage, in order to ship larger quantities, this choice will be required.
The country is facing a shortage in protein supply due to the outbreak of African swine fever, which has already cut the hog herd by 40 percent in the world's biggest consumer of pork.
