U.S. Poultry Industry

Written By Brian Hicks

Posted July 11, 2009

It looks like we have an international game of "chicken" on our hands. . . and it could cost the U.S. poultry industry dearly.

If it’s not our "protectionist" views, the trillions we owe, or a weak dollar that’s got China squawking, it’s chicken.

That’s right. Even we couldn’t have predicted poultry would be at the center of a "boiling" controversy.

But this trade war isn’t a first.

China has been crying over "protectionism" for quite some time. Days ago, for example, the U.S. International Trade Commission recommended punitive duties of up to 55% on low-cost Chinese tire imports because they were "disrupting" the U.S. market. Days later, the House approved legislation that would curb greenhouse gas emissions with a provision that would impose tariffs on goods from countries not meeting U.S. standards.

And now, thanks to our latest spending bill, the USDA will no longer accept poultry products from China on the idea that Chinese chickens don’t meet our health and safety standards.

And it’s got the Chinese — who depend on exports — clucking mad.

As a result, China claims we’re making protectionist moves and unfairly targeting China’s imports. And it’s fighting back by banning American poultry imports, although China says this isn’t the case.

Though, if true, it’s to the chopping block for the American poultry industry, which is already suffering from lower demand, higher production costs, and an oversupply of chicken.

You see, China is a big market for U.S. chicken feet, which brought in $280 million in 2008. Without that market, most of the feet would have to be "processed into feed or other non-food uses," which brings in less money to the U.S.

Tyson Foods (TSN:NYSE), for one, could lose a substantial portion of the market over the next six months, considering China is a huge market for U.S. chicken.

And, if the ban continues beyond September 2009, earnings for companies like Tyson and others could get hit hard. It’s part of the reason why industry groups are asking Congress to amend the House appropriations bill to remove Section 723, which "limits Chinese chicken from entering the U.S."  Unfortunately, the most likely opportunity to make that change will be during the conference committees between the Senate and the House in September.

We’re looking to go short these and other companies shortly in Options Trading Pit.

Enjoy your weekend,

Ian L. Cooper

P.S. In case you missed any of our top stories from Wealth Daily and our sister publications, we’ve included them here:

Consumer Debt Struggles Reach New Heights: Delinquencies Rise Across the Board
Late payments on home-equity loans rose to a record in the first quarter, as 18 straight months of job losses and a slumping economy left more borrowers unable to pay their debts, the American Bankers Association reported.

Dennis Kneale: an Idiot?: Foot in Mouth Disease Strikes Again
Could it be that bearish views from the likes of Nouriel Roubini are too spot on, too scary for CNBC to report to the naïve believers in Cramer’s, Kneale’s or Kudlow’s abysmal "bottom" theories? Could be.

Marine Energy Companies: UK Marine Energy Gets a Big Boost
While it’s true alternative energy has developed in fits and starts over the past several decades, marine energy seems to have been especially susceptible to the ebb and flo of opinion and policy. But the United Kingdom — a world leader in offshore water-driven power — just signalled that the tide is back in for marine energy companies.

Time to Check out of This Troubled Sector
Struggling hotel REITs are only one part of the rickety tower in commercial real estate these days. Unfortunately, it’s only a matter of time before the whole sector comes tumbling down. But that doesn’t mean you have to be just a bystander to it all. Steve’s identified 4 ways to earn big profits as it happens.

When to Invest in Oil: Oil’s Next Buying Opportunity Is Here
We’re at a critical junction for oil prices. If oil prices continue falling, we’re going to be right back where we started. More projects will be shelved, and future supply will be put on hold. We’ll simply end up with another supply crunch from the lack of new investment.

Investing in Renewable Energy Companies
The doubters are still out there, those who question the validity of renewable energy. . . those who think it’s government-sponsored. . . who think it’s not scalable. Or even worse, those who think it’s not profitable. If you’re one of them, you’re wrong. Plain and simple.

The Shrinking Value of the U.S. Dollar: The $15 Trillion Scam
The US government and Federal Reserve would like you to believe the US dollar has inherent value. That it’s stable, that it’s a store of value, and that it is (and will always be) the world’s preferred currency. But, as more and more people are learning everyday, that is all just a fairytale. . . a fantastic misrepresentation of reality.

Angel Publishing Investor Club Discord - Chat Now

Brian Hicks Premium