China hits Brazil broiler chickens with anti-dumping deposit

FILE PHOTO: Chicken are pictured at a poultry factory in Lapa city, Parana state, Brazil, May 31, 2016. REUTERS/Rodolfo Buhrer

BEIJING (Reuters) – China will impose temporary anti-dumping measures on Brazilian broiler chickens from June 9, the commerce ministry said on Friday, after finding in a preliminary ruling that its domestic industry has been substantially damaged by the imports.

Local firms buying Brazilian chicken will be required to pay deposits ranging from 18.8 percent to 38.4 percent of the value of their shipments, the ministry said in a statement. The measures cover products supplied by top Brazilian exporters JBS and BRF .

Brazil accounted for more than 50 percent of broiler products supplied to China, the world’s No. 2 poultry consumer, between 2013 and 2016, the commerce ministry said when it announced a probe of the imports last August.

“During the period of damage investigation, the quantity of imported products and market share from Brazil have continuously increased, and the prices of similar domestic products have been drastically reduced, causing serious damage to domestic industries,” the ministry said on Friday.

It added that while there was a positive trend in some areas of the domestic industry, selling prices and profits fell, and stocks increased, with the industry losing money.

The findings and the anti-dumping measures will be another blow to Brazil and its poultry exporters, which are still recovering from the fallout of a food safety scandal.

Last month, top global chicken exporter BRF said rising grain prices and trade bans in key markets have stymied management efforts to return the company to profit.

The probe’s findings also come as the United States pushes to regain access to the Chinese poultry market as part of ongoing trade talks.

Analysts were not surprised by the decision, although noting it is still an initial ruling and could change.

Brazilian exporters should be able to absorb the impact, particularly for chicken feet, which would otherwise have no value, said Pan Chenjun, senior analyst at Rabobank.

“China is not the most important market (for Brazil), but in value it’s quite important as it takes all the byproducts,” she said.

Of the 29 Brazilian companies named by the ministry, deposit rates on products from JBS and Seara Comercio de Alimentos Ltda are 18.8 percent, BRF products have a deposit rate of 25.3 percent, and shipments from C.Vale – Cooperativa Agroindustrial will be charged at 38.4 percent. Imports from all other unspecified producers will also be hit with the highest rate.

Pan expected importers to negotiate with suppliers to share the deposit fees.

Broiler prices in China have significantly recovered since last year, when they fell to decade-lows after hundreds of people died from contracting the H7N9 bird flu virus.

Farmgate prices of live chickens in eastern Shandong province , the country’s biggest producing region, are around 8 yuan ($1.25) per kg, up substantially from last year’s low of 3.5 yuan per kg.

Li Jinghui, managing director of the China Poultry Association, declined to comment on the news. An official at the China Animal Agriculture Association also declined to comment.

JBS and BRF representatives in China could not be reached.

It is not clear what will happen to shipments already on the way to China. An anti-dumping deposit levied on sorghum from the United States in April caused chaos in the grains trade, with dozens of cargoes stranded as importers tried to resell to other markets to avoid paying the tariffs.