Rising meat consumption draws U.S. companies to China

China produces and consumes the largest amount of pork in the world, but an increase in demand for meat - particularly chicken - has prompted some U.S. companies to set up shop overseas.

Tyson Foods Inc. and Cargill, based in Arkansas and Minnesota respectively, have established production plants in China.

'Meat production has been rising in China for three decades already,” said Fred Gale, a senior economist for the U.S. Department of Agriculture. 'We anticipate that it's going to continue growing as people change their standards and include more meat and poultry in their diets.”

China, traditionally a farming country, has been experiencing mass rural to urban migration since the late 1980s. The switch from small-scale agrarian production to more industrialized agriculture has correlated to a change in diet as well.

'An urbanized consumer doesn't produce their own food, so they'll need to eat more processed foods,” said Peter Goldsmith, a food-marketing professor at the University of Illinois at Urbana-Champaign. 'With urbanization and increasing incomes, Chinese consumers have shifted to meat. They ate a lot of pork, but now they are increasing consumption, particularly in the area of poultry.”

Goldsmith said chicken is the newest and fastest-growing protein in terms of mass consumption because of its low cost, transformability and availability.

Tyson has three poultry operations in the country.

However, Gary Mickleson, director of public relations at Tyson, said business has not been profitable yet.

from hatchery To slaughterhouse

The company plans on investing in a fully integrated poultry business in China. That would mean Tyson would have complete control of the chicken industry from production in the hatchery to processing in slaughter facilities. Two of the three Tyson plants in China are fully integrated, according to a company fact book.

While meat consumption is expanding in foreign markets, it has reached its peak in the United States because of stagnant population and income growth.

Last year, China accounted for 16 percent, or $14.4 million, of Tyson's international chicken sales.

'Consumers in China want to eat chicken, and you don't have to do a whole lot of product development,” Goldsmith said. 'You just open another KFC and boom, people are eating chicken.”

Goldsmith said Tyson also is a supplier to other food industries, retailers and branded companies. For example, Tyson has a partnership with KFC and serves as one of the chain's suppliers. Tyson partners with Chinese companies, too.

'Tyson brings in the technology, and the Chinese company brings in information about the market,” Goldsmith said. 'When it's branded, (the product) might not even say Tyson. It will say a Chinese name.”

Cargill, another major U.S. meat company, introduced a $350 million chicken operation in China last year. The operation, which includes a hatchery, feed plant, broiler barns and processing plant, is estimated to produce 65 million birds each year.

The company has built roads, installed gas lines and established an electrical grid in its Anhui, China, location, which provides poultry for food operations such as McDonald's and Yum Brands.

Officials from the Cargill team in Asia declined to comment for this story.

Millions of pounds of Pork exports to China

Most of the meat market in China still is occupied by Chinese companies, Gale said. Nonetheless, food safety concerns - such as last year's outbreak of the avian flu - have led businesses to look for larger companies that control their own farms. That creates an opportunity for U.S. companies.

'On the one hand, you'd like to support small holders, but small holders also means lots of middlemen, lots of handling of the product, which means you're going to get a lot of exposure and opportunity for food safety breach,” Goldsmith said.

He added that the United States is importing its model of integration and coordination, meaning contracting with larger-scale chicken producers and using feed that is traceable and tested.

Joe Schuele is director of communications for the U.S. Meat Export Federation, a trade association that represents companies exporting pork products. Schuele said China is a substantial buyer of non-muscle cuts such as pig ears, intestines and feet.

'China produces and consumes about half of the pork in the world,” Schuele said. 'About 95 percent of pork is produced domestically, however, because of the magnitude of the industry in China. When they do have fluctuations in their supplies, that creates big opportunities for other suppliers.”

Last year, the United States exported $903 million in pork to China, but Schuele said this year it would be less because of the decrease in pork consumption.

However, the USDA Economic Research Service reported that the meat industry exported nearly 70 million pounds of pork to China in February compared with about 50 million pounds of pork the previous February.

'There is a sluggish demand for pork, relatively speaking,” Schuele said. 'They are still consuming massive quantities of pork, but this is still such a massive industry that any time supply and demand is even slightly out of balance, you will see dramatic dips in prices.”

l The Midwest Center for Investigative Reporting is an independent, non-profit newsroom devoted to coverage of agribusiness and related topics such as government programs, environment and energy. Visit www.investigatemidwest.org.