South American sales of meat and poultry

by Steve Dittmer
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 International Trade
US meat and poultry trade opportunities abound in the growing South American market.
 
Because of the large populations and huge potential of the Asian Rim and China, trade with those regions often dominates the discussion. But trade with South America warrants some attention. Afterall, trade with that area of the world continues to grow, is easier for the US to manage and is certainly closer to home.
One example illustrates why trade maximizes the value of US production and fills gaps when the market demands something. What does the poultry industry do during football season when they need chickens with six wings instead of two? The industry can bolster the supply of chickens and turkeys needed during football and the fall holiday season through its free trade agreement (FTA) with Chile. In turn, the other parts of the chicken will be sold to Chile at competitive prices. Overall, the FTA with Chile has resulted in cross trade that has worked out well, according to Jim Sumner, president of the USA Poultry and Egg Export Council.

The FTA with Colombia has shown some of the same trends, with an arrangement benefitting both Sumner’s members and the domestic poultry industry association. They have worked out a system wherein quarterly auctions of portions of the import quota determine the incoming quantity. US exporters bid on the quota and Colombian agents handle things on the other end. This year, all of the quota was used, Sumner said. The associations run the system and it generates some income for them.

While there is an FTA with Peru, there is not a lot of trade, Sumner said. Peru has a domestic poultry industry and the exchange rate has not been favorable to increasing trade. The quota there is based on a first-come, first-served basis, and that doesn’t work as well. Exporters don’t know for sure ahead of time if a quota will have room and longer-term planning is harder to do.

As for outlook, Sumner said cheaper feed costs will help keep US production more profitable, but feed costs are just not a major factor in exporting. He sees steady growth in the South American market, but no potentially tremendous movement. There are several factors influencing that outlook. The Colombian economy is very dependent on the price of oil, which while recovered from its lows, is down from the levels of recent years.

There is little trade with Brazil; rather, Brazil is America’s biggest competitor. But the feed supply is short in Brazil at the moment and prices are very high, significantly affecting domestic production. That will make it harder for Brazil to compete with US exporters on the global market.

Lastly, there is not much trade with Argentina, as it is growing its own poultry industry.

 Meat Poultry
 

Diversified Beef Markets 

Jessica Julca, US Meat Export Federation’s (USMEF) South American manager, based in Peru, paints a varied picture of diversified markets, depending on the location one is considering within in that region. Her office was opened in 2011 and it was challenging at first, as there was not much familiarity with US beef and pork. With beef it was somewhat easier, as consumers in Peru, Chile and Colombia were used to seeing beef imported from Uruguay, Paraguay and Brazil. But there is a big difference between those products and US beef in quality and price.

To have the most impact quickly, the strategy was to reach importers and distributors for foodservice and retail stores. Training and promotion programs were instituted to get them familiar with US beef. Once key customers started having good results, the word spread.

Julca is based in Lima and began her efforts there because Peru is the gastronomic capital of South America. She started with seven importers, two of which were dedicated to high-end restaurants. Their results were then replicated in smaller restaurants. From Peru, the techniques and results spread to Colombia and on to Chile. In Chile, the largest volume is with retailers. The nature and the maturity of markets are different, however, in each country.

Chile has a wider variety of options for consumers but while their exposure is wider, their knowledge of each option is not deep. So much of the work in Chile is with the retailers. Store demonstrations are different in the southern portion of Chile because that region is close to central and southern Argentina, where the cultural traditions are more toward barbecuing meat.

Much of South America’s beef cuisine is oriented toward stews and soups, which is well suited to the thinner, less tender cuts from older cattle locally available. Julca’s mission was to show them how US beef could be used in the same cooking methods, but yield more tender, more flavorful results in less cooking time. At the same time, they were teaching consumers about yield and portion size to control costs, rather than just utilizing whatever was available and not comparing end results, especially as to waste.

Of course, not every country on the continent has potential at this time. Ecuador’s government has stopped all kinds of imports because their economy is based on the US dollar and they do not want dollars leaving the country. Venezuela is in both economic and political turmoil.

Meat Poultry .

Pork's Popularity 

US pork is strongest as a raw material in Colombia, with Chile following. After the further processing sector, retail is the No. 2 distribution channel, and then comes foodservice. That helps, as retail gives US pork more visibility and helps Julca increase product awareness.

Foodservice is the strongest sector, with good penetration at retail. Ribs, especially spare ribs and baby back ribs are popular. In-store demonstrations are set up to show the consistency and quality of US pork. Vacuum packaging and brand name products make it easy to identify US product and that is very important. Food safety is really important to consumers in South America and US product has contrasted well against local product in this respect.

Chile is one of the top 10 global exporters of pork, so its population is very familiar with new food technology, as contrasted with Colombia. Chilean consumers have a comfort level with US pork quality and safety. The biggest competitive disadvantage is price.

Varying Climates, Conditions 

Of course, there are major differences in weather, climate, elevation and food availability across South America. Road conditions and transportation are not the same in all provinces in all countries. As a result, some supermarkets experience difficulties in getting food transported to its locations. Food safety, especially regarding trichinosis, is not really a problem in most cases any more but still colors the thinking of the older generation of consumers, Julca said.

Some provinces do not have electricity, which means refrigeration is not available. This results in consumers shopping daily at “wet markets” for fresh meat. Some meats are still salted to help preserve them.

In the cities, refrigeration is available but the cultural preference is for chilled meat, with the perception that frozen is somehow not as good. Consumers in most cities know something about vacuum packaging but rural areas are still learning. Many of their consumers are not used to storing food, so they prefer to shop close by. They are used to a variety of fruits and vegetables. But in Peru and, to some extent in Colombia, supermarkets are making efforts to expand beyond the cities, which is helping to make meat and sausage distribution available outside the cities.

As for economic conditions, Peru’s economy has been growing over the last three or four years. The country is getting more industry and retail sectors are expanding. Colombia’s economy is suffering from the slump in oil prices. Chile has some inflation problems, with people paying more for goods. Some parts of the continent deal with instability and investments in those countries are down. But overall, Chile, Peru and Colombia have more stable economies, more stable governments and less inflation due to economies built on mining industries.

Some investors from Chile are going to Colombia and Peru to start businesses or to expand existing businesses. Locally based food retailers are strong competitors for retailers from other countries, like France. And US-based Wal-Mart is in Chile, for example, but Julca noted that Wal-Mart stores there do not look the same as those in the US, as large retail chains with a presence in South America tend to adjust their store layout and operating practices to each country’s culture. 

Overall, many more South Americans are using US beef and pork to prepare local style foods. USMEF is in place to provide customer service for importers and foodservice companies, “whatever they need” to take advantage of the benefits of US beef and pork. Exchange rates have cut meat volumes the last couple years but people are still investing and trying new products and over time, volumes will grow. Julca said she sees more restaurants promoting their use of US beef and pork on their menus.

Meat exporters and importers concentrating on South America have mechanisms in place to continue educating South American households about US beef and pork, taking advantage of economic progress as it happens.

 
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