Potential impacts of a port strike on the East Coast and Gulf Coast ports on the chicken and turkey markets
According to the International Longshoremen’s Association (ILA) website, they are, “the largest union of maritime workers in North America, representing upwards of 85,000 longshoremen on the Atlantic and Gulf Coasts, Great Lakes, major U.S. rivers, Puerto Rico and Eastern Canada, and the Bahamas,” and they’re planning to strike. The ILA is trying to negotiate a new Master Contract Agreement with the United States Maritime Alliance (USMX) regarding wages, worker safety, and automation. If the ILA’s terms fail to be met, approximately 45,000 longshoremen from the ports of Maine to Texas will halt work at 12:01 am on October 1st. What would this mean for the chicken and turkey industries?
Chicken update
On a year-to-date (YTD) basis the volume of broiler meat exported has accounted for 14.3% of the total volume of chicken produced in the U.S. Of the top five export destinations for U.S. chicken, two are Mexico and Canada, which don’t require the use of ships. Two of the other top five export destinations, the Philippines and Taiwan, are serviced primarily by the West Coast ports. That leaves Cuba as the only top five destination potentially impacted by the port strike. That said, it’s nothing to dismiss as, in terms of YTD totals, Cuba is responsible for buying 8.3% of the volume that the U.S. exports. That is approximately 1.2% of the total volume of chicken produced in the U.S. absorbed by one country alone, which has the potential to impact the market.
A couple of the chicken items that Cuba most frequently imports from the U.S. are leg quarters and drumsticks. Cuba tends to be somewhat price-sensitive, and in recent weeks, several export sellers noted that they were more interested in buying drumsticks instead of leg quarters due to the relative affordability of the former. This helped tighten supplies of drums while simultaneously reducing the call for leg quarters. Should a port strike occur, it might influence a further influx of leg quarter supplies to the domestic market, as well as relieve some of the supply restriction of drums. Already certain sellers to the export market are expressing some concern regarding what their ability to move production may look like in the coming weeks. Conversely, certain buyers are hopeful that supplies will indeed become more available as domestic retail demand has been relatively robust lately.
Turkey update
The turkey industry is less involved in exports than the chicken industry, but that doesn’t necessarily mean it wouldn’t be impacted should a strike occur. Year-to-date, approximately 9.2% of the turkey produced in the U.S. has been exported, but only about 7.2% of the exports are reliant on the East or Gulf ports, as nearly 79.1% of U.S. turkey is sent to Mexico and Canada.
While export business from the East and Gulf ports doesn’t majorly impact the majority of the turkey market, a port strike could have the potential to influence the supply of turkey necks. Jamaica, the number three importer of turkey from the U.S., is a major buyer of turkey necks. Furthermore, based on ten-year averages, exports to them peak in October. Similar to much of the U.S., temperatures in Jamaica typically peak in July and August and start to decrease from September through January, with September and October having the highest average monthly rainfall. This shift towards more rainfall and cooler temperatures sets the perfect weather for an increased desire to eat stew, which is exactly what turkey necks are used for in Jamaica.
Recently, supplies of frozen tom turkey necks have been limited and buyers have had to pay premiums to secure production. Since the start of September export quotations have risen by three cents and domestic quotations have increased by six cents. While we’re approaching peak buying season for Jamaica, a primary driver of these markets has been domestic grinding demand. Should turkey necks be unable to make it to Jamaica, it could increase the availability of supplies for the domestic market.
Of course, whether the markets are impacted this coming month by an inability to export from the East and Gulf ports depends on whether the port strike occurs, and if it does, for how long. Most exporters agree that a strike lasting a week would result in a recovery period of approximately a month.
For further insights, please watch our most recent meat webinar replay.
Written by Nick Wood
