UPDATE 2-USDA to buy up to $14 mln of chicken to trim glut

Tue Jun 15, 2010 4:55pm EDT

Related Topics

* USDA says will help producers facing glut, lower prices

* Loss of Russian export market has led to stocks glut

* Chicken to go to food banks, government meal programs

* Some dark meat chicken stocks up 21 pct from year ago

(Adds industry comment)

WASHINGTON/CHICAGO, June 15 (Reuters) - The U.S. Agriculture Department plans to buy as much as $14 million worth of dark meat chicken products to help producers facing a glut in stocks and decreasing prices, Agriculture Secretary Tom Vilsack said on Tuesday.

The U.S. chicken industry lost its top export market for dark chicken meat in January when Russia blocked imports due to concerns about a routine chlorine wash used by U.S. processors.

The idea to buy the chicken for U.S. food programs arose during discussions between the USDA and the National Chicken Council (NCC) about the Russia situation, the NCC said.

In a note on Tuesday, the NCC thanked the USDA for the purchase.

Russian and U.S. officials have held a series of negotiations to lift the ban, which has hurt exports from major producers like Tyson Foods Inc (TSN.N) and Sanderson Farms Inc (SAFM.O).

The USDA reported there were 90.59 million pounds (41.1 million kilograms) of dark meat chicken leg quarters in storage as of April 30, a 21 percent increase from 74.713 million pounds a year ago. The leg quarters are a key export item.

"American consumers prefer white meat, and while they also eat plenty of dark meat, they cannot consume all that is produced, considering that the chicken is nearly half dark meat by weight," an NCC statement said.

The government purchase, which will be used by food banks, school lunch programs, and other food assistance programs, will be helpful, but producers need Russia to return to the market to pare stocks, an analyst said.

"Every bit helps but what they (chicken producers) need is for Russia to buy 100,000 tons," said Paul Aho, an economist at Poultry Perspective.

That quantity of chicken would cost about $100 million at current market prices, Aho said. (Reporting by Roberta Rampton in Washington and Bob Burgdorfer in Chicago; Editing by Marguerita Choy and Sofina Mirza-Reid)

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