US-Europe chicken trade dispute seen lingering

By Bob Burgdorfer

CHICAGO, May 28 (Reuters) - A trade dispute over exporting U.S. chicken to Europe is unlikely to be resolved soon even though Brussels has recommended lifting an 11-year ban, U.S. agriculture and chicken industry sources said on Wednesday.

American chicken is banned in Europe because U.S. producers use a chlorine rinse on the product. U.S. sources have argued that Europe uses the chlorine rinse issue as an excuse to protect its industry.

The European Union currently buys much of its chicken from Brazil, a country that is expected to fight to keep a large presence in that market.

Earlier on Wednesday, the European Commission recommended lifting the ban on U.S. poultry imports, but with some important restrictions.

"The EU issue has a long way to go. We are uncertain at this time what impact, if any, it will have on the domestic industry," said Mike Cockrell, chief financial officer at No. 4 U.S. chicken producer Sanderson Farms Inc.

"They have not said much about lifting the current quotas on protein imported from the U.S., and that issue will have to be addressed if the lifting of the ban is to have any significant impact on the domestic markets," he said.

The European market could be significant for the U.S. chicken industry.

"It is hard to figure out exactly what the quantities and values will be, but it is definitely going to be good," said John Urbanchuk, an economist with the expert services firm LECG Corp.

U.S. observers were skeptical that Brussels' moves would result in chicken sales any time soon.

"When you are talking about getting chickens into the French markets and into the German markets, good luck. They are going to find a thousand excuses on why not to," said Michael Swanson, agricultural economist at Wells Fargo. "They want to promote their own agriculture activity."

There may be some success in shipping U.S. chicken to Eastern Europe, which Swanson said may be more open to trade.

The EU said even if the ban is lifted, U.S. chicken will still have to meet a number of conditions, including specific rinsing and labeling procedures.

"The conditions proposed by the European Commission would simply continue the protectionist policies that have prevented European consumers from enjoying safe, wholesome and affordable chicken produced in the United States," Bill Roenigk, chief economist for the National Chicken Council, the chicken industry's lobbying group, said on Wednesday.

For Europe, importing chicken may be cheaper than buying the expensive corn and soybean meal needed to sustain a domestic chicken industry, said LECG's Urbanchuk.

"One of the problems that Europe has is it does not have the domestic oilseed industry to support a very large poultry industry," Urbanchuk said. "It is probably cheaper in the long run and more efficient to increase imports of chicken from other suppliers that have an established industry."