U.S. chicken feet are being booted out of China

Processed chickens are transported on a truck at a municipal poultry slaughterhouse in Lima June 19, 2008.

CHICAGO (Reuters) - China and the United States are kicking up a trade war over chicken in which Beijing effectively has given the boot to millions of dollars worth of U.S. chicken, about half of which is chicken feet.

This action comes as Congress begins deliberating the 2010 federal budget for agriculture, which could extend a U.S. ban on imports of Chinese chicken products sparked by food safety concerns.

The ban has angered the Chinese and now, according to U.S. exporters, Beijing has halted imports of U.S. chicken, although officially China is saying imports are not blocked.

China is a huge market for U.S. chicken feet, commonly called paws, and bought 421,000 tons, or $280 million worth, in 2008, according to the USA Poultry and Egg Export Council, a trade group.

In China, paws are popular in soups, stews, and as snack items, but very few are sold in the United States.

Without the Chinese market, most of the paws will have to be processed into feed or other non-food uses, which brings less money to U.S. chicken companies.

In a note to clients last week, Stephens Inc analyst Farha Aslam said earnings for chicken producers Tyson Foods Inc or Sanderson Farms Inc would be impacted if the ban lasted past September.

China also buys some U.S. chicken wings and dark meat leg quarters. In total, China bought 754,000 tons of U.S. chicken in 2008, or $676 million worth, according to trade statistics.

Chinese importers last week told U.S. chicken companies that Beijing was not issuing import permits for U.S. chicken, effectively blocking the poultry for the rest of 2009.

It is believed some U.S. chicken could still enter China via Hong Kong, but industry sources said it is not known if the quantities would be comparable.

CHINA MAY BE RETALIATING

No reason was given for China's action, but U.S. poultry officials claim it is related to a Congressional measure that prevents imports of chicken from China.

"They want to get rid of the DeLauro Amendment. So this might be a shot over the bow," Paul Aho, an economist with the consulting firm Poultry Perspective, said of the Chinese efforts.

The measure, championed by Representative Rosa DeLauro, prevents the U.S. Agriculture Department from allowing imports of poultry from China.

DeLauro is the Democratic head of an influential House of Representatives appropriations subcommittee that oversees the U.S. Agriculture Department and Food and Drug Administration.

Her committee has effectively blocked imports of Chinese poultry products because of food safety concerns.

An annual spending bill, which the House of Representatives is expected to debate on Wednesday, could extend that ban through fiscal 2010, which starts October 1.

The Senate has not yet deliberated its version of the USDA appropriations bill.

In April, China launched a dispute with the World Trade Organization against the United States over the Congressional measure.

The poultry issue is the latest of several trade skirmishes between the two countries covering a range of products.

China has banned U.S. pork since the outbreak of a new strain of H1N1 flu virus, commonly called swine flu, even though the flu is not transmitted by hogs or pork.

Senior officials from the U.S. Trade Representative's office will travel to China next week to meet with officials about bilateral trade issues.

(Additional reporting by Charles Abbott and Roberta Rampton in Washington and Nick Carey in Chicago; Editing by Lisa Shumaker)

(Reporting by Bob Burgdorfer)