Liuhe profit motives lead to tainted chicken

China's largest farming corporation, Shandong Liuhe Group, has allegedly supplied chicken containing excess antibiotics to domestic restaurants, owing to its practice of selling veterinary drugs to its breeders for extraordinary profits, Shanghai-based China Business News (CBN) reported Monday.

The company supplied chicken products to the Shanghai warehouse of Yum! Brands Inc, operator of the US fast food chain KFC in China, China Central Television (CCTV) reported on December 18, though Yum! said on the same day that it had canceled its contract with Liuhe in August.

The Shanghai Food and Drug Administration (SFDA) took a chicken sample from the Yum! warehouse for a food safety test on December 18. Preliminary testing found a substance that the SFDA suspects is Amantadine, a forbidden veterinary drug, the SFDA said in a statement on its website over the weekend. Further testing is needed to confirm the finding.

Liuhe buys the majority of its chickens from contracted breeders, who are in turn required to buy their baby chicks, feed, veterinary drugs and vaccines from Liuhe, Guo Huiyong, an independent Beijing-based industry analyst, told the Global Times Monday.

Liuhe can make a 60 percent net profit by selling veterinary drugs to chicken farmers, the CBN report said. Two-thirds of these profits come from drug company kickbacks, and only one-third from sales markups, said the report.

New Hope Liuhe Co, Liuhe's parent, refused to comment when contacted by the Global Times Monday.

Most livestock, especially chickens, are legally given antibiotic drugs or herbal additives in response to diseases caused by excessive feeding, said Guo.

He said the excessive feeding aims to shorten the breeding period and meet demands from fast food restaurants like KFC and McDonald's.

But in order to increase profits, some Chinese farming companies may persuade breeders to buy not only drugs, but also drug-laced food which is fed to baby chicks almost around the clock, Su Xiangdong, general manager of the Chengdu Golden Spring Biological Technology Co, told the Global Times Monday.

Domestic farming companies like Liuhe can get high kickbacks from their drug suppliers, while selling the drugs to their contracted breeders at the current market price, resulting in extraordinary profits, said Guo.

Liuhe's chicken breeding business did not contribute much to the company's revenue and has even lost money at times, so its profits come mostly from feed sales, according to the CBN, citing New Hope Liu­he chairman Liu Yonghao.

Eight of 19 samples sent by Yum! were previously found to have excessive antibiotic traces, the SFDA said Friday.