Opportunities for Russian pork producers
However sad the cause, this week’s one-year food ban announced by the Russian president Putin appears to be good news for Russia’s pork producers.
First – a ban on pork from the EU or the USA is nothing new. Since January 2014, Russia has already closed its borders to all pig and pork products from the European Union. As African Swine Fever (ASF) was discovered just across the borders with Poland, and later Lithuania and Latvia, Russia decided to close its borders to pork from the whole of the European Union.
In addition, the ongoing outbreaks of Porcine Epidemic Diarrhoea virus (PEDv) in the United States caused Russia to suspend pig and pork imports in May.
In Pig Progress 30.06, correspondent Vladislav Vorotnikov described in an informative piece that especially Russian pork producers must have been pleased with recent import restrictions. The subsequent pork shortage meant they benefit from the sharply increased demand for pork.
Behind the scenes, a lot of work has been done to find a solution for e.g. pork from Western Europe as this is nowhere near the affected ASF zones. But whoever had hoped that borders would reopen soon can continue dreaming. In an ongoing trade war as a consequence of plane MH17 being shot down in Eastern Ukraine, Russia yesterday closed its borders to food products from 'the West', including Canada, Australia, Japan and Norway – and announced it would last a year.
So far, the US and EU poultry industries do not seem to be overly worried, as this industry is not hit that hard. But what does this mean for their pork industries? Just a couple of quick figures:
• Pork from the US - a total of $20 million was exported to Russia last year.
• Pork from the EU - about €969 million was exported to Russia. With that figure, pork is the third largest group of products affected, after fruit and cheese.
• Just to indicate how important Russia is to the EU – Russia is the EU's second-largest market for food exports – 10% of all EU exports went to Russia in 2013.
• Within the European Union, there is an increased call for an emergency fund to compensate agricultural producers for direct and indirect losses. After all, a lot of food products, including pork, will now have to find different customers and most likely price levels will decrease.
What does the food ban mean for pork producers elsewhere in the world?
• When exports from the EU and the US drop, in theory others could step in. Indeed, on the day prior to the announcement of the food ban, Russia approved 52 Brazilian companies to export meat products to Russia. Brazilian pork producers, however, may not profit that much in the short term, as the Brazilian pork production industry is not really prepared to supply this extra amount, writes Boerderij. Since Russia has proved to be a relatively whimsical customer over the years, with trade bans in place whenever it saw fit, the Brazilians have come to focus strongly on growth on the domestic market. For poultry producers, there could be more opportunities, as poultry production simply requires less time.
What does the ban mean for pork markets in Russia?
• As indicated in the article above – Russian pork producers will probably be happy as reduced imports will mean prices for pork will rise. Meatpackers have been struggling with the shortage and will continue to do so.
• Germany's agricultural minister Christian Schmidt predicted that the food ban will without a doubt be felt by Russian consumers.
• Not everyone agrees, however. In the short term, Russia will most probably not notice too much, Wim Boonstra of Rabobank in the Netherlands told Boerderij. "Russia searched for a sanction which hit the other party more than it hit itself." This is also what the BBC is being told by locals.
• Nikolai Pankov, chairman of the Russian State Duma Committee for Agrarian Issues, told press agency Itar-Tass that the Russian food security is not at risk. Russia would be 70% self-sufficient with pork, he said. He added, "We completely provide ourselves with basic foodstuffs in all directions. That is why I think food security is not in question in Russia."
The one thing that might change this picture again could be future developments. For sure, the ban calls for further action and reaction. The last move hasn't been made in this conflict.
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