October 22, 2007

 

Analysts take Russia livestock, poultry action in US in stride

 

 

Livestock and poultry market analysts are taking with a grain of salt news that Russia de-listed several pork and poultry processing plants and cold storage warehouses in the US as eligible exporters of pork and chicken to Russia.

 

A total of 17 poultry processing plants, four hog plants, three packing plants and one cold storage facility will be ineligible for exports as of November 1.

 

The reduced number of facilities eligible to export meat to Russia could stifle exports, but more than one saw it as a political move more than a matter of cleanliness as Russia's Veterinary and Phytosanitary Service said.

 

Russia is the fifth-largest US customer for pork products, said Ron Plain, agricultural economist at the University of Missouri. However, purchases through August are down 12 percent from a year ago at about 126 million pounds, he said.

 

The country is the largest US customer of chicken products, Plain said. Through August, purchases are up 15 percent to 1.2 billion pounds.

 

Credit Suisse's Robert Moskow said in an e-mailed comment that Russia accounts for 33 percent of US poultry exports, and the newly banned poultry facilities represent about 10 percent of Russia's demand.

 

Russia accounts for only 6.5 percent of US pork exports, Moskow said, and the newly banned slaughter facilities represent 11 percent of Russia's demand.

 

"As a result, it does not look like the impact on the pork market would be terribly material on US pork prices," Moskow said.

 

Generally, Russia is looking for low-cost protein and tends to import products that tend to stack up in US warehouses like hams or leg quarters, Plain said.

 

Sue Trudell, vice president of EMI Analytics, said it's not uncommon for Russia to do something like this at this time of the year. The move often is seen as necessary to protect its domestic producers from US imports.

 

Moskow also said that while protein demand is growing in markets like Russia and China, those countries don't like to be overly dependent on the US for their food supply.

 

"Russia in particular has a reputation for protecting its domestic industry when imports increase too much," Moskow said.

 

Trudell said the delistings' effect on US markets "may be minimal" since production and shipments can be shifted to other plants within the same companies. She does not expect the same type of market reaction as in 2005 when Russia cut off all US chicken imports. At that time, leg quarter prices went from 44 cents a pound to 32 cents in one week.

 

However, marketers could ask for some type of stress-related discounts and pressure the market a little, Trudell said.

 

Moskow said he thinks the delisting "is incrementally negative news for a protein industry that is already experiencing declining chicken prices and perhaps declining pork prices as well, as packers increase slaughter to record levels."

 

CATTLE/HOG SLAUGHTERS

 

US cattle slaughter for the week was estimated at 674,000 head, compared with 634,000 a week ago and 643,000 a year ago. Year-to-date slaughter stands at 27.265 million head, up 1.5 percent from a year ago.

 

Hog slaughter for the week is estimated at 2.334 million head, compared with a record 2.353 million last week and 2.202 million a year earlier. Year-to-date hog slaughter is estimated at 85.036 million head, up 2.9% from a year ago.

 

TOTAL MEAT PRODUCTION

 

The USDA estimated total beef, pork and lamb production for the week at a record 1.005 billion pounds. Previous week's output was 974.9 million, and the year-ago figure was 950.9 million. Year-to-date combined meat output is 38.302 billion pounds, up 1.8 percent from last year.

 

Broiler/fryer slaughter for the week was estimated at 167.086 million head, compared with 171.257 million a week ago and 161.719 million a year ago.