September 24, 2014


Russia food ban triggers rise in US meat stocks, slump in EU pig prices



Rising pork and chicken stocks in the US is proof that Russia's embargo on Western food products has started to bite.


Bob Brown, president of Robert A. Brown, Inc. in Edmond, Oklahoma, made the observation afterreading August's monthly cold storage report from the US Department of Agriculture, which shows increases in meat leading inventories.

The report shows August pork stocks totalling 546.3 million pounds, up 2%from July and down slightly from a year ago.

In August, Moscow banned Western meat imports in response to sanctions the US and the EU hadslappedon Russia for its role in eastern Ukraine.

Hams, which totalled 179.4 million pounds, accounted for most of the pork stock increase with bone-in hams up 24% from July and a 17% boneless ham gain.

Total pork rose roughly 10 million pounds more than usual in August, and virtually all of that was boneless hams, Brown said.

"Part of that had to do with the US that in June and July had just started shipping hams to Russia after several months of not doing so because they had previously barred it," he said.

In June, Russia lifted its initial ban on US pork imposed last year over the use of the feed additive ractopamine that promotes lean muscle growth in hogs.

However, the sizable increase in boneless hams from July to August may have been diluted somewhat by processors and retailers putting more of them in storage in perpetration for the winter holidays, said Brown.

US pork exports to Russia in 2013 totalled 17.2 million  pounds compared to 275.2 million the year before, according to USDA data.

Chicken stocks in August totalled 616.0 million pounds, with the biggest increase, other than hens, traced to leg quarters that at 127.2 million pounds were up 6% from July, according to Monday's USDA storage report.

Brown pointed out that Russia was a popular destination for US leg quarters that ultimately were drawn into Russia's meat ban on the West.

"Leg quarters in storage in August were up 7.5 million pounds from the prior month versus the five-year average that is normally down 5 million," said Brown.

He attributed leg quarter's nearly 13 million pounds swing in the average to lack of Russian buying, but added that leg quarter stocks were still down 35 million pounds from last year.

Leg quarters initially destined to Russia would probably find more use domestically due to an unexpected decline in production here traced to breeding flock issues, he said.

Broiler exports to Russia last year totalled 608.7 million pounds, compared to 588.4 million in 2012.

In Europe, meanwhile, pig prices dropped the most this week since at least January 2011 amid a seasonal increase in supply and Russia's ban on meat imports from the EU.

German hog prices fell 6.5% to 1.446 euros (US$1.86) a kilogramme from 1.546 euros last week, Interessengemeinschaft der Schweinehalter Deutschlands e.V. wrote in a weekly report. That was the biggest drop since the third week of 2011, when pork prices in Germany plunged a record 18% amid concern about dioxin-tainted pigs.

The EU exported 969 million euros of pig meat to Russia last year, led by Germany with 240 million euros and Denmark with 199 million euros of pork shipments, EU data show.

"The seasonal increase in supply in connection with the Russian import ban on pork is causing this hefty price slump," ISN wrote. "The price decline took on a tremendous pace. A disaster, is the unanimous opinion of market participants."

Germany is the EU's biggest pig producer, ahead of Spain, Denmark, the Netherlands and France, according to EU data.

Pork accounts for almost 50% of meat consumption in the EU. Average consumption of pork in the 28-nation bloc may rise to 31.3 kilogrammes a person this year from 31 kilogrammes in 2013, the EU predicts.

Pig prices in Spain fell 4.2% to 1.679 euros a kilogramme, the most since 2009, while prices in the Netherlands dropped 7.9% to 1.329 euros a kilogramme, ISN data showed. Prices in France fell 3.7% and those in Denmark slipped 1.8%.