November 13, 2008

 

Analysts and industry officials are concerned over how long the drop-off in US meat and poultry exports to Russia will last.

 

It is hoped that the lull in US sales to Russia will be temporary, but it's impossible to make a clear statement yet, according to Toby Moore, vice president for the US Poultry and Egg Export Council.

 

Russia was an important market for US meat this summer until the dollar began appreciating against the weaker ruble. US export levels were also held back by falling oil prices and the recent credit crunch.

 

Credit Suisse analysts said it is unknown how long the Russian market will resist US meat, and credit problems in the export market and the strengthening US dollar has diminished US meats' cost advantage in the global export markets.

 

In July, US exporters shipped 16.9 million pounds of beef and beef variety meat worth US$17.6 million to Russia, but that was when the US dollar was still weak.

 

"US beef sales to Russia have virtually stopped while exporters from countries like Brazil are taking advantage of the currency situation," said Gregg Doud, chief economist with the National Cattlemen's Beef Association (NCBA).

 

Brazil, which has seen the depreciation against the dollar in recent months, initially managed to displace some US beef exports in July and August, according to NCBA statistics. However, Russia's weakening economy and global credit crunch has stopped even cheaper Brazilian beef.

 

Brazilian poultry has also displaced US chickens and that is likely to continue into next year, with the US losing poultry market share to Brazil, said Credit Suisse analysts.

 

Russia, which traditionally accounts for 30 percent of US poultry exports, has slashed next year's poultry import quota by 300,000 tonnes and the move will impact the US chicken industry.

 

US pork exports to Russia have also been hurt in recent months by the exchange rate and financial crisis, but the drop in shipments is unlikely to be long-term, said Nick Giordano, vice president and counsel on international trade policy for the National Pork Producers Council.

 

Giordano added that while recent pork exports to Russia have suffered a setback, it would continue to be an important market and pork shipments to Russia next year are expected to be good.

 

Matthew Shane, senior macro economist for the USDA's Economic Research Service, said Giordano's view is possible but the US product will have to be more affordable and Russia's economy will have to strengthen.

 

The appreciation of the US dollar and weakness in Russian economy is leading Russia to turn away from the US and import from other countries, said Shane.