U.S. Meat Trade Should Not Count On China, Russia

December 14, 2012 10:23 PM EST | By Bob Burgdorfer
(Reuters) - U.S. meat companies have banked on exports to China and Russia for growth for two decades, but political tensions and efforts in those countries to boost domestic production may cap that revenue source. (Photo: Wikimedia Commons)

China and Russia often have been two of the largest buyers of U.S. meat, but lately they have halted or limited purchases citing health concerns or unfair trade practices.

U.S. meat industry officials dispute those charges and claim the actions were politically motivated as both countries work to increase their own production.

Regardless of the reason, business leaders and economists at the Reuters Food and Agricultural Summit this week questioned the future of U.S. meat exports to those countries.

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Positive comments from Moscow this week that a deal was near to restart U.S. chicken exports to Russia failed to excite the chief executive of No. 4 chicken producer Sanderson Farms Inc. (SAFM.O)

"(Vladimir) Putin himself made a comment about the U.S. having to meet Russian standards. Now, if the chicken industry gets the attention of Putin, that is a little different ball game than what we have had to deal with in the past," Chief Executive Joe Sanderson told Reuters reporters this week.

"So, I remain neutral about it," he said of the Russian market.

In December, Russia banned nearly all U.S. chicken, arguing a chlorine rinse used to cleanse the meat violated its food safety guidelines. Russia had been the top overseas buyer of U.S. chicken. But the latest monthly trade data shows chicken sales down 64 percent from a year earlier.

"Right now, we have those markets but the real question is long term. I wouldn't count on them unless we can show a clear sustainable comparative advantage," Michael Swanson, senior agricultural economist at Wells Fargo, told the Summit.

With Russia closed or partially closed, the U.S. chicken it had purchased must go elsewhere. Sanderson said Mexico, Vietnam, or Africa, would be likely markets.

China, with its 1.3 billion people and growing economy, is often seen as a growth market for U.S. meat exports. It was the No. 2 buyer of U.S. pork in 2008 when Beijing hosted the summerOlympics and has been an important buyer U.S. chicken.

But shipments of both are now down considerably due to bans and duties.

Such barriers have arisen before in China and by Russia, which this week prompted a warning from the chief executive of fertilizer maker Agrium Inc (AGU.TO).

"When I look at commodities, I try to look at a high demand of supply-demand fundamentals, and then I try to say, 'Are you relying only on China?'" said Agrium Chief Executive Michael Wilson. "If you're relying on China to be the savior of your future, look out. Because China can turn off the tap just as quickly as it can turn it on."

(Reporting by Bob Burgdorfer; Editing by David Gregorio)

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