Prior to the embargo, the US accounted for exports of 80,000–160,000 tonnes (t) of pork to Russia per year and is now much more competitive in terms of logistics and price, compared to Brazil. The NMA suggested that, in the event of sanctions being lifted, a major shift in Russia’s importers to the US seemed inevitable.
Speaking in mid-January at a press conference in Moscow, Russia’s First Deputy Prime Minister Igor Shuvalov said that sanctions against Russia and the food embargo could possibly be lifted somewhere around the end of 2017.
He suggested that “every market participant should be ready for this step”. This is the first time a Russian politician at such a high level has admitted the possibility of cancelling the embargo soon.
Talks regarding the future lifting of sanctions against Russia, as well as the food embargo, have been spurred by Donald Trump’s victory in the US presidential elections. Trump has promised “to restore relationships with Moscow”.
Threat to Brazil monopoly
Russia’s legislative framework means the food embargo is a counter-measure to sanctions. So in theory the lifting of sanctions against Russia by one country would mean its immediate exclusion from the list of trade partners affected by the food embargo.
According to NMA head Sergey Yushin, following the introduction of the food embargo, Russia became the key export market for Brazil’s pig farmers. In 2016, Brazil delivered 240,000t of pork to Russia, accounting for 95% of total pork imports.
Due to their monopoly position in Russia, Brazilian exporters set the price for half-carcases at US$1.80 per kg, which has left their Russian partners without any margin. Meanwhile, US suppliers are now exporting pork at a price US$0.40 lower than Brazil’s pig farmers, Yushin noted.
This means that, if the food embargo were to be lifted, Russia’s importers would turn to US farmers and, even if the latter raised the price by US$0.20-$0.30, compared to its current rate, they still would be more competitive than Brazilian exporters, Yushin estimated.
Miratorg ready to turn to US
Russia’s largest pork producer and one of the largest pork importers, agricultural holding Miratorg also pointed to the big potential for US pig farmers in Russia.
Dmitry Sergeev, Miratorg’s press secretary, told GlobalMeatNews that, last year, the company imported 100,000t of meat, including pork, or 17% of the company’s total sales in Russia. Miratorg is closely monitoring global market conditions and, if the food embargo is lifted, the company is ready to start purchasing pork from US suppliers, said Sergeev.
Miratorg is in constant contact with several US pig producers, already accredited for meat exports to Russia, Sergeev stated, adding that he was not in a position to disclose the names of these companies, as this information was commercially sensitive.
According to Miratorg’s estimates, the opening of Russia’s market to US companies would not bring any additional pressure to domestic prices, due to logistical costs and importers’ margins, but it could lead to a rise in pork prices in the US market, if there were large quantities involved.
In general, Russia will still require some meat imports for the foreseeable future, in order to balance the volumes of demand and supply in the domestic market, given the culture of consumption and the needs of the domestic meat processing industry, Sergeev explained.