Duration Of Pullback In US Meat Exports To Russia Uncertain

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

Toby Moore, a vice president for the U.S. Poultry and Egg Export Council, said he is hopeful the lull in U.S. sales to Russia will be short term, but it's impossible to make a precise prediction.

Russia was the rising star of import markets for U.S. beef, pork and poultry this summer until the dollar began appreciating against a weaker ruble, oil prices began dropping and the recent international credit crisis combined to put the brakes on record U.S. export levels.

Russia traditionally accounts for about 30% of U.S. poultry sold abroad.

By August, U.S. pork exports to Russia reached 96,085 metric tons - nearly double the yearly tariff-free quota of 49,800 tons allowed by Russia - according to data maintained by the National Pork Producers Council.

Analysts for Credit Suisse said Monday it is unclear how long the Russian market will remain sour for U.S. meat and poultry.

"Credit problems in the export market are likely to go away at some point, but it could be months, not weeks," the analysts said in a Monday report. "After that, the U.S. will continue to contend with the fact that the strengthening of the U.S. dollar has reduced its cost advantage in the global export markets."

July was the height of U.S. beef exports to Russia, according to the National Cattlemen's Beef Association, a U.S. rancher group. U.S. exporters sent 16.9 million pounds of beef and beef variety meat worth $17.6 million in that one month alone.

But that was when the U.S. dollar was more affordable for Russians. The U.S. dollar, which got about 23.40 rubles at the start of August, now gets over 27 rubles.

And now, NCBA Chief Economist Gregg Doud said, U.S. beef sales to Russia have virtually stopped while exporters from countries like Brazil are taking advantage of the currency situation.

Brett Stuart, a founding partner of the agriculture trade consulting firm Global AgriTrends, said, "It's ground to a halt. We were sending 2,000 tons of beef per week to Russia and it's almost zero now. We aren't sending hardly anything there."

Brazil, which has seen the real depreciate against the dollar in recent months, initially managed to displace some U.S. beef exports in July and August, according to statistics maintained by the National Cattlemen's Beef Association. But Russia's weakening economy and the global credit crunch has stopped even cheaper Brazilian beef

"Brazil suspended beef exports to Russia at one point because the risk of default got so high," Credit Suisse analysts said. "Russians have been asking for extended payment terms and renegotiated prices."

AgriTrends' Stuart said Australian exporters were hit hard by Russian demands to renegotiate beef prices.

Brazil has not only been trying to sell more beef to Russia, but also chicken, displacing U.S. product and that is seen to likely continue into next year.

The Credit Suisse analysts said Monday: "We think Brazil will take market share away from the U.S. in the important Russian chicken market in 2009."

The U.S. Poultry and Egg Export Council's Moore said it is common knowledge that Russia is now buying less U.S. chicken. How much less, though, is unknown because there is about a two-month lag in data collection.

The latest figures are for August and they show a robust trade, according to Moore. Russia bought $576 million worth of chicken in the first eight months of this year, versus $455 million in the same time period last year.

Russia traditionally accounts for about 30% of U.S. poultry exports, taking the cuts least favored on the U.S. domestic market. U.S. consumers prefer breast meat and the poultry sector depends on foreign markets such as Russia to take leg quarters.

U.S. pork exports to Russia have also been hurt in recent months by the dollar-ruble exchange rate as well as the growing lack of credit available to importers, said Nick Giordano, vice president and counsel on international trade policy for the National Pork Producers Council.

There is no official data available yet on the past couple months' sales, but "based on industry reports," the picture is of a slowdown in sales to Russia, Giordano said.

But, he said, he is optimistic that the drop isn't long term.

"I would characterize what's gone on in the past couple months in Russia as a bump in the road," Giordano said. "I think its going to continue to be an important market for pork exports in the future.... We expect another good year next year in Russia."

That's a possibility, said Mathew Shane, senior macro economist for the U.S. Department of Agriculture's Economic Research Service, but U.S. product will have to be more affordable and Russia's economy will have to strengthen.

"All of a sudden two factors are both operating on Russia to look to cheaper sources because...of the weakness in their economy and the appreciation of the dollar," Shane said. "So both of those factors are probably going to lead Russia to try to reduce its dependence on the U.S. and buy its supplies from other countries."

-By Bill Tomson, Dow Jones Newswires; 202-646-0088; bill.tomson@dowjones.com