Russia Bans Imports From 19 U.S. Poultry Producers
Friday, August 29, 2008
MILWAUKEE, Aug. 28 -- The nation's chicken producers faced more bad news Thursday as Russia said that 19 unnamed U.S. poultry producers will be barred from exporting their products there, a move that would deprive them access to a key market.
Meat producers are already grappling with high costs for grain and fuel and an oversupply of meat that is keeping prices down. They're focusing on exports, which are seen as key to offsetting domestic weakness, and they're benefiting because of the weak U.S. dollar.
Russia is an important market for many poultry producers, including the nation's largest chicken producer, Pilgrim's Pride, as well as Sanderson Farms and Tyson Foods, the world's largest meat company.
Shares of many meat producers, including top hog producer Smithfield Foods, based in Virginia, tumbled on worries about potential cuts by Russia to chicken and pork import quotas. On Wednesday, Russia's top agriculture official was quoted as saying import quotas could be cut by hundreds of thousands of tons, with that country's producers making up the shortfall.
On Thursday, Prime Minister Vladimir Putin said 19 U.S. poultry producers will be barred from exporting their products to Russia. Putin, the country's former president, told CNN that the unidentified American producers had ignored warnings from Russian inspectors who examined poultry companies last year. He said the move had nothing to do with tension over the recent war in Georgia and was purely economic.
The U.S. industry's trade group that focuses on exports wasn't so sure.
"We try and keep our industry out of politics and into marketing opportunities, but sometimes it's very difficult to separate the two," said James H. Sumner, president of the USA Poultry & Egg Export Council.
He said it was too early to tell what all this means and noted there had as yet been no official government communication.
Sumner said that if there were any deficiencies in the plants, they would be corrected in weeks or a few months, and the ban wouldn't hurt business too much.
Business with Russia accounts for 33 percent of total U.S. chicken exports, making it the largest customer, BMO Capital Markets analyst Kenneth Zaslow wrote in a research note Thursday.
In the first half of the year, U.S. producers shipped $395.7 million worth of broilers to Russia. That was up 42 percent from the previous year, while volume grew 20 percent.
Shares in many meat companies slumped on worries about the situation. Sanderson Farms' stock fell 2.5 percent, to close at $34.36, while Tyson's shares dropped 2.3 percent, to $14.99. Shares of Smithfield Foods fell 3.8 percent, to close at $20.73.