Russia - Buying US poultry again
Sanderson Farms, Inc., said Russia resumed imports of the company’s poultry products after the country’s six-month ban on U.S. chicken led to swelling supplies and weaker prices.
The end of Russia’s poultry ban, announced in June, may help beef and pork producers, trimming supplies of a cheaper, competing meat during a time of consumer belt-tightening, analysts say.
Sanderson Farms’ poultry plant in Collins, Miss., was approved Aug. 18 for imports and is currently packing product for Russia, Lampkin Butts, the company’s chief operating officer, said during a conference call yesterday.
Another 11 plants were also approved, and Sanderson is working on gaining approval for two others, Butts said during the call, which followed the release of Sanderson’s quarterly financial results.
“There remain differences of opinions between our governments on various interpretations of the agreement, and those still must be reconciled,” Butts said. “The good news is that product is once again moving to Russia.”
Russia agreed to end a ban on U.S. poultry that began Jan. 1 following talks between President Obama and his Russian counterpart, Dmitry Medvedev. The ban largely cut off the U.S. from its biggest foreign poultry customer in recent years.
U.S. broiler exports to Russia tumbled 90 percent, to 75.6 million pounds, during the first half of the year, compared to the same period in 2009, according to government data.
During the previous five years, the U.S. broiler exports to Russia averaged of 1.71 billion pounds.
U.S. beef and pork exports are already up over last year, and Russia may provide an additional boost, analysts said.
Additionally, Russia is in the grips of a severe drought that's expected to slash the country's grain production. If global market prices for feed grains get too high, Russia may boost U.S. meat imports, said Mike Zuzolo, president of Global Commodity Analytics & Consulting in Lafayette, Ind.
“If feed grain prices go too high between now and the end of the year, or the shipping costs are more prohibitive, then I think Russia would likely contemplate just buying the meat and send it over in freezer container ships,” Zuzolo said.
As Russia's domestic feed grain supplies tighten, the country's import potential for pork “could be just as significant as that for poultry and beef, especially if they don’t see significant soil replenishment for their new-crop wheat in the next two weeks,” Zuzolo said.
Russia’s poultry ban stemmed from a dispute over the amount of chlorine U.S. processors used to disinfect the meat. Under the agreement, the U.S Department of Agriculture will publish on its website information on which disinfectants are approved by Russia for use on poultry and other food.
Stronger exports combined with smaller livestock herds to boost beef and pork prices this year.
Pork carcass cutout values, an industry benchmark reflecting wholesale prices, reached an all-time high yesterday at 95.67 cents a pound, according to the USDA. Cutouts are up more than 80 percent from a year ago.
Sanderson Farms executives also expressed caution over the economy, indicating that demand from restaurants and other foodservice buyers is expected to remain soft at least into next year.
“We continue to believe we will not see a meaningful rebound in food service demand until well into calendar 2011 at the earliest, and then only if employment numbers begin to improve,” chief executive officer Joe F. Sanderson, Jr., said during the call.
“Consumers need to get their jobs and confidence back before they start eating out again,” Sanderson said.
Laural, Miss.-based Sanderson Farms, one of the largest U.S. poultry processors, said net income during the three months ended July 31 fell 16 percent to $36.1 million as the Russia ban led to weaker chicken prices. Sales fell 3.1 percent to $489.1 million.
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