MOSCOW. (Galina Papernaya for RIA Novosti) - After exhausting phyto-sanitary bans which haunted meat suppliers from Brazil for the whole of 2006, its livestock produce is making a comeback in Russia.
As of today, the ban has been lifted on supplies of frozen meat from the majority of the states where cattle were sick and on all processed meat products of Brazilian make. But the importers are confident that all limitations on the imports of freshly frozen meat will be removed in January. This is the only way to proceed because almost all of Russia's meat-processing industry is based on high quality and relatively inexpensive Brazilian meat. Its reserves in storehouses are almost gone.
In the outgoing year, Rosselkhoznadzor, Russian food quality watchdog, has been busy introducing and lifting all kinds of bans. By and large, Russian food imports have not gone down, but their structure has changed compared to the previous years - mostly because of restrictions on the imports of beef and pork from Brazil, Russia's biggest meat supplier.
The main reason for restrictions was an outbreak of foot-and-mouth disease in several states at once in October 2005, when 56 countries, including Russia, fully or partially banned Brazilian beef. On December 13, 2005, Rosselkhoznadzor prohibited meat imports from eight states: Mato Grosso do Sul, Matto Grosso, Goias, Sao Paulo, Minas Gerais, Parana, Santa Catarina, and Rio Grande do Sul. They account for 60% of Brazil's total exports to Russia.
In April 2006, Russian food quality inspectors decided to meet Brazilian exporters halfway, and allowed to bring in meat produced after July 1, 2006 from Rio Grande do Sul, and in August, from Mato Grosso. In the fall, the ban was lifted on meat from Goias, and Minas Gerais.
This is how head of the National Meat Association Sergei Yushin described to us the situation: "Now practically the whole of Brazil is open. Several states are still shut, but for us only one is important - Santa Catarina, from which we received tangible amounts of pork."
Now Russian officials have given key market players hope that all bans on Brazilian meat imports will be removed in 2007. The remaining restrictions concern heat-treated processed meats from all Brazilian states (including Mato Grosso do Sul and Parana, where the outbreak occurred). This makes sense because foot-and-mouth bacteria do not survive hot temperatures. Alexei Alexeyenko from Rosselkhoznadzor explained: "A ban is only lifted on ready-made prepack. They occupy a tiny portion in our total Brazilian imports." Miratorg, the chief operator on Brazil, confirmed that they amount to less than one percent of Brazilian meat supplies.
The heads of two local Brazilian companies - Sadia and Perdigao - were the only ones to applaud the removal of the ban. They are the only suppliers of heat-treated meat products in the Russian market. Strictly speaking, the second prepack exporter - Perdigao - will be the only company to make sizeable profits, since Sadia is going to launch together with MiraTorg its own production line in Kaliningrad in 2007. The first Brazilian-Russian JV will turn out 40,000 tons of meat products a year. Its first line will make boneless coated chicken legs, wings and nuggets. The Russian McDonalds is ready to buy the whole amount of nuggets - it only works with Brazilian meat. The JV will also produce a full range of ready-to-use beef and pork.
The Brazilians made the final decision to build their own production line in Russia because of the bans imposed in 2006 - they had to transfer whole production lines from "blacklisted" to "clean" states in order not to delay supplies to the Russian partners. "Our distributors were short of processed products this year, and as a result, we sold less than we had planned," said Andrei Korneichyuk, who is in charge of prepack at MiraTorg.
Due to the shortage of domestic beef and pork, imports fully determine meat prices in Russia (Brazilian imports play a decisive role in this respect). The more restricted the imports, the higher the prices on frozen meat.
Sergei Yushin is convinced that Russian prices, on pork above all, will continue to depend on the world market situation, which is not developing in Russia's favor. The Russian market has felt in full measures the consequences of Argentina's decision to reduce exports because of meat shortages at home. "Bigger supplies of high quality Brazilian meat will stabilize prices," Meetland Food Group Director Dmitry Gordeyev said.
Brazil is supplying Russia with beef, pork, and chicken. The following figures show how much the Russian market depends on South American meat. "Up to 90% of all foreign meat comes to us from Uruguay, Paraguay, Argentine, and, of course, Brazil," said Anton Surkov, CEO of the Association of Russian Poultry Market Operators (a group of major importers). Meanwhile, the quotas allocated by the Ministry of Trade and Social Development to "other countries" (which include all South American suppliers) cover only 40% to 45% of meat imports. In other words, the bulk of South American meat is outside the quotas, which involves higher import duties.
Next year Brazil will supply Russia with more meat because the EU quota has now been transferred to "other countries" (250,000 tons were redistributed in two steps - in summer and fall). This was done because of Europe's failure to fill its quota. "We won't find enough meat in Europe, and the world market is short of meat as well," Sergei Yushin and his colleagues argue. "Distribution of quotas does not correspond to the market requirements. Beef imports are one example. In a year we received 183,000 tons under the quota, and almost the same amount (182,000 tons) over it,' he emphasized. Global meat shortages and high quotas immediately affect our market. The end user is paying for this - prices on pork have gone up three-fold since 2003.
The share of Brazilian meat products in the imports structure also shows their importance for the Russian market. In the first 10 months of 2006, Russia imported 465,000 tons of beef (507,000 tons in 2005). Out of this amount, 165,000 tons, or 30% of foreign beef imports came from Brazil alone.
Beef imports went down because of the bans. Pork imports during the same period added up to 470,000 tons, including 170,000 tons, or 36% of the total, from Brazil. But although pork imports grew, Brazil for the first time yielded its first place to Europe, which exported to Russia 180,000 tons of pork.
Brazil has never exported much poultry. The lead in this market belongs to the United States, which supplies Russia with 635,000 tons of poultry, or 67% of the Russian market. In the outgoing year, Brazil exported 157,000 tons of poultry to Russia, which amounts to a mere 16% of Russian poultry imports. This figure has remained almost unchanged as compared with 2005.
The National Meat Association estimates Russian total meat imports from Brazil at $1,600,000,000. This is how much the Russian operators have spent on the purchase of meat, its delivery, and customs clearance. In the first 10 months of 2006, they spent $250 million on poultry, $650-$680 million on beef, and $680 million on pork. Traditionally, the bulk of all meat has undergone industrial processing.
According to Russian sanitary standards, not all meat can be sold retail. There are different requirements to quality. Experts are confident that there will be more Brazilian meat, at least beef, in Russian stores in 2007. Despite general bans in 2006, Rosselkhoznadzor has been actively distributing retail licenses to Brazilian suppliers.
Galina Papernaya is a commentator at the Vremya Novostei newspaper.
The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti.
