Potential for Russian retaliation spooks poultry, food industries

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, July 30, 2014 - As U.S. lawmakers consider imposing tougher sanctions on Russia following the downing of Malaysian Flight MH17 and ongoing turmoil in Ukraine, Russia is threatening to ban U.S. chicken imports in what some call a retaliatory action. At press time, Russia was considering a ban on U.S. chicken and some European fruit and was reportedly investigating McDonald's cheese for safety.

Russia's food safety agency Rosselkhoznadzor said it is considering a ban on U.S. chicken imports ostensibly because of a U.S. outbreak of salmonellosis, according to a news report from RIA Novosti. The outbreak in question is tied to potentially tainted chicken from Foster Farms that has spread to 29 states. As of early July, the outbreak, which began in March but has since slowed, had sickened more than 620 people, according to the Centers for Disease Control and Prevention.

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To date, most of the sanctions against Russia have targeted financial services, energy and the arms trade. At this point, any farm trade embargo would be felt mostly by the U.S. poultry industry. Ag sanctions would likely be minimal for the largest share of U.S. agricultural markets because U.S. ag trade with Russia has changed dramatically over the past few decades.

In 1980, when the U.S. imposed a trade embargo against the Soviet Union following its invasion of Afghanistan, U.S. agricultural exports plunged. The year prior to the embargo, America shipped $2.8 billion in farm products, primarily corn, wheat, and soybeans, to the Soviet Union-about 8 percent of all U.S. agricultural trade, according to USDA's Chief Economist Joseph Glauber. In 1980, following the embargo, shipments of ag products to the USSR fell to $1 billion.

“Today it is a very different picture worldwide,” Glauber said. In 1991, the Soviet Union dissolved into 12 independent nations, including Russia, and last year, the U.S. shipped $1.2 billion worth of a diverse mix of agricultural products to Russia alone, but those exports accounted for only 0.8 percent of total U.S. agricultural exports. Top export sectors included poultry (about $300 million), followed by tree nuts ($170 million) and soybeans ($160 million).

“If U.S. exports to Russia were shut off, the question is whether they could get the products from somebody else,” says Glauber. “That happened in 1980.” U.S. producers took a financial hit, and the subsequent farm bill included language - still in effect today - that producers need to be compensated if a trade embargo affects over a certain percentage of their production, Glauber said.

Today, the U.S. poultry industry has the most to lose.

“We are taking it one day at a time,” says Jim Sumner, president of the USA Poultry and Egg Export Council (USAPEEC), based in Stone Mountain, Georgia. Until recent developments, Sumner's primary concern was that any Russian trade restrictions would be implemented on a case-by case-basis under health and quality regulations; he was hoping that the situation would not deteriorate to an all-out ban.

“Our concern is certainly heightened,” says Sumner. “We have no idea at this point what to actually expect in terms of imminent announcements, but we have advised our members and the industry to extend due diligence with shipments to Russia.”

But even for poultry, today's hit would be much less than it would have been years ago. In the mid-1990s, Russia accounted for as much as 40 percent of total U.S. broiler exports, according to USAPEEC. Last year, these exports to Russia were 7.5 percent of the total. Russia, however, is still the second-largest market for U.S. broiler trade, behind Mexico. With the global chicken market currently tight and prices strong, any slack created from a Russian import ban would likely be picked up by some of the other 100-plus U.S. trading partners, Sumner said.

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