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ASF Tensions in Baltic Region Could have Major Pork Trade Implications

African swine fever in Lithuania has heightened pork trade tensions between Russia and the European Union

African swine fever in Lithuania has heightened pork trade tensions between Russia and the European Union

Lithuanian officials recently confirmed the country’s first cases of African swine fever (ASF). These are the first ASF cases to be detected within the boundaries of the European Union, with the exception of the Italian island of Sardinia.

The EU veterinary certificate states that the EU is free of ASF with the exception of Sardinia. With this no longer being the case, EU veterinary officials requested that Russia allow them to continue to sign export certificates if they guaranteed exclusion of products from the affected regions of Lithuania. Russia’s Veterinary and Phytosanitary Surveillance Service (VPSS) did not agree to this request, so exports were effectively suspended on Thursday when certificates could no longer be signed.

Earlier in the week it appeared that Russia would only block pork and live hog imports from Lithuania and would not impose new import restrictions on other EU member states. But that question remained unsettled as VPSS stated that it was not satisfied with the EU’s approach on regionalization. For this reason, VPSS suspended imports from all of Lithuania, rather than the six regions proposed by the EU. VPSS also left open the possibility of restricting imports from the entire EU unless EU officials agreed to further negotiations on regionalization. While Russia did not officially take such an action, the decision by EU veterinary officials to stop signing certificates has essentially the same effect.

Most observers do not expect a long-term stoppage of exports from the entire EU, but anticipate that affected areas will remain restricted.

Sources: Global Trade Atlas and USMEF estimates Through November, Russia’s 2013 pork imports were down 18 percent from the same period in 2012

Sources: Global Trade Atlas and USMEF estimates
Through November, Russia’s 2013 pork imports were down 18 percent from the same period in 2012

“We’ll see what happens over the next few days,” said John Brook, USMEF regional director for Europe, Russia and the Middle East. “The EU has a perfectly adequate regionalization system in place and plenty of experience in dealing with these circumstances. But in this situation, the EU is certainly dealing with some unique political influences.”

Another interesting question is how pork products will be handled that originate from Kaliningrad, a Russian exclave that borders Lithuania. Kaliningrad has a very well-developed meat processing industry that relies heavily on raw materials imported from the EU. While VPSS is unlikely to place restrictions on products processed in Kaliningrad because it is Russian territory, a prolonged trade impasse could prompt Lithuania and other EU member states such as Poland and Latvia to restrict transit of these products through their country.

USMEF Economist Erin Borror notes the stakes are also very high for meat processors operating on the Russian mainland, and for European exporters serving Russia.

“Russia relies heavily on European pork for processing, and the EU also relies heavily on Russia to fuel its exports,” Borror explained. “Russia accounts for 18 percent of the EU’s total export volume – second only to China. Russia is also the leading value market for EU pork, accounting for 21 percent of total export value. With Russia still closed to U.S. pork and taking limited quantities from Canada, Brazil will not be able to fill the void in Russia. If this trade impasse continues it will also force the EU to push more product into other international markets, meaning more competition for U.S. pork.”

“Some of Russia’s domestic meat processors suggest that a stoppage of imports from the EU could have very substantial consequences,” adds Yuri Barutkin, USMEF St. Petersburg manager. “EU pork accounted for nearly 60 percent of Russia’s total imports last year (from January through November, 532,000 metric tons). Imports of offals (90,500 mt) and pork trimmings (239,700 mt) were almost exclusively attributed to EU suppliers.”

Ukrainian news sources are also reporting that VPSS has requested that Ukrainian veterinary officials stop certifying pork exports to Russia. Following an ASF outbreak in the Lugansk region of Ukraine, VPSS suspended imports only from that specific region. However, this latest request suggests that VPSS is suspending import of all of Ukrainian pork exports, perhaps in an effort to make its policy toward the Ukraine consistent with the stoppage of all imports from the EU.

While ASF-related trade issues represent a significant threat to Russia’s pork supplies, the disease also continues to take its toll on Russia’s domestic industry. This week VPSS reported another outbreak of ASF in Russia – this time in the Tula region near Moscow, at a 50,000 head commercial pork facility. Russia has had two previous ASF outbreaks at large commercial facilities – one in southern Russia and one in central Russia. These facilities’ entire herds were liquidated.

USMEF will continue to monitor this situation closely and provide further updates as more details become available.