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Russia May Resume Import of Some EU Pork Products, but Impact Will Be Limited

The European Livestock and Meat Trades Union (UECBV) has announced that recent meetings between veterinary officials from the European Union and Russia “should allow a resumption of the EU export of some products from the pork sector to Russia.” Russia suspended pork imports from the EU in late January 2014 due to findings of African swine fever (ASF) in Lithuania, Poland and Latvia.

This comes as welcome news not only to the European pork industry, but also to suppliers in the United States and other pork-exporting countries. Many markets, especially in Asia, have been significantly impacted by an influx of EU pork that would otherwise have been destined for Russia (see export results below).

It is important to note, however, that the above-referenced meetings between the EU and Russia only addressed the ASF-related impasse, not the food embargo imposed by Russia in August 2014. At that time, Russia suspended imports of many food products from the EU, U.S., Canada, Australia and Norway in retaliation for economic sanctions imposed by those countries due to the political conflict in Ukraine.

Under the decree that ordered the August food embargo, pork muscle cuts and trimmings from the EU still could not enter Russia even if the ASF-related suspension is lifted. So the resumption of EU exports would be limited to fat and variety meat, and UECBV estimates that it would likely restore trade to about 40 percent of previous levels.

Last year (through November) EU exports of pork fat totaled 201,960 metric tons (mt), down more than 40 percent from the same period in 2013. Larger exports to a number of markets could not offset a 92 percent decline to Russia, which had taken nearly 70 percent of EU pork fat exports in 2013.

Russia was also a significant market for EU pork variety meat exports, but to a much lesser degree than for pork fat, taking about 10 percent of EU exports in 2013. Last year those losses were offset by widespread growth elsewhere, as January-November exports actually increased 6 percent to 991,940 mt. The China/Hong Kong region now takes about 70 percent of EU pork variety meat exports, with volumes also increasing to the Philippines, South Korea and Thailand.

So the UECBV announcement is encouraging, because it represents the first sign of progress in several months on restoring pork trade with Russia. In the near-term, however, it may only help ease the pain on EU pork fat prices and have little impact on the competitive landscape for muscle cuts and variety meat. USMEF understands that most EU pork fat supplies have either been exported or sold into other channels, so there are no large stockpiles in freezers. Any resumption in access to Russia would impact future fat production and help boost fat prices.

US-EU-Hog-Prices

Another interesting development from the EU-Russia meetings is the possibility that Russia’s Veterinary and Phytosanitary Surveillance Service (VPSS) may begin working with individual EU member states, rather than the European Commission, on relisting plants – a significant departure from the situation that has existed since last year when Russia suspended imports from the EU.

EU pig prices remained in the doldrums in the first half of January, averaging $68.11/cwt last week, down 32 percent year-over-year in dollar terms and down nearly 20 percent in euros. Although the gap has narrowed, U.S. prices remain about 8 percent higher than EU prices.

Piglet prices edged slightly higher over the past two weeks but were still down 27 percent year-over-year in euros, averaging $41.95 per head. Prospects of larger global supplies and the continued lack of access to the EU’s historically largest market, have weighed on prices.

EU-Pork-VM-Exports

EU pork/pork variety meat exports remained robust in November at 255,911 mt, down just 1 percent year-over-year following a huge October volume of 293,379 mt (up 15 percent). January-November exports of 2.528 million mt were slightly higher year-over-year as strong growth to China/Hong Kong, Korea, Japan, the Philippines, the United States, Taiwan and Australia offset the loss of Russia and a steep drop in exports to Ukraine. Excluding variety meat, however, pork muscle cut exports were down 3 percent to 1.536 million mt.

EU pork is expected to remain a formidable competitor over the coming months, especially as the euro dropped to $1.12/USD on Jan. 23 following quantitative easing by the European Central Bank. This is a multi-year low, and down about 20 percent from a year ago. Europe’s pork supplies are also expected to remain ample, with the European Commission forecasting a slight increase in production this year.