Will Russia return as the world’s largest beef importer?

Will Russia return as the world’s largest beef importer?

Once the world’s largest beef importer, Russia has cut off nearly all trade. Will it return as a player in the world beef trade?

Just four years ago, Russia was the world’s leading beef importer, receiving shipments from nearly all of the world’s major suppliers. A year later, Russia would complete its accession to the World Trade Organization, making it – at least in theory – an even more attractive destination for beef exporters.

It was in 2012 that U.S. exports to Russia reached their peak – totaling 80,408 metric tons (mt) valued at more than $300 million. In early 2013, however, the Russian market closed to U.S. beef due to an impasse over the use of beta agonists, and it remains closed today. The U.S. is hardly alone, however, as a combination of technical barriers, economic sanctions and counter-sanctions and a sharply devalued ruble has greatly limited the number of beef suppliers serving Russia and the volume of beef entering the market.

Beef muscle cuts are included in the food import embargo announced by Russia in August 2014, which suspended imports of most food products from the U.S., the European Union, Australia, Canada and Norway. This action was taken in retaliation for economic sanctions imposed against Russia due to the ongoing conflict in Ukraine. But even prior to this embargo, Russia had closed its doors to several suppliers.

Canadian beef has been effectively out of the Russian market since 2012, also due mainly to Russia’s policy on beta agonists. In early 2014, Russia began restricting imports of Australian beef due to findings of residues of the growth promotant trenbolone. By July 2014, the market had closed to all Australian beef.

The beef supplier most impacted by the August 2014 embargo was the European Union, which had shipped nearly 54,000 mt of beef and beef offal to Russia in the first seven months of that year, valued at $161 million. With access now limited to beef variety meats, EU exports have plummeted more than 95% from a year ago, totaling (through July) just 2,840 mt valued at $4.7 million.

One might think that the restrictions imposed on these countries would have opened up growth opportunities for Russia’s remaining suppliers, but this is not the case. A depressed currency and plunging consumer confidence have caused Russia’s imports of all goods to decline by about 40% in 2015, and beef imports have followed a similar pattern. Through July, Russia’s beef and beef variety imports were down 31% in volume (283,000 mt) and 39% in value ($917.6 million). Imports were lower from nearly all major suppliers, and although a small volume increase is shown for Argentina, those imports have shifted to primarily variety meats as China outbids Russia for Argentine muscle cuts.

Russia’s Beef Imports in 2015

January-July, with % change from a year ago)

                                                Volume                                                Value

Brazil                           92,689 mt (-33%)                                $338.8 million (-43%)

Belarus                        69,803 mt (-23%)                                $230 million (-16%)

Paraguay                    58,483 mt (-14%)                                $202.3 million (-27%)

Argentina                     29,551 mt (+2%)                                 $65.8 million (-17%)

Uruguay                      6,262 mt (-57 %)                                 $17.2 million (-70%)

New Zealand               4,357 mt (-12%)                                  $9.1 million (-40%)

The one notable exception is Russia’s imports of Ukrainian beef, which more than doubled in volume (12,706 mt) and increased 57% in value ($33.2 million). Late last year, Russian officials touted India as a potentially large beef supplier and approved several plants to serve Russia. But significant trade with India has not materialized, as Russia’s imports totaled only 3,476 mt valued at $12 million.

Russia definitely has aspirations of self-sufficiency in meat production, but that goal centers mostly on its poultry and pork industries, rather than beef. Nonetheless, in the past five years, significant investments have been made toward creating a modern beef industry in Russia, built around top-tier genetics and grain feeding. Although the scale of this initiative is still quite small, Russia’s domestic beef producers have benefited from reduced imports, especially in the high-end restaurant sector where competition from imports has been greatly diminished.

But for Russia’s beef industry to achieve sustained success, it will need to become more competitive in both the domestic and international markets. This point was recently driven home by Russian Prime Minister Dmitry Medvedev in a speech published by Rossiyskaya Gazeta, an official government news source, in which he cautions against closing domestic markets to foreign competition. Medvedev noted that the absence of foreign suppliers across many sectors is damaging the competitiveness of the Russian economy.

Editor’s Note—Joe Schuele is vice president, communications for the U.S. Meat Export Federation. He is based in Denver, Colo.

Data source: Global Trade Atlas

 

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