Impact of Russia’s ban on U.S. poultry small, unless it’s your chickens

08/07/2014 5:51 PM

08/09/2014 6:21 PM

Russian retaliatory sanctions announced this week against U.S. and European agricultural products are minuscule in the grand scheme of global trade but are hardly paltry for poultry producers in the Carolinas and across the South to Texas.

The sanctions against more than $1 billion in annual U.S. farm exports to Russia pale compared with the isolation many Russian energy and financial firms are now feeling in the wake of a blacklisting by both Europe and the United States.

Yet Russia’s actions in response carry some bite, whether it’s on salmon roe exports from Washington state or on almonds and pistachios grown in California. It’s especially true for chicken and turkey raised or slaughtered in the Carolinas, Mississippi and Texas.

“Fortunately, Russia is not as significant to us as an industry as they were,” said Mike Cockrell, chief financial officer for Sanderson Farms, a large poultry producer and exporter with operations in North Carolina, Texas, Louisiana and in its home state of Mississippi. “In 2008 they represented about 20 percent of our industry’s exports.”

That’s not to say Russian sales are inconsequential. Sanderson Farms shipped 87.5 million pounds of product there last year, worth about $40 million.

“Forty million dollars is certainly a lot of money, but at the end of the day we and the industry will seek out alternative markets for our product,” said Cockrell, noting that the $40 million represents about 1.5 percent of his company’s total sales.

Pilgrim’s Pride Corp., headquartered in Greeley, Colo., is also a major poultry exporter, doing business with 105 countries. But it was mum Thursday on the impact of Russia’s sanctions.

“We are not providing any comment at this time,” said Rosemary Geelan, a spokeswoman. Pilgrim’s Pride operates in Texas, Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, North Carolina, South Carolina, Tennessee, Virginia and West Virginia.

Tyson Foods is another major poultry and meat exporter to Russia. Its website notes that Russia accounted for 3 percent of all its chicken exports in fiscal 2012 and 9 percent of its pork exports.

“We don’t report export volumes for specific counties,” said Worth Sparkman, a company spokesman, adding that “we’re disappointed about the loss of the Russian market but don’t expect the impact to be significant since the volume we ship there can be absorbed by other global markets.”

After the U.S. and the European Union ratcheted up sanctions against Russia last month, retaliation was expected. Sanderson’s sales force actively sought new markets for dark chicken and turkey meat for weeks before Wednesday’s announced retaliation.

“You don’t find alternative markets for 87.5 million pounds of chicken overnight. It will take us some time to do that,” Cockrell acknowledged, adding, “We’ve done a pretty good job diversifying our exports.”

Sanderson Farms exports some product from a facility in Kingston, N.C., but most of its exports originate at de-boning plants in Waco, Texas, Hammond, La., and operations in the Mississippi cities of Laurel, Collins and Hazelhurst. The company is shopping potential sites for a new plant near Fayetteville, N.C., which will be more export focused. Much of its chicken exports now go through the Port of New Orleans.

About 3 percent of the exports moving through South Carolina ports, namely Charleston, are bound for Russia. Food and agriculture products account for about 12 percent of all the cargo bound for Russia, according to data crunched for McClatchy by the South Carolina Ports Association. South Carolina ports last year moved about 1,800 20-foot containers of food and agriculture products to Russia.

Georgia’s Port of Savannah also handles a large volume of poultry exports.

“We are monitoring the trade embargo to Russia very closely. The primary export ag commodities that move through our ports to Russia is poultry and peanuts, very important markets for the state of Georgia,” said Curtis Foltz, executive director of the Georgia Ports Authority. “The sanctions have just been announced and our customers are evaluating the impacts to Russia and any opportunities in alternative markets.”

The Russian ban on poultry is not a first. U.S. poultry was banned during the Bush administration in 2003 and 2004 when Russia objected to trade penalties levied against Russian steel. Poultry was again targeted again briefly in 2010.

While an inconvenience for U.S. exporters, the poultry sanctions ultimately hurt the Russian consumer. Russian poultry is more expensive because the country has to import feed, and U.S. producers enjoy numerous cost advantages.

“We don’t sell chicken to Putin. We sell chicken to Russian consumers, and they are going to be the ones that suffer from this,” predicted Cockrell. “If that’s what Putin wants to do, it’s his consumers suffering as a result.”

The United States chose not to impose sanctions that could hurt ordinary Russians, so Russia’s announcement Wednesday carried some irony.

“What the Russians have done here is essentially to impose sanctions on their own people,” David Cohen, the Treasury Department’s undersecretary for terrorism and financial intelligence, said in a call with reporters.

Russia’s government is limiting access to food, a move, said Cohen, “that the U.S. and our allies would never do.”

The checkered history of Russia using poultry imports as a political weapon spurred other U.S. poultry companies to steer clear of that market.

“It was just such an up-and-down market,” Mitch Mitchell, vice president of sales for Case Farms in Morganton, N.C. , which had taken the decision before he joined the management team, but it was the same one taken by his prior employer. “We just got tired of the roller-coaster.”

Case Farms exports about 10 percent of its product, mainly to South Korea, China and elsewhere in Asia. A protracted cutoff of Russia could lead to lower profits from poultry exports, he warned, if companies are all courting the same buyers for U.S. chicken.

Lesley Clark of the Washington Bureau contributed.

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