Q+A-U.S. seeks agreement with Russia on poultry trade

MOSCOW Mon Jan 18, 2010 7:47am EST

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MOSCOW Jan 18 (Reuters) - U.S. agriculture and trade officials begin two days of talks in Moscow on Tuesday in an attempt to keep Russia open to poultry supplies worth about $800 million in 2008. [ID:nN15203392] [ID:nLDE60E0XC]

WHAT IS THE PROBLEM?

Russia banned imports of U.S. poultry from Jan. 1. Imports cleared by customs before Jan. 19 are permitted. [ID:nLDE60D1JG]

Russia cites the use of chlorine as the reason for the ban. Consumer protection watchdog Rospotrebnadzor says the presence of chlorine in water used to cool poultry results in "the accumulation of by-products dangerous to human health" in and on the surface of the meat.

U.S. meat firms routinely use chlorine to kill bacteria that cause food poisoning. The country says the process is safe.

Russia restricts the use of chlorine in poultry plants to 0.5 parts per million. Jim Sumner, president of the USA Poultry and Egg Export Council, said this was 10 times lower than the standard chlorine content in U.S. municipal drinking water.

WHAT OTHER PRODUCTS ARE AFFECTED?

The poultry ban follows a separate round of restrictions on U.S. pork. Another Russian body, animal and plant health watchdog Rosselkhoznadzor, has banned pork from all but six U.S. processing plants for excessive antibiotic residues.

Beef could also be affected. Russia's veterinary service has asked the U.S. Agriculture Department by Feb. 1 to reinspect U.S. beef plants exporting to Russia. [ID:nN15223379]

Russia says suppliers should honour its food safety regulations and that all bans are on health and safety grounds. Critics of the bans, including some U.S. officials, say they could be politically motivated or protectionist in nature.

Russia wants Russia to become self-sufficient in meat and has invested billions of dollars to spur domestic production. [ID:nLG143853] [ID:nL8479744]

WHAT IS AT STAKE?

Exports of poultry, pork and beef together earned the United States more than $1.3 billion in 2008.

Russia bought $801 million worth of chicken from the United States in 2008, making it the No. 1 U.S. poultry export market.

Moscow allowed Washington to ship 901,400 tonnes of poultry under a quota set for 2008. It was cut to 750,000 tonnes in 2009 and 600,000 tonnes for 2010. [ID:nLC468862] [ID:nLDE5DK0BA]

Russia also bought $476 million of U.S. pork, ranking it among the top five buyers, and a further $95 million worth of beef, making it the 10th-largest export market for U.S. beef.

Russia's various meat bans could affect plants owned by several traded U.S. companies, including pork industry leader Smithfield Foods Inc SFD.N, Tyson Foods Inc (TSN.N), Sanderson Farms (SAFM.O) and Pilgrims Pride PPC.N.

Louise Slaughter, a U.S. lawmaker who has sponsored a bill to ban the routine use of antibiotics in livestock, said the Russian pork and poultry bans should be a cue for the United States to overhaul its meat safety laws. [ID:nN06148689]

WHO IS PARTICIPATING IN THE TALKS?

U.S. Agriculture Department Undersecretary Jim Miller and Assistant U.S. Trade Representative Jim Murphy will lead a delegation of more than 10 technical experts to Moscow.

Russia's team will be led by Gennady Onishchenko, head of the Rospotrebnadzor watchdog.

"We will be discussing the vast scientific evidence demonstrating the safety of using chlorine as an antimicrobial for poultry," USTR spokeswoman Nefeterius McPherson said.

The talks are expected to focus on poultry, and not pork. The pork bans have been administered on a plant-by-plant basis by another body, Rosselkhoznadzor.

HAS THIS HAPPENED BEFORE?

Moscow periodically removes U.S. meat plants from its approved export list, citing technical concerns. In 2006, Russia banned U.S. chicken for several months due to issues related to veterinary inspection certificates.

Russia cut its poultry quota by 24 percent to 952,000 tonnes in 2009 [ID:nLL548093]. On the eve of the quota negotiations, Rospotrebnadzor issued an order banning from Jan. 1, 2009 sales of poultry washed in excessive volumes of chlorine.

Rosselkhoznadzor then refused to issue import permits for 2009 to U.S. plants which did not provide guarantees they did not practice excessive chlorine washing. [ID:nL5622292]

After Washington agreed to the quota cuts, the new standards were postponed to Jan. 1, 2010 and the issue of permits resumed.

WHAT WILL HAPPEN NEXT?

Russia has adopted a tough stance. Prime Minister Vladimir Putin said on Jan. 14 that Russia would use other sources for its meat should U.S. supplies fail to comply with its laws.

Possible alternatives include Brazil, the European Union, Argentina, Canada, Turkey and Thailand, said Andrei Teriokhin, head of the Russian Poultry Market Operators' Association. But this would be both expensive and time consuming for Russia.

A prolonged ban could allow domestic firms, such as Russian market leader Cherkizovo (CHEq.L), to increase market share.

It would also hurt U.S. livestock and poultry producers already suffering from the worldwide financial crisis, and drive up domestic meat prices, as products that were previously exported start appearing on U.S. store shelves.

While analysts do not necessarily expect a breakthrough in this week's talks, many say Russia's poultry ban is likely to be short-lived as the market is so large.

Should the two sides reach a compromise on chlorine use, U.S. poultry supplies could in theory resume immediately. (Reporting by Robin Paxton, Aleksandras Budrys, Roberta Rampton and Bob Burgdorfer, writing by Robin Paxton; editing by Sue Thomas)

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