Russia’s Christmas present for US exporters

When a story gets into the Wall Street Journal we all take note.  And the report by Kelsey Gee and Bill Tomson at the weekend that Russia wants all US pork exports to Russia to be certified free of ractopamine made the market take note – hog futures fell. According to the Wall Street Journal the absence of a residue testing programme for ractopamine by the USDA would mean that all US pork exports to Russia are effectively halted. This is not the first time that ractopamine has got in the way of smooth trade flows between Russia and the USA – and between the USA and other countries. If you believe that “the customer is always right”, there is only one thing to say. Get a residue testing programme in place – quick. That might fly in the face of WTO-purists who would argue that the WYO has accepted that small amounts of ractopamine residues in meat export products are OK. But any appeal to the WTO and, eventually, an appeal to the disputes settlement body would take months and years. Much longer than it might take to set up a ractopamine testing system for exports.

But a foolproof residue testing is not something that can happen overnight – not across the board anyway (and would there be sufficient supplies of ractopamine-free pork?). The short term questions is will this mean a decline in the US hog price?

Context is everything when we look at this issue. The Russia export market is not bigfor the USA – c. 9,000 tonnes sold in September in a monthly total of c. 150,000 tonnes (6%). The 2012 YTD US pork sales to Russia are c. 70,000 tonnes in an annual total of 1.6 million tonnes (4%). But the growth rate is high – up 26% so far this year whilst other markets are not moving ahead so fast. US sales to China are up just 13% this year and slowing in monthly year on year comparisons – whilst the Japanese market is down 6% YTD. However, US pork sold in the Canadian market has grown by 16% in 2012 and this gives a clue as to why the impact of the Russian dictat may not be so large. If Russia wants pork imports (and, strangely, this is a question that needs to be asked) then it can only get them from a relatively few overseas sources. Canada is one of them. And, if Canada’s sales to Russia increase, I bet we will see US sales to Canada jump in order to make up the gap – since the Canadian hog industry is in no shape to expand short term. That suggests US hog prices should not get trashed.

Dr John Strak, Editor Whole Hog