Will America’s PEDv stymie President Putin’s EU pork ban?

A month or so ago the Russian ban on imports of pork from the EU looked like it might hit Europe’s pig producers very hard indeed. Around 25% of the EU’s exports of pigmeat are destined for Russia in an average week so the sudden cessation of this trade on the pretext of finding African Swine Fever (ASF) in a few wild boars in Lithuania and Poland would be expected to  have a very depressing effect on prices. And indeed this was the initial impact. But then no-one had factored in the PEDv outbreak in the USA – which is now spreading through North America to Mexico and Canada. Russia had previously banned US pork from its shores on the basis that US exporters could not guarantee the (much lower) Russian residue limits for beta agonist growth promoters in US-sourced pork. That argument had been going on for several months and had taken a chunk of US production out of the world’s global pork export  supply – and the EU’s producers had probably gained from that US-Russian wrangling. But when ASF was found in Lithuania early this year (which most probably originated from wild boars in Belarus or Russia where ASF is endemic) the scene looked set for Russia to play the EU-ban card and, simultaneously, approve some US pork plants and effectively lift the ban on American products. In fact, officials from the Russian veterinary and phytosanitary authority were scheduled to meet US officials in Washington in early March. High politics then intervened because that meeting was cancelled: the USA was looking for reasons not to cooperate with Russia in order to penalize Russian “adventures” in the Crimea and Ukraine.

Now, the USA has been prepared to play the “commodity card” with Russia before now so it would be easy to connect a cancelled meeting with a larger geopolitical strategy but it may just have been coincidence that the phytosanitary meeting was in the diary just at the time when State Department officials were looking around for meetings to cancel. But think about this sequence of events. The impact of America’s PEDv has been large and may still be growing and US hog prices have increased by +60% in 2014 over last year. Analysts are predicting a shortfall in domestic supplies of between 3-10% in 2014. Whatever the number, US hog producers are not missing the Russian export market at the moment – and if they did supply the Russian population with pork bellies America’s domestic prices would face even more upward pressure. USDA officials would, presumably, have let the State Department know this. PEDv has, in effect, taken the sting out of Russia’s trade tantrums.

So, with the USA not able/willing to make up the self-inflicted pigmeat deficit that Russia faces EU pig prices have started to recover – not because the trade with Russia has resumed but the hole in Russia’s import demand is probably being partially filled by non-EU and non-US exporters. I guess Canadian, Brazilian and Chilean suppliers are doing well out of this – perhaps even some Chinese processors. It’s funny old world.