Brazilian Meat Exports Set to Benefit from Russia - Ukraine Crisis

08/07/2014 - 09h06

The political crisis involving Russia, the United States and the European Union is likely to benefit Brazilian meat exports.

The country may add nearly US$ 300 million to its revenues from chicken exports alone.

On Wednesday, Russia suspended imports of raw materials from countries imposing sanctions on it in response to the Ukraine conflict.

The measure, which will last for a year, was taken to "protect national interests", according to the Russian government.

Russian authorities then increased the number of Brazilian companies authorized to export beef, pork and chicken to the country from 30 to around 80.

This clearly shows their intention to replace products lost as a result of the Ukraine crisis with Brazilian imports.

This plan has its origins in a meeting in Paris two months ago, between the Russian Minister of Agriculture, Dankert Sergey, and his Brazilian counterpart, Neri Geller.

Sergey told Geller that Russia would be in urgent need of meat and the Brazilian imports would be given preferential treatment.

OPPORTUNITIES

The most lucrative opportunity from Brazil's point of view is in chicken.

The country could increase exports from 60,000 to 210,000 tonnes per year, occupying a slice of the market left vacant by the United States.

It could also cover the gap left by the EU, estimated at 40,000 tonnes.

If indeed Brazil manages to sell these extra 150,000 tonnes of chicken, it will add US$ 300 million dollars to its trade balance.

In 2013, it exported 3.9 million tonnes of birds at a value of US$8 billion, 60,000 of which went to Russia.

In the case of pork, Brazilian producers may not be able to satisfy Russian demand immediately, as demand and production are internally adjusted.

One reason for the lack of the pork is the complex relationship between Russia and Brazilian exporters.

Russia frequently reduces the number of firms licensed to export goods to Russia, thus checking increases in Brazilian production.

The last serious embargo on Brazilian pork occurred in mid-2011. Given all the potential complications, the sector wants to diversify further its markets so as not to be too dependent on exporting to any one destination.

Regarding beef, the good news is the opening of the market for innards.

Russia is already one of the main consumers of Brazilian beef and their increasing demand may result in increasing beef prices across the markets - including for the Brazilian consumer.

As the Russian initiative comes at a time of weak internal demand in Brazil, part of the production may be sent abroad, which will put further pressure on prices within the country.

With additional material from LEANDRO COLON in London

Translated by TOM GATEHOUSE

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