If Russia wants WTO membership, it must accept U.S. poultry, which could mean hundreds of millions of dollars to the state chicken industry
The poultry industry recently found itself in a unique position — the carrot dangling at the end of an international-diplomacy stick.
Late last month, President Barack Obama and Russian President Dmitry Medvedev struck an agreement to end the ban Russia had placed on U.S. poultry back in January. In return, the Russians are hoping to get favorable treatment as it continues to seek World Trade Organization (WTO) membership.
“This obviously is big, big news. The Russian ban was starting to really hurt a lot of our farmers,” said Danny Thornton, Mississippi State University Extension Service instructor in the Poultry Science Department and long-time chicken farmer.
Jon Jones, who operates a chicken farm in Simpson County, said, “I just am happy to hear some good news. I don’t know where my chickens end up, and I don’t really care, as long as someone is buying them.”
The stakes were high as Russia is the U.S.’ top poultry importer. Before the ban, the U.S. poultry industry was exporting 600,000 metric tons of product to Russia. Over the past three years, the value of domestic poultry going to Russia averaged $800 million.
For Mississippi, the Russian market is even more important. Almost half (47 percent) of all of the state’s exported poultry went to Russia before the ban. That is twice as much as the number two importer, China (23 percent). The farm gate value of Russian exports in 2009 was $165 million, compared to China’s $81.5 million.
For the last 13 years, poultry has ranked first among the state’s agriculture commodities. The state, which produces nearly five billion pounds of broilers annually, is home to some 2,000 chicken farms, and the industry as a whole directly employs approximately 24,000 workers.
“The lifting of the ban illustrates what I’ve been telling everyone for years — poultry is global,” said Mark Leggett, president of the Mississippi Poultry Association.
The issue, indeed, made headlines worldwide when Russia announced it would accept no more U.S. poultry beginning Jan. 1. Russia cited the U.S. industry’s use of pathogen reduction treatments, or PRTs, as the reason for the ban.
The industry uses chlorine-based PRTs to clean chicken carcasses of bacteria. The Russians claimed the PRTs were unsafe for consumers despite being approved by the U.S. Food and Drug Administration as well as the European Food Safety Authority.
The Russians had been accepting PRT-treated U.S. poultry for decades before the ban. Many wondered why the Russians would suddenly say “nyet” to U.S. poultry imports.
Jim Sumner, president of the USA Poultry and Egg Export Council who played a role in getting the ban lifted, puts one man in the center of the controversy, Gennady Onishenko, Russia’s chief sanitary officer.
“He just decided that chlorine is poison,” Sumner said. “He went zonkers on the deal. I don’t know if he’s sincere or not, but he is playing it as if he is sincere.”
Sumner said the negotiations with the Russians were complicated by a similar issue with the European Union (EU). In 1997, the EU put a halt to U.S. poultry imports because of PRTs.
This put the U.S. in a difficult diplomatic position when dealing with the Russians. If the U.S. bent to Russia and said chlorine-based treatments are harmful, the EU would use it as ammunition against lifting its ban on U.S. poultry, Sumner said.
In the end, the U.S. did not allow PRTs to be harmful, but agreed that processors would treat all chickens exported to Russia with any one of three alternative cleansers as opposed to chlorine. Those operations exporting to Russia will self-report which alternative they are using, and the U.S. government will verify that those operations are indeed using a cleanser other than chlorine.
Both Obama and Medvedev expressed relief when the agreement was announced June 24.
Certainly the Mississippi poultry industry is breathing easier. Russians prefer dark meat and leg quarters, and prices began falling for those cuts after the ban was enacted.
Mike Cockrell, CFO of Laurel-based Sanderson Farms Inc., said Russia was not a major customer of Sanderson, representing only about 2.5 percent of sales. Still, the reopening of Russia means approximately $50 million in sales to Sanderson, which produces some 12 million pounds of dark meat and leg quarters per week.
Improved prices for dark meat and leg quarters would benefit the entire industry in Mississippi, even those that do not export to Russia, Thornton said.
Cockrell estimated that the reopened Russian market could bring dark meat and leg quarters up by 10 cents per pound. Sumner called that estimate “conservative.”
Thornton said the ban’s lifting came just in time for producers, who were facing more than just depressed prices.
“Producers don’t like to go without chickens longer than 10-14 days. If they have to go, say, three weeks, they really start to feel it in their wallet,” he said. “If the ban had continued, producers might have lost one whole batch of chickens this year, which would have been devastating.”
“We have had two bad years in a row,” Leggett said. Input costs skyrocketed in 2008 due the rise in fuel and feed prices that squeezed the industry’s profits. While 2009 was better, it only “back-filled” the previous year, he said.
“We were looking for 2010 to be a bounce-back year,” Leggett said. “So, when the Russians enacted the ban, it was a tough blow. Getting the Russian market reopened gets us back to level, and the timing could not be better.”
Unfortunately, timing might be bad on another international issue. Late last month, U.S. authorities rounded up 11 individuals, accusing them of spying for Russia. This has infuriated the Russians, calling it Cold War tactics.
Both Leggett and Sumner expressed concern that the issue could derail the new export agreement.
“I don’t know if it will or not, but it makes me nervous. It is not a good time for this,” Sumner said.
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