Russian deal on U.S. beef reported
Posted on Wednesday, December 12, 2007
Russia recently bought its first U. S. beef since mad-cow disease scared off international buyers four years ago, a beef industry economist confirmed Tuesday.
Gregg Doud, chief economist of the National Cattlemen’s Beef Association in Washington, said recent reports that Russia purchased whole-muscle beef were true, but declined to name the source for his information. The $ 500, 000 beef deal was possible because of recent trade talks and a weakening dollar, which makes U. S. meat more competitive internationally.
Russia and 60 other countries cut off U. S. beef after the discovery of bovine spongiform encephalopathy, or madcow disease, in a Washingtonstate cow in December 2003. Most markets have reopened, but Japan and China maintain restrictions on U. S. beef, and South Korea is currently banning all U. S. beef.
Officials at Springdalebased Tyson Foods Inc. said it has not shipped any beef to Russia from its U. S. plants, but agreed that meat exports — including pork shipments to Russia — have been aided by a weaker dollar.
With Asian markets flagging, Russia could provide some stability in U. S. beef exports, some economists contend. Others say this could be a short-term value purchase by the Russia.
“One transaction isn’t a trend. We need to see more things occur here. But what it clearly indicates is that certain types of U. S. beef are competitive with Brazilian and South American beef,” Doud said.
U. S. beef is more attractive to Russia today because the dollar has declined against the Russian ruble, while the currency of beef-exporter Brazil, which regularly sells to Russia, appreciated against the ruble.
In January, a dollar would buy 26. 31 rubles, but on Tuesday it had fallen to 24. 44 rubles. In January, the Brazilian real was worth 12. 31 rubles. On Tuesday, the real could buy 13. 89 rubles, indicating a strengthening of its currency that makes Brazilian beef more expensive on the world market.
“It’s difficult to say there is a big strong trend, but it is taking a few more rubles per real,” said John Kruse, an agricultural economist for Lexington, Mass.-based Global Insight, a market analysis firm.
Russia’s economy is one of the fastest growing in the world, partly due to a surge in oil revenue, Doud said. Like other countries with growing middle classes, Russia has acquired a taste for more expensive meat products.
Historically, Russia has been a small buyer of U. S. beef.
Before the ban in 2003, Russia bought $ 44. 5 million of beef variety meats, which include livers, hearts and kidneys, and $ 8. 6 million of beef or veal. That same year, Japan, the largest buyer of U. S. beef before the ban, bought $ 1. 15 billion of beef, and $ 224. 5 million of variety meats.
“While we certainly value the Russian market, it’s difficult to say whether it could ever be as significant as the Korean and Japanese markets once were to the U. S. beef industry,” Tyson spokesman Gary Mickelson wrote in an e-mail Tuesday.
Erica Rosa, an economist with the Livestock Marketing Information Center in Colorado, said Russia’s propensity to find the cheapest deal on the market may limit the upside for domestic producers.
“Russia is very fickle sometimes, but when the dollar does appreciate, we could see some loss in tonnage,” Rosa said.
It’s unclear when the dollar could begin to appreciate against key currencies.
Economists at Global Insight predicted Tuesday that the dollar will likely reach a “trough” against some currencies in 2008. Global Insight predicts a general slowdown in the U. S. economy in 2008, which will mirror cooling in other regions of the world, including Asia.
However, Global Insight said the weakening dollar would continue to strengthen global exports and the overall economy.
The weak dollar also will promote the export of corn, soybeans and wheat, Kruse said.
Rising foreign shipments of corn could cause more upward pressure on corn prices. In turn, that would increase the farm costs of raising cattle, resulting in tougher margins for U. S. packers.
“Right now we are looking for the strongest corn exports since 1979, because of the weak value of the dollar. That’s despite all the demand in ethanol. That tells you how weak the dollar has become,” Kruse said.
In other export news, China agreed to allow pork into its market from six U. S. processors that were banned earlier this year for using ractopamine in pig feed, the U. S. Trade Representative said Tuesday. China delisted a Tyson plant this summer for ractopamine, but company officials said Tuesday they had not learned if China cleared it for export. The U. S. Trade Representative did not name the plants cleared, which was one outcome of the U. S.-China Joint Commission on Commerce and Trade meetings this week. Tyson shares fell 29 cents, or 1. 89 percent, to $ 15. 03 in Tuesday trading on the New York Stock Exchange.
To contact this reporter: dirvin@arkansasonline. com
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