Reuters recently reported that Russia has placed a ban on numerous food products from the U.S., the European Union, Canada, Australia and non-EU member Norway. Cattle (live and feeder) and lean hog futures are sharply lower, most likely a result of the move by Russia. The geopolitical unrest in the region has been looming over markets since it became front page news, but this move directly impacts the agricultural sector.
First, U.S. beef exports are small in comparison to the amount of U.S. beef that is consumed domestically. Approximately 10% of beef produced in the U.S. is exported. Of the beef exports, Russia is in the tail of our major trading partners. More specifically, of the eight major beef export markets that the U.S. ships to on a regular basis, Russia ranked #7 in 2008, #8 in 2009, #8 in 2010, #6 in 2011, #6 in 2012, and #8 in 2013. The percentage of all beef exports sent to Russia from 2008 to 2013, respectively, was 2.4%, 0.7%, 3.5%, 5.2% (the high water mark for U.S. beef exports to Russia), and 0.01%. So, while any market is important, beef exports to Russia should be kept in perspective and for 2013 and 2014 (through May) Russian exports have been minor.
Where the impact will be felt the most in the livestock sector is with the pork market. In 2013 Russia banned U.S. pork from entering the country and that had a sizable impact on hog and pork prices. Russia is a much larger player in the pork export market for the U.S. From 2008 to 2013 the percentage of total pork exports sent to Russia were, respectively, 9.2%, 6.9%, 3.6%, 3.7%, 5.1%, and 0.3% (much of 2013 was under the ban). The high water mark was in the mid-1990’s, with 1995 pork exports to Russia accounting for 19.4% of the total. Russia consistently ranks as the U.S.’s 5th, 6th, or 7th largest pork trading partner.
U.S. livestock markets are reacting in a negative way to Russia’s trade ban on food products. This is not surprising. The larger impact on the hog/pork market is trickling into the cattle/beef market. Both on are edge given that prices remain at record levels, with even the slightest hint of sour demand news providing the fuel for a pull back.
Russia’s policy (untranslated): http://government.ru/media/files/41d4f8cdfeeb731522d2.pdf