March 5, 2012

Brazilian Processors Frustrated by Russian Meat Embargo

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Officials from the state of Parana continue discussions with their Russian counterparts on what needs to be accomplished in order to lift the Russian embargo on Brazilian meat products imposed in June of 2011. The sudden embargo surprised everyone in Brazil because Russia is the main purchaser of Brazilian meat and there was no indication whatsoever that the Russians were dissatisfied with sanitary practices in Brazil.

In June of last year, Russian officials imposed the embargo on 25 Brazilian meat processing facilities because of what they said were inadequate sanitary practices at the facilities in question. Brazilian officials have not accepted that explanation and they have felt all along that the embargo was a decision based on internal Russian politics.

At the same time they were imposing an embargo on Brazilian products, Russia was opening new accounts with members of the European Union and the United Sates, which has led Brazilian officials to speculate that the real reason for the embargo was to facilitate Russia's entry into the World Trade Organization. Whatever the true reason, Brazilian meat processors are increasing their sanitary standards and hiring new inspectors while at the same time, trying to cope with a sudden decrease in their exports.

The Russian meat embargo impacted mainly processing facilities in Parana, but there are also embargoed facilities in Mato Grosso, Sao Paulo, and Rio Grande do Sul. As a result, total pork exports from Parana fell 29% in 2011 and total gross receipts from pork exports fell 22%. Poultry exports from Parana to Russia have fallen 97% since the imposition of the embargo.

In response to the embargo, the state legislature of Parana recently created a new agency called the Agency for the Defense of Agriculture and Livestock (Adapar) whose goal is to correct any real or perceived deficiencies in the state's food processing sector. The agency has already indicated that it intends to hire 300-400 more inspectors bringing the total to 1,200 inspectors in the state.

At the same time that Russia declared that the sanitary practices in Brazil did not meet their standards, the USDA declared that pork processors in Brazil will be authorized to start exporting pork to the United States. While Brazilian officials feel there was no rational basis for the embargo, they are nevertheless continuing to meet with their Russian counterparts in an attempt to resolve their differences. Shortly after the embargo was imposed, Brazilian officials felt the differences could be worked out quickly, but it has already been nine months and only limited progress has been made in bridging their differences.