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Russia buys Brazilian pork due to lack of choice

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Oscar Rousseau

By Oscar Rousseau+

21-Jul-2017
Last updated on 24-Jul-2017 at 13:18 GMT2017-07-24T13:18:52Z

Brazil's pork exports are falling, in spite of rising Russian imports
Brazil's pork exports are falling, in spite of rising Russian imports

Brazil pork exports are down amid political turmoil, but Russia, which has alienated the world’s biggest pig meat traders, has little choice but to buy Brazilian.

Shockwaves from the rotten meat saga and a corruption scandal at meatpacker JBS have hit Brazil’s pork exports, which have dropped 4% year-on-year in the first five months of 2017, claim Rabobank.

Russia has increased its pork imports from Brazil by 10% in the same period, although it lacks options after banning pork from the world’s top exporters – the US, Canada and the EU.

As Brazil still harbours serious ambitions of becoming a world-leading pork exporter , questions now turn to the countries that could help satisfy this dream.

‘Unsettling nature’

China is important for everyone and that’s part of the equation, but more important for Brazil in volume terms is Russia,” said Justin Sherrard, Rabobank’s global animal protein strategist.

Despite the unsettling nature of what has been going on in Brazil, and how traders might be cautious in places like China, Russia doesn’t have too many choices.

The view from Rabobank is that Russia will continue to be a key importer of Brazilian pork for at least another 18 months, after it extended its ban on EU pork. The level may drop slightly in that time, but a total collapse is unlikely.

Russia has different ideas

The question now is how Brazil is going to recover its meat exports in the second half of the year. They’re helped by favourable movement of currency, but hindered by this underlying question that traders are probably asking themselves: is this going to be a stop-start type of affair, or is this now back to business as usual? And until traders have really formed that view… I think there is going to be some caution in terms of buying from Brazil.

While Russia may be a key importer today, there are long-term concerns for Brazil as Vladimir Putin’s government has ambitions to become a self-sufficient meat producer. And competing with Brazil are big Russian meat processors, such as Miratorg and Cherkizovo, which are chasing ongoing growth and becoming export powers in their own right.

Russia may lack choices today, which favours Brazil, but the market could be significantly different in 18 months for both.

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