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Russian Pork Market Still Wobbly a Year after WTO Admission

30 September 2013

RUSSIA - It has taken a year for Russia's pork prices to climb back after the last plunge, which was triggered by the admission of Russia to World Trade Organisation (WTO). This rise would not have been possible without a host of events beyond purely market supply and demand interaction, writes meat market analyst, Andrey Dalnov.

Earlier this year, Rosselkhoznadzor, the Russian agency responsible for food security, began to shun key foreign meat suppliers due to their use of the growth promoter ractopamine.

US and Canadian producers fell victims to their habit to beef up their production through using the growth promoter. Of course, one can say that they had used it with impunity for some 15 years, but it is never too late for Rosselkhoznadzor when food security is concerned. As a result, the US was crossed off the list of meat suppliers in February, closely followed by Canada, which lost access to Russian market in April.

As a side effect, this motion provoked a fierce discussion on food forums of the flaws in the US domestic meat production system.

Brazilian pork producers have managed to escape the fate of its northern counterparts. Brazilians may be the heaviest users of ractopamine after China but it has firmly promised to provide only “clean” meat to the Russian market.

In April, the Russian government discontinued trade preferences for developing countries, which Brazil enjoined according to WTO rules, but it did not affect the volume of Brazilian pork exports to Russia. The preferences allowed eligible producers to pay 25 per cent less custom tariff on pork out of quota. Russian annual pork tariff quota is 430,000 tons. But, preferences or not, Brazilian export is well below potential and cannot be squeezed further without a country wide ban.

European pork producers do not mess with ractopamine. In fact the EU itself has long used this drug as a pretext to hinder pork imports from USA, Canada and Brazil. Although things have improved a lot since Upton Sinclair wrote his revelatory novel “The Jungle”, there is still no perfectly clean meat plant.

So, after an inspection carried out by Rosselkhoznadzor in April, virtually all Spanish pork facilities were canceled from exporters’ list as they failed to live up to Russian sanitary standards. Sixteen German facilities were “shut down” in late June on similar grounds. Germany and Spain are the key exporters of European pork to Russia.

Rosselkhoznadzor inspectors’ actions have prompted OECD agricultural policy analysts to question Russia's adherence to the WTO's Sanitary and phyto-sanitary (SPS) agreement. However, Russia does not have to fear any WTO sanctioned retaliation in the foreseeable future. 

After so many leading pork exporters had been cut out from the Russian meat market, imports fell 14 per cent below last year's volume. Domestic price of carcasses soared in late June and by mid-September reached 140 RUR - slightly higher than it was in the same period last year.

Russia's leading business newspaper Vedomosti claimed that “African swine fever (ASF) helped pork producers” to raise prices but there is no evidence that this summer’s ASF outbreaks disrupted logistics for a long time. Besides, no widening price gap between regions has been reported. And it is usually the case when production is locked in main producing areas.

So why does the Russian pork market appear not to be ruled by market forces at all? The answer is simple - Russian commitments under WTO accession protocol are not compatible with food self-sufficiency policies which had been promoted for more than a decade by various Russian governments.

The obligations which Russia promised to fulfill in order to become a part of WTO – an international body established to promote free and fair international trade – were coined during the most undemocratic process in shabby bureaucratic lobbies by few functionaries. Neither industry unions nor (allegedly) high rank Agricultural Ministry officials were aware of particularities by the time the Protocol was published.

Tariff barriers were dismantled. A striking example is the eight-fold decrease of tariff on imports of live pigs from 40 per cent to five per cent. In 2009, the Russian market was flooded by live pigs from Europe and only rise of tariffs helped to stem the imports.

Interestingly, in 2009, another country faced the same problem. Canada was steadily raising its export of live pigs to USA. The US answered with Mandatory country of origin labeling (MCOOL) of meat, which derailed business of Canadian and Mexican livestock exporters. This rule has been disputed by Canada and Mexico in WTO ever since.

Currently, there is no export of pigs to Russia as it had been banned by Rosselkhoznadzor even before the Protocol of accession came into force on 23 August 2012.

After signing the Protocol of admission to WTO, Russian officials must have found themselves in an awkward position. There is no possibility to protect domestic pork producers as they pledged to do without contradicting the spirit, if not the letter, of the document. It is sad, but there are no winners. So far WTO has failed to make the Russian pork market more predictable. Moreover, events in the Russian pork market indicate that Russia and WTO are going to be an unhappy "couple" and that their "marriage" was premature.

ThePigSite News Desk

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