Russia is an extremely important and strategic market and has kept bilateral relations with Brazil for years. Regarding livestock, Russia is an important purchaser of Brazilian pork, beef and broiler. Over the last years, Russia has consolidated as the major purchaser of Brazilian pork and is currently the fifth beef buyer. Russia was the major beef purchaser in 2014. Only in 2017 (until October), Russia alone accounted for almost 40% of pork and 11% of beef shipments from Brazil.
Brazilian shipments of beef accounted for roughly half of the entire volume (48%) of beef that Russia purchased in 2016. Paraguay is the second major beef supplier to Russia and last year alone, Paraguay accounted for 28% of beef exportations to Russia. Paraguay is an important player in the international scenario, with potential to grow and to open new markets. However, although 63% of the Paraguayan production is focused on the international scenario, the limited herd from the country (13.8 million animals, according to Senacsa, roughly 6.3% of the Brazilian herd) prevents Paraguay from becoming the major beef supplier to Russia, at least in the short-term.
As for swine, the Brazilian participation is even higher – Brazil supplied 93% of all Russian purchases in 2016.
Russia’s dependency on Brazilian beef is significant and it is hard to find suppliers in the short-term. As for pork, some European countries have been increasing their production; however, this depends on grains from Brazil. For these European countries to increase production and take Brazil’s place as pork suppliers, environmental problems may be a barrier, as already seen in the Netherlands and Germany, where concentration of swine herds has contaminated table water, causing health problems to the population. In Brazil, this type of event is highly unlikely in the Central-West, due to characteristics of weather, environment and soil.
Russia has also shown a strong intention to increase its protein production, and pork is among them. For that purpose, the country would need to create a profitable production structure, due to high production costs with grains importation and structures to face severe winter.
In this scenario, recent news indicating that Russia will embargo Brazilian pork and beef from December 1 concerns the domestic sector, but to a certain extent. The fact that the sector is not alarmed is also related to the “tradition” of Russia temporary embargoing purchases of Brazilian meat.
Moreover, meat exportations to Russia decrease this time of year, due to weather conditions. Winter in the Northern Hemisphere freezes most channels in Russia, hindering the entrance of ships into the ports. In other words, Brazilian meat (or any other product) would have difficulties to arrive in Russia this time the year.
In 2016, from November to December, pork shipments to Russia dropped 43% and, in the same period of 2015, a staggering 47.3%. As for beef, exportation usually decreases from October to November. In 2016, the drop was 30% and, in 2015, 58.4%.
Embargos imposed by Russia recently were temporary, due to many reasons and to one or several Brazilian slaughterhouses. This time, Rosselkhoznadzor (veterinarian and phyto-sanitarian service in Russia) announced on November 20, the embargo of all pork and beef purchases from Brazil, claiming the occurrence of ractopamine in pork samples.
Ractopamine is a growth promoter and is prohibited in Russia. It is used in the pork production and is allowed in Brazil and other destinations of the Brazilian meat. The substance has its use authorized in countries with strict sanitary regulations, such as the United States and Canada. Besides, there is no proof of harm to meat consumers. Some analysts say that the embargo means pressure from Russia to free the entrance of wheat and other products into Brazil.
FUTURE – Players surveyed by Cepea are unanimous. They all believe the embargo will be suspended soon. The domestic sector is optimistic regarding future meat sales to that country. In 2018, Russia will host the World Cup, an event that can bolster meat demand.
RECOVERY SIGNS – After the crisis over the last years, Russia has given signs of recovery. Data from the World Bank indicate that the Russian GDP might increase roughly 1.4% this year, a small percentage, but significant for an economy that, in 2015, registered a decrease of 2.8% in the GDP.