Russia names banned poultry plants

It's a game of political chicken, and U.S. poultry producers are caught in the middle.

Russia, the top market for U.S. chicken exports, will be banning imports from at least 19 plants on Monday. While U.S. producers say these bans won't have much impact, they wonder if there are more bans to come _ which could further dampen an already weak industry.

On Thursday, Russian Prime Minister Vladimir Putin announced the bans in an interview with CNN, citing what he said were ignored warnings about inspections.

Companies affected, including Tyson Foods Inc., the world's largest meat producer, are vowing to right any wrongs, if need be. The industry's trade group said it had been expecting Russia to reduce imports anyway, as the country's own production rises. It downplayed any threat to the U.S. industry.

But still, Russia is a key market for U.S. chicken producers at a time when they're seeing profits squeezed by high costs for grain and fuel and a U.S. market so oversupplied it's keeping prices low.

In the first half of the year, U.S. producers shipped $395.7 million worth of broilers to Russia. That was up 42 percent from the previous year, while volume grew 20 percent.

Plants affected include at least two owned by Tyson, two from Sanderson Farms Inc., the nation's fourth-largest chicken producer, a Jennie-O Turkey plant owned by Hormel Foods Inc., and other companies.

Putin has said the move has nothing to do with tension over the recent fighting in Georgia and was purely economic.

But Mike Cockrell, chief financial officer of Laurel, Miss.-based Sanderson Farms, doesn't see it that way. Russia has banned U.S. poultry before, and sometimes it comes during times of political tensions, he said.

"It appears chicken is still being used as a political tool," he said.

The bans starting Monday won't hurt business, he said, because production at the two affected plants _ both in Mississippi _ can be shifted to at least two other plants approved by Russia.

But the big concern, he said, was if Russia started banning more plants. He said based on comments this week _ including the country's top agriculture minister saying it wanted to cut poultry and pork imports by hundreds of thousands of tons _ anything is possible.

Russia also issued a cautionary statement to 29 other U.S. plants, saying their products showed levels of certain substances higher than Russia allows, according to the U.S.A. Poultry & Egg Export Council, an export arm for the industry.

Exports have been one of the saving graces as the industry tries to offset a weak U.S. economy, Cockrell said. So more cuts could be bad news.

"They're not as big as they used to be," he said of Russia's appetite for U.S. poultry imports. "But they're still the most significant and if they quit buying, that would certainly dull that bright spot."

Shares of major meat companies have been down since the chicken tensions flared. Shares of Tyson fell 47 cents, or 3.1 percent, to close at $14.52 on Friday, while Sanderson Farms shares fell 5 cents, or 0.15 percent, to close at $34.31. Hormel fell 46 cents, or 1.3 percent, to close at $35.66.

Pilgrim's Pride Corp., the nation's largest chicken producer, saw its shares tumble 3.6 percent to $12.84. The Pittsburg, Texas-based company was not on any of the banned lists.

Shares of Smithfield Foods, the nation's largest hog producer, fell 62 cents, or 3 percent, to $20.11, even though Russia hasn't said anything definite about pork imports.

If there were more bans, Cockrell said, the industry would have to further cut its production so prices don't keep falling. Meat producers are already cutting production as they try to boost market prices.

Cockrell said Sanderson would address the issues Russia has cited, as did Little Rock, Ark.-based Tyson Foods. Julie Craven, a spokeswoman for Austin, Minn.-based Hormel said the company would work with Russian officials and hoped to resolve the issue in the coming weeks.

Tyson said in a statement all its products are safe and it did not believe the bans would have much impact on export sales because two of its plants had not been shipping to Russia.

It noted it had 16 other plants approved for Russian exports and likewise downplayed the importance of Russia as an export market.

"We are doing more business in places such as China, Africa and the Middle East," Tyson said.

To get the plants reinstated, the U.S. Department of Agriculture can audit them and see if the deficiencies are corrected, the U.S.A. Poultry & Egg Export Council said. The USDA has authority to approve the plants to resume exports to Russia, it said.

The USDA said in a statement late Friday that Russian objections "are not consistent with standards and food safety policies in the United States" and international ones. It said the facilities comply with U.S. food safety regulations.

The export council said it would work with the USDA to see if the banned plants even want to remain eligible for Russian exports.

Farha Aslam, an analyst with Stephens Inc., said the plants that are still eligible will ship more of their products to Russia, while banned plants will find other foreign markets or keep products in the U.S.

The end result could be higher prices for Russian customers, she wrote in a note Friday, because Russia imports 40 percent of its poultry consumption.

Jim Sumner, president of the export council, said U.S. producers are used to being caught in the middle.

"We have over 100 export markets so it's not going to have a dramatic effect," he said. "Of course we like to avoid any such situations. But we've learned to deal with it through the years."