Birds of a feather will flock together in Russia again, after the country lifted its ban on U.S. chickens. Agreeing not to use a chlorine rinse to cleanse chickens prepared for export to Russia, Pilgrim's Pride
This wasn't simply a fight over chicken feed, either. Before the ban went into place, Russia was the top export market for U.S. chickens, accepting about $800 million worth of the fowl annually. Tyson
Russia got its feathers ruffled that U.S. chickens were washed with chlorine. Although it's been a standard industry practice for decades, Russia said it wanted to conform to the same standards its European trading partners used. The regulations restrict chlorine to 0.5 parts per million, some 10 times lower than what's found in regular American tap water. Russia will allow three other rinses to sanitize chickens instead.
Even with the ban lifted, sales might still be as hard as hen's teeth to find. Russia had cut poultry quotas 20% last December (and slashed pork quotas 43%), and 2010's poultry quota could be cut from 600,000 metric tons to 450,000 metric tons, with the lost sales going to other countries. Russia is planning on cutting quotas again in 2011 and 2012, almost halving U.S. poultry exports to Russia from where they were two years ago.
Still consumers might find themselves madder than a wet hen over the cost of chicken, since the reopening of Russian markets is expected to send prices higher. Leg prices alone are expected to climb 18%. While that has the potential to boost profits for the companies involved, the industry has already been suffering from weak demand and higher costs, and grain costs are expected to rise again.
A pig in a poke
Chicken wasn't the only meat making processors squawk last year. Both Russia and China banned pork, too, as fear of swine flu swept the globe. You could almost hear Tyson, Smithfield Foods
Chinese hog farmer and feed producer AgFeed Industries
Where's the beef?
However, the porkers ought to be able to absorb some of the market share from beef processors, which are staring at declining herd sizes. Since 2006, beef cow numbers have fallen by 5%. Per-capita supplies are forecast to drop 2% this year, and an additional 1% in 2011. That will result in higher prices for beef consumers, and fatter margins for beef producers. Still, pork processors should be able to pig out on stolen market share.
In short, meat processors in general are facing a conundrum. With consumers very selective about where they're eating these days, the processors are caught in the middle. If they're not careful, they might find themselves led to the slaughterhouse.