Russian decision over US beef increases competition for Australian exports

Beef Central, 10/11/2013


Russia’s likely changes next year to restrictions over the importation of US beef due to concerns over the use of beta agonists in US beef production will inevitably have some impact on Australia’s beef trade into Russia.  

Russian officials there say they will lift the ban on US beef in 2014, although no date has been provided. Reports suggest Russia will allow the U S to ship up to 60,000 tonnes of frozen muscle cuts under the import quota.

Once the US agrees to the quota, Russia will have to lift the restrictions, which have been in place since February this year.

Analysts say the US is likely to readily accept the deal, because the quota is the same volume that was earlier agreed-to for 2013.

The quota on US muscle cuts includes an in-quota tariff off 15pc and an out-of-quota tariff of 50pc. There is no quota on beef variety meat but they also carry a tariff.

Prior to the February ban, the US exported 80,408t of beef cuts and variety meats to Russia in 2012. Exports dried up in December because of signals that Russia was going to impose a ban due to a zero tolerance policy for the growth promotant, ractopamine. The ban officially took effect in early February and there’s been no significant US beef exports since.

Meanwhile Australia’s beef exports to Russia hit their highest level since May 2012 in October, totalling 4557 tonnes, more than twice the figure exported this time last year.

The boost in shipments comes as the Russian quota year winds-down and importers seek to fill their quota allocations. The recent ban on some Brazilian plants from the market and the redistribution of the unused US 60,000t frozen beef quota (more details below) has also acted to increase interest for Australian beef from Russian buyers.

Despite the boost in exports in October, Australian shipments to Russia for the year-to-date remain 22pc below 2012 volumes, at 23,456t. South American beef exports to Russia have risen throughout 2013, with Brazilian exports to Russia up 14pc year-on-year, contributing to a tough competitive environment for Australian beef in the market.

At the same time Australian beef has been receiving higher prices in alternate markets, meaning product has flowed in higher volumes to these markets at the expense of shipments to Russia, MLA’s Europe/Russia region analyst Ben Larkin says. Cheaper South American product has impacted on the price Russian importers have been willing to pay for Australian frozen beef. 

Chilled beef exports remain the highlight for Australia’s trade into the market, with October shipments up 194pc year-on-year, to 212t, while 2013 year-to-date volumes are up 153pc at 2210t when compared to 2012.


Russian redistribution of US quota come too late

In late October Russia re-allocated the unused US beef import quota, freeing-up 60,000 tonnes of US-assigned quota that has been sitting idle since the US was banned from the Russian market in February. Despite the reallocation, the fact that it comes so late in the quota year (operating on a calendar year basis), means that supplying countries, including Australia, will struggle to capitalise on the increased tonnage opportunity.

Australia currently shares access to a 407,000t frozen beef quota in Russia, while the EU and the US both have country-specific quotas of 60,000t, respectively.

For Australia, the redistribution will have only a small impact, Mr Larkin said. Shipping times to St Petersburg are more than 50 days, leaving no time for product to arrive and clear customs before the end of the quota year.

The majority of Australian frozen beef shipped to Russia in 2013 has been destined for the country’s east coast, arriving through the port of Vladivostok. Shipping times to Vladivostok in most cases are below 30 days, meaning that theoretically, Australian product could arrive before the end of the quota year.

Despite the opportunity to ship to the port of Vladivostok, the short notice of the redistribution of the quota means that many Australian packers will be unlikely to be able to fill potential orders in production schedules, Mr Larkin said.

Competitive prices from South American suppliers, who are also keen to capitalise on the redistribution, will also limit the incentive for Australian exporters to re-direct production to the market. 







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