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Russia food ban offers new hope for Brazil

Aug 08 2014 09:07

Brasilia - Russia's ban on many western food products presents a massive opportunity for meat and grain exports from agricultural powerhouse Brazil and a smaller one for its Latin American neighbors.

Around 90 new meat plants in Brazil were immediately approved to export beef, chicken and pork to Russia and the South American nation is already working to increase its exports of corn and soybeans sales to Russian buyers, Brazil's secretary of agricultural policy, Seneri Paludo, said on Thursday.

Brazil's enthusiasm for Russia comes as Moscow's relations with the rest of the West are at Cold War-era lows. Russia banned all imports of US food products and certain goods from the European Union, Australia, Canada and Norway after President Vladimir Putin ordered retaliation for sanctions against Moscow over the Ukraine crisis.

In a further snub to Washington, US intelligence contractor Edward Snowden was granted a three-year residence permit in Russia, his lawyer said on Thursday. Brazil's relations with Washington also cooled after revelations last year that the United States spied on President Dilma Rousseff's personal e-mails.

As the world's top exporter of beef, chicken and soybeans, and one of the only countries in the world with land available to ramp up agricultural production, Brazil is a clear winner from the embargo. But smaller countries like Argentina and Chile could benefit, too.

"Russia has huge potential as a consumer of agricultural commodities," Paludo told journalists in Brasilia, comparing the "window" opened by the embargo to the "revolution" that Brazil's exports experienced when China's commodities market opened a decade ago.

Brazil's beef association Abiec said 58 of the 90 plants were for beef - 27 for fresh meat, and 31 for processed. Brazilian food companies, like chicken exporter BRF SA and meat packer JBS SA, stand to benefit. The companies did not immediately respond to requests for comment.

JBS has businesses in the United States and Mexico as well as Brazil but it does not sell US beef to Russia.

Beef products topped Brazil's exports to Russia in the first six months of the year, Brazilian trade data showed. Brazil ships the vast majority of its soybeans to China and sent just 352 849 tonnes of soy to Russia between January and June.

The president of Brazil's animal protein association ABPA said on Wednesday Brazil could cover US chicken exports to Russia and would increase exports by 150 000 tonnes per year, though increasing pork exports would be harder.

Hong Kong replaced Russia as the top buyer of Brazilian beef in 2013 but beef association Abiec said exports to Russia "were certain to rise" in the second half of the year.

Brazil's other agricultural exports to Russia include sugar, coffee, orange juice and bananas. In 2013, agricultural exports to Russia were worth $2.72bn.

Moscow stocking up

In Moscow on Thursday, the middle and upper classes browsed through aisles neatly stacked with French cheeses, Australian wines and Spanish cured meats, in what may mark a last chance to stock up on all luxury goods except caviar for at least a year while the import ban lasts.

Chile, a possible alternative for European fruit, exported $643m of goods to Russia in 2013, mainly in processed foods, salmon and fruit, the government's trade body said. It declined to say if Chile is one of the countries in talks with Russia's animal health body.

Sergio Mendes, director for Brazil's cereal exporter's association Anec, said Brazil would need "a good bilateral agreement" with Russia before grain exporting companies would ship significant quantities of soy and corn there.

"The main barriers are relating to crop pests and bureaucracy," he told Reuters. Only a few specialized companies were currently exporting soy to Russia, Mendes said, though he acknowledged that Brazil is perhaps the only country that could substantially increase production if Russia's demand peaks.

Grain traders in Argentina said Brazil would benefit most from the food bans, though there may be a residual impact for Argentine commodities if Brazilian supplies aren't enough to satisfy Russia's need for grains, which they said was unlikely.

"The biggest opportunities will likely be for oils and meals rather than grains, but we think that Russia will turn to Brazil as a supplier first, given that Brazil is part of Brics," said one trader, referring to the economic bloc that also includes Russia, India, China and South Africa.

Russia has only bought small amounts of Argentine soymeal and soybeans in recent years, according to data from the agriculture ministry.

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brazil  |  russia  |  agribusiness  |  sanctions  |  trade

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