020354 Russia Poultry Ban a Windfall For US Shoppers?

Chicago, IL - U.S. consumers may soon benefit from Russia's ban on U.S. chicken and turkey imports, since much of the 2 billion pounds sent to Russia each year may be diverted into U.S. stores, driving down prices and possibly hurting demand for beef and pork, analysts said.

"I think initially we will see some cheap retail leg-quarter features," said Kevin Bost, a meat analyst for Topco Associates, a Chicago-based food cooperative that supplies about 2,000 supermarkets nationwide.

Wholesale chicken prices have already dropped, and Bost said leg quarters may soon be selling for as little as 19 cents per pound in local stores, compared with 29 to 49 cents before the Russian ban.

Russia is the top overseas buyer of U.S. poultry, taking more than 2 billion pounds a year of mostly dark-meat chicken leg quarters. But it halted those purchases beginning March 10, citing food safety concerns about salmonella and the use of antibiotics in feed.

Food industry and U.S. Agriculture Department officials say U.S. poultry is safe and have countered that Russia imposed the ban to protect its growing poultry industry as well as to retaliate for the Bush Administration's recently announced tariffs on steel imports into the United States.

Talks between the two countries continue, with U.S. President George W. Bush saying last week that a settlement that restarts U.S. shipments into Russia was a priority.

The Russian ban could cost meat and poultry giant Tyson Foods Inc. about $1 million a week in lost sales, Wall Street analysts said. But Tyson's shares have not been affected.

"I don't know if the pinch has started yet," said Prudential Securities food analyst John McMillin.

"The fact that Bush is going over there in May and he stated in his news conference a desire to solve the problem, there is the hope in the investment community that it won't be a long problem," said McMillin.

U.S. market analysts said not only would a lengthy ban drive down supermarket chicken prices, but the extra meat could also hurt sales of more expensive beef and pork.

"I think the extra tons that we can't export to Russia certainly increase the competition for beef and pork, and that is bearish," said Joe Kropf, a meat analyst with Kansas City- based Kropf and Love Consulting.

"My fear is this is not a short-term proposition. They are not backing down at all," Kropf said of Russia.

There is also concern that other countries might follow Russia's lead on poultry.

In Ukraine, which banned U.S. poultry imports in mid-February over the antibiotics issue, government officials said on Thursday they would maintain the import ban. A delegation of U.S. officials arrived in Kiev from Russia on Thursday for talks on the ban.

Ukraine imported about 72,000 metric tons of meat last year, including about 69,000 tons of poultry meat, mostly from the United States.

The bans come at a bad time for the U.S. meat industry since production of beef, pork and chicken is already high, putting pressure on wholesale and retail meat prices.

The U.S. Agriculture Department said U.S. beef production last week was up 3 percent from a year ago and pork output up 3.4 percent. Chicken numbers are up about 4 percent this year.

"Over the next two to three months, the competition at the (supermarket) meat case will be very aggressive," said Jim Robb, an analyst with the Denver-based Livestock Marketing Information Center.

The meat glut may not last long, however. Topco's Bost said poultry producers will be quick to cut production if Russia appears determined to maintain the ban.

"If it drives down the processors' (profit) margins enough, it will cut production," Bost said.

Chicken producers have not yet announced production cutbacks, said Richard Lobb, a spokesman for the National Chicken Council. In 1996, when Russia implemented a similar ban, several companies announced production cutbacks, he said.

"Nobody has made any similar announcements," he said of the current ban. "I really think they are in a mode of waiting to see what happens."

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