Pork, poultry industries brace for impact of sanctions by Russia

The pork industry is one of the agricultural sectors that will “feel the pinch” of a year-long ban on Canadian agricultural exports to Russia, with as many as 1,000 containers of pork currently on the water en route to Russia.

Oil technology could be next in tit for tat of sanctions war

Pork prices are high this year, but losing a substantial export market like Russia could hurt the industry. (Toby Talbot/Associated Press)

The pork industry is one of the agricultural sectors that will “feel the pinch” of a year-long ban on Canadian agricultural exports to Russia, with as many as 1,000 containers of pork currently on the water en route to Russia.

Russia imposed sanctions on Wednesday against meat, fish, milk and dairy products, fruit and vegetables from Canada, the U.S., the European Union, Australia and Norway.

Russian Prime Minister Dmitry Medvedev said the ban was a response to escalating sanctions against Russia, which have already put limits on currency exchange for its banks and technology exchanges.

As much as $50 million in frozen pork products may currently be in transit to Russia, according to Jim Laws, executive director of the the Canadian Meat Council.

Important market

Russia is the fourth most important market for Canadian pork, after the U.S., Japan and China, and sold about $260 million of product there last year, he said. That is down from about $358 million in 2012.

The industry has taken steps to work with the Russian meat industry, adapting its offerings, which include boneless hams and frozen swine products that cater to the Russian taste for sausage.

“This is an important market for Canada indeed. We’ve been a bit worried about this for the past several weeks with tensions rising between the two countries,” Laws told CBC News.

“We hope if consumers in Russia are affected in any way in terms of short supply or rising prices, the Russian government will reconsider its actions,” he said.

Quebec-based pork and poultry supplier Olymel, which calls Russia its No. 2 market, said it is going to try to find other markets for the products it usually sells to Russia.

Poultry, beef, seafood

“While it is powerless to change the decision by the Moscow regime, Olymel will make every effort to find other outlets for products that were destined for the Russian market in order to reduce the impact of this decision. Olymel does not yet have full information concerning the application of this measure, and is thus unable to assess the consequences,” the company said in a statement.

Manitoba cattle producer Cheryl  McPherson is bracing for the impact, on top of a labelling dispute that has cut into sales to the U.S. McPherson says Russia may not be Canada's biggest market, but any restriction will hurt her bottom line.

“It feels like you're left out. nobody realizes you're out there and it's  affecting you,” she said.

Laws said the Canada Meat Council will work with the Russian and Canadian governments to try to get the shipments of meat currently en route to Russia diverted to other markets or returned to Canada.  

Pork producers have been enjoying high prices as a virus that kills young pigs has hurt pork production in the U.S., he said.

“The only good news for us right now is pork supplies around the world are very tight and farmers have been enjoying record prices for the live animals – if it had to happen, this was a time it was least detrimental,” he said.

Seafood producers are also likely to be hurt

"For lobster, Russia is a small but potentially good market,” said Geoff Irvine, head of the Lobster Council of Canada. “The biggest impact on seafood in Canada will be on northern shrimp, and maybe cheaper fish like Pacific hake and herring."

Clearwater Seafoods  head Ian Smith says the Russian market only accounts for  three per cent of his company's annual revenue, so the pain will be negligible.               

“Clearwater has a very broad portfolio of products, a broad porfolio of markets and customers we deal with. The Russian market is about our frozen-at-sea coldwater shrimp and it's one of many markets we sell to. ...  Do we want to be selling shrimp in Russia? Of course we do, and we expect that market will come back in the future,” he said.

Oil technology could be next

But the bulk of Canada’s exports to Russia is in machinery and mechanical appliances, aerospace and transport sectors, areas that have not yet been hit by sanctions.

Prime Minister Stephen Harper indicated yesterday that sanctions may be extended to cover the oil technology sector.

That might be a good next step, said David Gordon, a former director of policy planning with the U.S. State Department, now head of research at the Eurasia Group.                

“The U.S. in its sanctions began that already last week and the week before. The EU has gone there on gas and oil, the U.S. going to go there on gas as well. The technology is really advanced in North America and so I think here is where the substantial role for Canada is,” Gordon said in an interview with CBC’s The Lang & O’Leary Exchange.

He said he believes the restrictions on the banks and on high-tech exchanges are already hurting Russia and the move to ban agricultural exports may have more impact in Russia than they do in Canada.

“It’s probably going to create more pain within Russia than it does for any of its counterparts,” he said, adding “I do think for Russian middle-class consumers, they’re not going to be happy about this.”

Gordon believes Russia will not go as far as cutting off gas supplies to Europe, though it has already signed a deal to sell to China.

“Russia is really going to need the revenues from gas,” he said and won’t want to frighten Asian customers.

“Part of what the Asians are going to watch very carefully – Is Russia going to politicize the export of energy? If the answer to that is yes, that is going to make them a much less attractive partner,” he said.