Saturday, August 30, 2008

MILWAUKEE | It’s a game of political chicken, and U.S. poultry producers are caught in the middle.

Russia, the top market for U.S. chicken exports, will be banning imports from at least 19 plants on Monday. While U.S. producers say the bans won’t have much affect, they wonder whether there are more bans to come - which could further hurt an already weak industry.

On Thursday, Russian Prime Minister Vladimir Putin announced the bans in an interview with CNN, citing what he said were ignored warnings about inspections.

Companies affected — including Tyson Foods Inc., the world’s largest meat producer — are vowing to right any wrongs, if need be. The industry’s trade group said it had been expecting Russia to reduce imports anyway, as its own production rises. It downplayed any threat to the U.S. industry.

But still, Russia is a key market for U.S. chicken producers at a time when they are seeing profits squeezed by high costs for grain and fuel and a U.S. market so oversupplied it’s keeping prices low.

In the first half of the year, U.S. producers shipped $395.7 million worth of broilers to Russia. That was up 42 percent from the previous year, while volume grew 20 percent.

Plants affected include at least two owned by Tyson, two from Sanderson Farms Inc., the nation’s fourth-largest chicken producer, a Jennie-O Turkey plant owned by Hormel Foods Inc., and other companies.

Mr. Putin has said the move had nothing to do with tension over the recent fighting in Georgia and was purely economic.

But Mike Cockrell, chief financial officer of Laurel, Miss.-based Sanderson Farms, doesn’t see it that way. Russia has banned U.S. poultry previously, and sometimes it comes during times of political tensions, he said.

“It appears chicken is still being used as a political tool,” he said.

The bans starting Monday won’t hurt business, he said, because production at the two affected plants - both in Mississippi - can be shifted to at least two other plants approved by Russia.

The big concern, he said, was Russia banning more plants. He said based on comments this week - including the country’s top agriculture minister saying it wanted to cut poultry and pork imports by hundreds of thousands of tons - anything is possible.

Russia also issued a cautionary statement to 29 other U.S. plants, saying their products showed levels of certain substances higher than Russia allows, according to the U.S.A. Poultry & Egg Export Council, an export arm for the industry.

Exports have been one of the saving graces as the industry tries to offset a weak U.S. economy, Mr. Cockrell said, so more cuts could be bad news.

“They’re not as big as they used to be,” he said of Russia’s appetite for U.S. poultry imports. “But they’re still the most significant and if they quit buying, that would certainly dull that bright spot.”

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