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Russia ready to survive without "Bush's legs"

Reuters, 17.02.10


MOSCOW, Feb 11 (Reuters) - Russia, the largest buyer of U.S. poultry meat, has sufficient resources to force Washington to accept its demands on import terms or otherwise squeeze it from the lucrative market, Russian analysts and producers said.

"We are capable of solving the supply issues," Vladimir Fisinin, president of the Russian Poultry Breeders' Union, the powerful industry lobby told Reuters. Russia has been purchasing large volumes of U.S. poultry since the early 1990s, when it turned to the United States to supply low-cost meat, mostly chicken leg quarters, commonly known as "Bush's legs".

The nickname goes back to when U.S. President George H.W. Bush was promoting U.S.- Russia trade. Moscow recently banned the meat because U.S. producers use a chlorine wash, which Russia claims violates its food safety standards.

Russia said on Thursday it was ready for a second round of talks after a first round ended last month without any commitments from Moscow to reopen its market.

Analysts said Russia has the upper hand as it is rapidly expanding domestic production and looking for alternatives to the 600,000 tonnes Washington could ship under an import quota granted to it for this year.

"I believe they (the United States) will have to yield in one way or another," said Yelena Tyurina, general director of the Agricultural Marketing Institute thinktank. "If they do not export the meat to Russia, they will have problems with disposing of these volumes especially because they are now also having problems with China."

China, another important market for U.S. poultry meat, has said it will levy heavy anti-dumping duties on U.S. chicken products.

"The United States will most likely agree with the Russian demands, as poultry meat prices there are falling, while stocks are rising," said Darya Limareva, an analyst with the Institute for Agricultural Market Studies (IKAR).

STOCKS TO LAST SEVERAL MONTHS

Russia appears to have sufficient stocks to survive without U.S. imports, while domestic producers are rapidly increasing output in line with the goal set by the government to reach self-sufficiency in poultry meat in the next three years.

"I believe stocks may last until the end of March," Tyurina said. "And imports from other countries continue and domestic producers are increasing output," she added.

Fisinin said that Russia had stocks of 220,000 tonnes of poultry meat at the start of the year, which rose further in January.

"Even if not a gram of poultry is imported (from the United States), we will live happily until the end of May," he said.

IKAR's Limareva said that average accumulated stocks of domestic poultry meat alone in Russia may last 25 to 27 days. "Russia will not face a deficit at least in the next couple of months. That's for sure," she said.

Russian domestic poultry output rose last year by 315,000 tonnes, equal to half of planned U.S exports to Russia this year, Fisinin said.

"This year we have all the necessary capacities to increase output by another 300,000 tonnes, and by 150,000 in the first half of this year, thus patching the possible gap," he said.

Russia has set the target to completely end imports by the end of 2012, and poultry breeders are drafting a plan of achieving this target, which they expect to send to the Agriculture Ministry for approval in March, Fisinin said.

"In the next three years we plan to raise output by 920,000 a year," he said. Domestic poultry prices have been declining this year, and the existing high stocks are unlikely to reverse this process in the next few weeks, Limareva said. But prices may rise if U.S. imports stop as meat from alternative suppliers will cost more.

"Brazil, the European Union, Thailand and Turkey, have expressed their wish to ship poultry meat," she said. "But it is evident that signing new contracts will take time and prices of new supplies will be substantially higher."

"We are running the risk of loosing cheap product which is mostly used in meat processing and production of semi-fabricates, as well as sold in provinces, where incomes are lower than in big cities," Tyurina agreed.



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