The U.S. Meat Export Federation this week released an issue brief focused on the recent action by Russia to ban the import of meat with ractopamine residue, explaining that the meat industry has significant margins to lose as a result of the bans.
Russia implemented a full ban in February, just a few weeks after its accession into the World Trade Organization was finalized. U.S. Trade Representatives denounced the Russian decision, and USMEF says the decision has prompted action in the meat packing industry to segregate meat products with and without the residues.
Racopamine is a veterinary drug approved for use in the U.S. and approved by Codex standards – the same standards used by the WTO.
USMEF says several large packers were considering changes to their operations to improve ractopamine segregation, raising several questions which have implications for the meat industry's participation in the global meat trade.
Though Russia's actions are the key player in the debate, China last week notified the USDA of its intention to implement new enforcement measures for its zero tolerance policy for ractopamine residues in U.S. pork imports.
Packer's changes require closer look at economics
Although Russia only accounts for roughly 7% of U.S. beef exports and 4% of pork exports, this understates its importance to the U.S. red meat industry that in 2012 found willing buyers for American pork in 116 different countries and beef in 132.
Last year Russia imported $566 million of U.S. beef and pork, but most of this trade was in only a few items (inside and gooseneck rounds, beef livers and hams). Because Russian buyers pay a premium for these items over customers in other foreign markets or here at home, where excess supplies of round and ham cuts as well as livers often put downward pressure on prices, the closure of the Russian market will have a larger negative impact on live hog and cattle prices here in the U.S. than the value of the lost trade alone, USMEF says. This is because these items will be sold at lower prices and the added supply will depress prices on the U.S. market.
USMEF adds that the impact of losing the Russian market will be about $800 million for the U.S. meat industry – roughly $15 per head for cattle and $4 per head for hogs.
China adds another dimension to debate
Although it remains closed to U.S. beef, China in 2012 purchased nearly 16% of all U.S. pork exports by volume, accounting for more than $704 million of U.S. product, USMEF says, which translates to about $4.75 per head for variety meat alone and closer to $7 per head when muscle cuts are included. Like Russia, China pays a premium for items that are undervalued by other markets.
China and Russia join other countries that have similar ractopamine restrictions, such as the EU and Taiwan. These regulations, USMEF says, brings into clear focus the dilemma that arises when U.S. support of science-based trade and meeting the demands of our customers collide with a foreign country's non-science-based import requirements.
Industry searches for middle ground
In the days and weeks leading up to the Russian market closure, the meat industry worked closely with the U.S. government to find a way to preserve access to the market by pressing Russia to adopt a science-based standard for beta agonists. At the same time, the industry also asked USDA to develop a program for certifying residue-free exports.
This two-track approach reflected the industry's continued commitment to safe, effective production technologies and global trading rules that set science as the foundation for health standards, USMEF says, but it also reflected the industry's commitment to supplying markets with the products they demand.
"We remain hopeful that a way can be found to resume beef and pork exports to Russia but, for the foreseeable future, this is likely to be possible only if the U.S. and Russian governments can agree on a program under which USDA will certify beta agonist residue-free exports," USMEF says in the issue report.
USMEF notes that Russia's ban is a reminder that if the U.S. meat export industry is to succeed in a competitive market, it will be necessary to make hard decisions.
"Some of these decisions could require compromises that none of us like, but increasingly we are learning that this is an inevitable consequence of participating in a growing, lucrative and complicated global market," USMEF says.