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Sanctions hit pork producers

Officials scramble to find buyers for meat headed to Russia

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Manitoba's pork industry has been caught in the crossfire in an escalating trade dispute between Canada and other western countries and Russia.


On Thursday, Russia announced a year-long ban on food imports from Canada, the U.S., the European Union and other western countries. Russian Prime Minister Dmitry Medvedev also threatened airspace retaliation.

"For a long time, Russia has not responded to the so-called sanctions declared against it by certain countries," Medvedev told a government meeting. "Until the last moment, we hoped that our foreign colleagues would realize that sanctions lead to a blind alley and that no one benefits from them. But they didn't realize this, and now we have been forced to respond."

The sanctions were in retaliation for sanctions Canada and other countries had imposed on Russia in recent months to protest its annexation of the Crimea region.

The Russian sanctions are aimed at meat, fish, milk and dairy products, fruit and vegetables from Canada, the U.S., the EU, Australia and Norway.

'Obviously, it's going to be a challenge to move that much product'

-- Manitoba Agriculture Minister Ron Kostyshyn

Canada's pork producers are poised to take the biggest hit from the sanctions. Canada's agricultural exports to Russia amounted to $563 million in 2012, mostly in frozen pork, Agriculture and Agri-Food Canada reported.

There are currently as many as 1,000 container loads of pork on ships bound for Russia, the Canadian Meat Council reported. They will have to be redirected.

"It becomes a huge concern for producers, because any time pork product backs up at the packers, that generally relates to a lower price paid to producers," said Karl Kynoch, chairman of the Manitoba Pork Council.

"Hopefully, with the good relationships that our packers have with other countries, they can... redirect the pork product into other good markets sooner rather than later," he said.

Russia is Canada's and Manitoba's fourth-largest export market for pork products, and Canadian export sales to Russia had been on track to hit $500 million this year.

The Manitoba government said pork products accounted for $62 million of the $69 million worth of agricultural products Manitoba exported to Russia in 2013. That was nearly double 2012's total of $34.6 million and more than six times 2011's total of $9.7 million. Year-to-date numbers also suggest that upward trend would have continued in 2014.

'We will not be intimidated'

-- Canadian Industry Minister James Moore

Manitoba Agriculture Minister Ron Kostyshyn said in addition to the $62 million worth of fresh, chilled or frozen pork products, Manitoba also shipped more than $2 million worth of live animals to Russia last year and more than $5 million in other products. The latter number included $4 million worth of fish and $400,000 worth of vegetables.

The province did not ship any milk or fruit products to Russia last year, or any other meat products. Kostyshyn said although Manitoba companies also export agriculture equipment to Russia, that wasn't included in this round of sanctions. Manitoba also imports some products from Russia, but only $188,000 worth in 2013, and most of them were beverages.

Like Kynoch, Kostyshyn expressed hope Manitoba pork processors will find other buyers for the pork that would have gone to Russia.

"But obviously, it's going to be a challenge to move that much product," he added.

A spokesman for Manitoba's largest pork processor, Maple Leaf Foods, could not be reached Thursday for comment.

A senior official with its second-largest pork processor -- Neepawa-based HyLife Foods -- said Russia was an important export market for the company, accounting for about 20 per cent of its total production.

'It becomes a huge concern for producers'

-- Karl Kynoch, chairman, Manitoba Pork Council

"So it (the loss of the Russian market) is a significant material loss," general manager Guy Beaudry said.

Beaudry said while HyLife officials hope to find alternative export markets for that product -- likely the United States, Japan and Mexico -- they expect prices for ham and other processed products to drop in the coming months as a result of all that product being diverted into those other markets. "So from a volume perspective, we're confident we'll be able to maintain the targeted volumes we had for this year," Beaudry said. "But I do believe we're going to sustain an economic loss because we don't have access to the Russian marketplace."

Kynoch noted the sanctions come at a time when Manitoba and Canadian pork producers are enjoying a resurgence of sorts, thanks to a combination of strong global demand for pork, higher pork prices and lower feed costs.

"In 2014, we're probably seeing the largest profits we have seen... after four years of very heavy losses," said Kynoch.

Federal Industry Minister James Moore said the federal government is still looking to see what impact the Russian sanctions will have on the Canadian economy, but it will not affect Canada's resolve to stand up to Russia.

"We will not be intimidated," he said.

Moore added the "belligerent and irresponsible behaviour" of Russian President Vladimir Putin must be opposed, and the ban on food imports and other products from Canada, the United States and Europe "will certainly hurt Russia more than they hurt Canada," he said.

-- with files from Mia Rabson, The Canadian Press

Republished from the Winnipeg Free Press print edition August 8, 2014 B6

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