At first glance, It had all the ingredients of a John Le Carré novel, not least the KGB’s apparent attempt to recruit a young future British Prime Minister into its ranks. Yet while the David Cameron’s visit to Moscow last week certainly made for sensational headlines, it could also have far reaching implications for the beef industry.
For anyone involved in the beef sector, the major steps taken to re-establish trade links can’t have escaped attention. The long-standing Russian ban on British beef is a subject that EBLEX, together with Defra, has been working hard to address for some time.
Russia is one of the largest global importers of beef, buying more than 600,000 tonnes each year, historically much of it coming from Brazil and other South American countries. However, supplies from Brazil have tightened in the last couple of months after Russia delisted some 85 plants.
These substantial imports into Russia have largely been driven by a long-term downward trend in domestic production. Total cattle inventories are expected to shrink to 16 million head this year, down four per cent, on top of a three per cent decline in 2010. The accelerated decline has been caused by increased feed costs, exacerbated by a 25 per cent decline in feed availability at the start of 2011, compared with 2010.
These two elements point us to the same conclusion – the potential for beef exports to Russia is enormous. The question is: “How does the UK capitalise on it?” As mentioned earlier, Brazil and other South American countries dominate exports to Russia, but the increase in exports from the EU has been nothing short of meteoric. They increased by more than 350% in 2010, compared to 2009, making it the second largest beef exporter to Russia. Coupled with fading fortunes for Brazil, that could mean that in 2011/12, the EU fills an even larger share of the Russian order. Good news indeed – the only (substantial) fly in the ointment being the fact that at present the UK can’t benefit from this increased trade due to a continued BSE-related ban. Ironically, there are several member states within the EU which have trade relationships with Russia despite having higher instances of BSE than us. If beef exports were to resume, our estimates suggest the market could be worth around £115m to the UK in the first three years. That’s based on a conservative two per cent market share.
The opening of the Russian market is part of EBLEX’s ongoing export strategy to secure new market access to optimise returns for producers and processors in England, particularly useful for those cuts for which there is low or no demand domestically. To this end, through the Export Certification Partnership with Defra, we have placed Russia as a top priority in terms of market access and the lifting of import restrictions. As well as high level contact at a technical level, EBLEX also asked for the matter to be raised at ministerial level. The fact that this was on the agenda during Mr Cameron’s visit shows the importance everyone is now attaching to this issue. By putting the issue on the political map, we hope the profile of the discussions will be permanently raised, driving us ultimately towards the goal of opening the Russian market, something which could be achieved in a relatively short period of time if the political winds are favourable.