By John Helmer, Moscow
There is a tide in the affairs of men, which taken at the flood, leads on to pork sausage. And we must take the current when it serves, or lose our profitability.
If Europeans do that, it’s classical from Shakespeare’s Julius Caesar. If Russians do it, it’s trade war. Oleg Tyagnibok, the Ukrainian oppositionist whom the US Government is promoting into power in Kiev , hasn’t been asked yet what he thinks of the Russian ban on European pork imports. But he’s bound to blame the “Moscow-Jewish mafia” because he’s blamed them before, though not exactly for trying to enforce the kosher code.
The pork business is a sensitive one – not so much because it’s large in aggregate Euro or dollar trade value, but because the Russian market is the second largest consumer of pork imports in the world (Japan comes first) and the largest consumer of European Union (EU) pork; because pork production keeps farm voters happy in corners of Europe where their votes count in close elections; because in Russia itself the price of pork sausage is as sharp a trigger for voter discontent as the price of bread; and finally, because there has been a steady concentration of Russian pig farming and pork production into a handful of corporations and the men who own them, the porkligarchs. For the story of how unhappy they were at the loss of profitability inflicted on them since 2012, when Russia joined the World Trade Organization (WTO), read this .
In the line-up of EU member-states with the biggest herds of pigs, Germany is the largest slaughterer, as well as the largest consumer and the largest exporter. Spain, France, Poland, and Denmark are also big producers and exporters, and thus vulnerable to the Russian market. To feed the Russian appetite for pork, the alternative producer-exporters are China, the United States, Canada, Brazil, and maybe Vietnam.
Since January 2013 US exports of pork to Russia have been banned for failure to eliminate residues of the growth chemical ractopamine.
TOP 10 PORK PRODUCING COUNTRIES IN THE WORLD
Source: http://www.dailylivestockreport.com/ 
African Swine Fever (ASF) is a highly infectious, highly lethal disease which passes from wild to domestic pigs, and through the pig food chain. Its first detection in Russia was in 2007 (the disease originated from Georgia); since then the international Food and Agricultural Organization (FAO) has charted the history of its recurrence in this report . The charting was good through December 2012. The report predicted worsening outbreaks in western Russia during the seasonally warm months of backyard production, June through November. These materialized in mid-2013.
MAP OF ASF OUTBREAKS AMONG WILD BOAR, DOMESTIC PIGS, IN RUSSIAN REGIONS, 2007-2012
Source: http://www.fao.org/ 
As the maps show, the incidence was particularly acute in the western regions of Belgorod and Tambov near the Ukrainian border. When the outbreaks occurred, the EU issued a blanket ban of pig and pork product movement into the EU from all of Russian territory, including Siberia – which is off the FAO charts because there was no ASF outbreak. The EU immediately offered €2.5 million to Estonia, Latvia, Lithuania and Poland for what was reported at the time as aid to prevent the Russian infection crossing the border, moving westwards. No action was taken by the EU towards Ukraine.
Wild boars can migrate over distances of 200 kilometres or more, and though the boar map shows they are relatively scarce in Russia, they grow increasingly more common in Belarus, the Baltic states, and central Europe. Whither the boar, thence ASF.
WILD BOAR CONCENTRATION IN EUROPE
Source: http://www.fao.org/ 
Until last month, the Europeans believed themselves clear of the infection – except for Sardinia.
Then late in January ASF infection was discovered in Lithuania. The US Meat Export Federation describes  what happened next: “Lithuanian officials recently confirmed the country’s first cases of African swine fever (ASF). These are the first ASF cases to be detected within the boundaries of the European Union, with the exception of the Italian island of Sardinia. The EU veterinary certificate states that the EU is free of ASF with the exception of Sardinia. With this no longer being the case, EU veterinary officials requested that Russia allow them to continue to sign export certificates if they guaranteed exclusion of products from the affected regions of Lithuania. Russia’s Veterinary and Phytosanitary Surveillance Service (VPSS) did not agree to this request, so exports were effectively suspended on Thursday when certificates could no longer be signed.”
On February 8, according to a notice issued by Rosselkhoznadzor (RSN), the Russian veterinary and phytosanitary agency, the EU certificate was no longer accurate, and all of the EU was at risk until a new certificate can be issued. “The disease outbreak in Lithuania,” announced RSN, “radically changed the epizootic status, not only of this state, but also the entire European Union, which according to the principles and objectives enshrined in the Lisbon Treaty, is a single economic, social, territorial, and therefore epidemiological and epizootic space… the status of the European Union on this disease has changed from safe to underperforming.”
RSN was critical of the European Commission for doing too little to stop the eastward spread of ASF, too much to protect the EU’s pig farmers and pork exporters. “The European Commission in a hasty manner, without adequate scientific justification and without inviting experts of the Customs Union [Russia, Belarus, Kazakhstan] , held its own ‘regionalization’, and proposed to limit the isolation [quarantine] only in Lithuania, located along the south-eastern border with Belarus at a depth of 20-30 km.”
RSN then introduced  new import regulations, allowing pig-meat products heated to destroy ASF and pork covered by a new EU certificate. This was not a ban on EU imports, but it did set conditions for imports which the EU has until now refused to implement. The impact was momentous for the EU exporters. Belarus and Ukraine exports were unrestricted.
Source: US Meat Export Federation 
Tonio Borg, a Christian Democratic politician from Malta who became the Health Commissioner for the European Commission in 2012, attacked  the RSN action. Borg first blamed Russia for infecting the boars who, he claimed, took their infection over the Lithuanian frontier. Borg, a lawyer by training, claimed “latest scientific evidence shows that these two Lithuanian cases of ASF are linked to the unsuccessful attempts to control the prolonged presence of ASF in the western regions of Russia and the recent introduction of the disease in Belarus. No information or evidence has been provided by the Russians about measures taken to contain any risk of further spread of the disease into the EU.”
In Borg’s political past at home on his Mediterranean island, he has attacked the EU for failing to do enough to help Malta cope with waves of illegal immigrants landing from Libya and other conflict zones in northeastern and northwestern Africa. The EU should accept a proportionate share of the immigrants, Borg claimed  just before he took his Brussels appointment, and contribute more to naval patrols and other measures to turn back the flood.
But Africans landing in Malta are a different story from boars landing in the EU. According to Borg’s statement of February 7, “Russia has imposed unprecedented trade restrictions on the export of pigs and pig meat from all 28 EU Member States, even though the occurrence of the disease is restricted to only a limited area of Lithuania. These restrictions, apart from having a serious economic impact on European business operators, are also disproportionate and contrary to international trade principles. Imposed two weeks ago by Russia, this trade embargo continues to apply despite an as yet unsuccessful request to meet my Russian counterpart… I repeat that in view of the reassurances provided, the surveillance and control efforts made, and the outstanding health status of all non-affected EU regions, a blanket ban is completely disproportionate”.
RSN’s response was to remind Borg that it was maintaining the same “commitment to the principle of equivalence of the measures taken” as the EU had taken against Russian products during last year’s ASF outbreaks in western Russia. Borg had been the commissioner in charge then and since. In the interval RSN accuses the Europeans of failing to negotiate the new terms for the EU’s veterinary certificate and for the regionalization required on both sides of the border to curtail the infection risk.
For voter consumption, Poland’s prime minister Donald Tusk has publicly accused the Russian government of starting a new trade war over pork. This is despite Tusk’s earlier success in negotiating the lifting of the two-year Russian embargo  on imports of Polish meat products from 2005 to 2007. Polish, Lithuanian and other eastern European politicians claim the RSN action on swine fever is retaliation for the EU’s support of the anti-Russian opposition in Ukraine. Other European supporters of the Ukrainian opposition also accuse Russia of waging trade war on imported chocolates, dairy products, and tulips.
Lithuania has applied for $6 million from EU headquarters to erect a new fence to stop Russian boars from crossing. Latvia and Poland are also expected to put in for fencing money.
Alexei Portansky, Professor of the Department of Trade Policy at the Higher School of Economics in Moscow, dismisses the allegation of disproportionality in RSN’s action against EU pork. “This is a matter for [phytosanitary] investigation. And until the parties have agreed on a mutual procedure for investigation, there is no investigation. Until there is, it is difficult to say who is right and who is wrong. This is a situation where one side thinks the other is wrong. That’s normal — that happens a lot in the WTO.”
Sergey Yushin, head of the executive committee of Russia’s National Meat Association, rejects the trade war claims. “I’ll start with the fact that there is no ban. Pay attention to this. There is no new harmonized veterinary certificate to reflect the prevailing reality on ASF in the European Union. In the current certificate it is written that in the EU for the last three years there was no ASF except for Sardinia. But, as we now understand, after the ASF discovery in Lithuania, this statement is untrue. Therefore, there is no ban on the part of Rosselkhoznadzor. It did not impose a ban. It’s just that the certificate which exists today, and is agreed between the EU and the [Russian] Customs Union does not correspond to reality. Therefore it is necessary to revise the certificate.”
“But to review [the obsolete certificate] is possible only on the basis of comprehensive data about what really is the situation in the EU at the moment. And the ball, it seems to us, is now in the EU’s court. It should provide comprehensive, detailed and full information, in particular, on the monitoring carried out for ASF in the wild or on farms or factories, in the different countries; and what tools of control there are over the [inter-regional] movement of animals.”
According to Yushin, the problem of infection in Lithuania isn’t as fresh as Commissioner Borg has been claiming. “The corpses were found already decomposed,” so the timing of the boars’ movements and the direction from which they have come are “a very technical issue.”
Borg’s claims that Russian measures have been disproportionate fly in the face of EU protectionism to keep out Brazilian pork, argues Yushin. The EU record shows  that for years now the EU has refused to accept Brazilian proposals for regional containment of veterinary infections, on the basis of which the European Commission has imposed import bans. “Therefore, the [Russian and EU] measures are exactly symmetrical,” says Yushin. “The last case of ASF in Brazil was in 1981. [The European] ban on the import, in particular pork, from Brazil is still active, and for the whole country. So the ban is already in force for almost thirty years.” For independent evidence of Brazil’s efforts to contain and eradicate ASF, read this .
RSN spokesman Alexei Alekseyenko is emphatic that RSN’s measures “are absolutely proportional. The fact is that the EU introduced approximately the same measures when we had an ASF outbreak and when the scope of their measures hit the entire country, including areas where there was no ASF (Kamchatka, Sakhalin, etc.). From the Kaliningrad region, although there was no ASF, the EU allowed product supply only after serious heat treatment. We have set them the same conditions… With the EU, the case is complicated by the fact that they do not have tracking systems for products over the territory of the European Union. That is, what is produced there can be circulated freely throughout the territory. The ASF virus persists in meat over many months. From bitter experience we have encountered this in Russia when [infected] products were distributed illegally from areas of outbreaks, causing secondary outbreaks sometimes at very far distances.”
A North American meat trader at this week’s ProdExpo industry convention in Moscow concedes that the Russian are giving the EU tit-for-tat. “At the Food Expo it was noted that part of the current EU problem is the fact that the EU refused to recognize Russia’s program of regionalization [last year] So if a disease is discovered in one region of Russia, the entire nation is considered infected. Russia’s ban on the entire EU is a way of saying ‘two can play at that game.’”
European prices on the pig slaughter market have been falling  for two weeks now as the volume of unsold meat is counted which must be disposed of on the European side of the Russian frontier.
On the Russian side, two of the largest domestic pork producers are Cherkizovo, which is listed on the Moscow and London stock exchanges and controlled by Igor Babaev (right); and Miratorg, which is privately owned by the Linnik brothers.
The share price of Cherkizovo started rising in December and peaked in early January, before the Lithuanians announced their infected boar corpses:
ONE-YEAR CHART OF CHERKIZOVO SHARE PRICE ON THE LONDON STOCK EXCHANGE
Source: http://www.bloomberg.com/ 
Market capitalization for Cherkizovo is currently $766 million. It has been higher – $1.2 billion in September 2010.
Alexander Kostikov, head of investor relations and communications at Cherkizovo, makes this forecast: “In the short term the ban on imports will cause some increase in prices. In the longer term, it can contribute to the revival of investment interest in Russia’s industrial pig production. After the price shock of the 2012-2013 years most of the big agricultural companies froze their investment in pig farms. Restrictions on imports may return interest in these investment projects.”
Dmitry Sergeyev, spokesman for Miratorg, says his company is “firmly convinced that biosecuriy issues must take first priority. In the Russian Federation the large-scale fight against the spread of African Swine Fever (ASF) has already caused, by estimates of Rosselkhoznadzor, direct and indirect damage to different sectors of the economy amounting to about 30 billion rubles [$860 million]. It is totally unacceptable to accept the risk of introduction of this dangerous disease on our territory from the European Union. The rejection of European imported pig products is a necessary and adequate measure until the situation is fully clarified.”
Yushin of the National Meat Association points out that the impact of the current measures will be offset for Russian consumers. “Europe is an important trading partner in the supply of pork, but not the only one. Its share increased markedly [in 2013], but before Europe’s share was not as significant. Take, for example, 2009. The EU accounted for 38%of deliveries; in 2010, 45%; in 2011, 51%. So the EU has been increasing [market share] gradually while others lost. In 2012 [the EU share was] 40%. And in 2013 it was 60%. But then again, who have lost large shares – Canada, which used to account for 25% of supply, and the US, which accounted for 12% in 2012. Now take 2013: the US imports were closed due to ractopamine; they managed to import just 1.2%. For the same reason, Canada fell from 25% to 12%. But at the moment, US and Canadian enterprises have provided enough information that they can produce meat without ractopamine. Accordingly, Brazil, Canada and the US could potentially increase their shipments to the Russian market.”
Domestic production will also grow, the association is calculating. “The EU should bear in mind that Russian production increased in 2013 by 340,000 tonnes deadweight. And the first forecasts for this year [indicate that] growth may reach an additional 150,000 tonnes. Accordingly, we do not expect any sudden negative changes. We have had about ten days since European delivery was not allowed on the Russian market, but the dynamics of prices at wholesale, and so far in retail too, are practically unaffected. So I think the possibility of supplies from other regions of the world and our own production will keep prices stable. In addition, it is necessary to note that the prices in the summer of 2012 and the summer of 2013 were approximately 20% higher than they are now in the wholesale market. Even if there is a price increase, it is unlikely to reach the historical peak of summer 2012.”
The North American trade source anticipates that European pork will be replaced in the Russian market by Canada, Brazil and “soon the USA — supposedly they are about to finalize their deal with RSN. I believe this ban will remain in place for a month or two. In the meantime Russian hog producers (and non-EU exporters) will reap the benefits of higher prices, providing a major incentive for at least those constituencies to support the status quo. Plus if enough time passes, Russia will re-allocate European quota to other countries, as they do with beef every year. This means that the Russian importers will not suffer and lose quota whatever happens. So don’t expect any universal outbursts of indignation; the Europeans are likely to be on their own this time.”