This week, another trade snafu seems to be developing from the disparate issues of steel, chicken parts and antibiotics. And the impact of the trade dispute could ripple deep into the American agri-economy.
Currently, the U-S is facing a glut of roughly 6 million pounds of chicken hindquarters a day, or more than one million dollars of meat the U-S market cannot consume.
The original match of the Russian dark meat market with the white meat driven U-S market came about during the administration of President George Bush senior. The Russian consumption of the so-called "Bush Legs" has steadily risen ever since
But, the recent loss of the massive Russian market has revealed the lack of market diversification in the chicken industry. Chicken hindquarters account for half of the total chicken production in the U-S and Russia imports 50 percent of all U-S hindquarters. The result is one-fourth of all U-S chicken production is directly dependant on Russian sales.
Tomm Pfitzenmaier: "We still are suffering the effects of this steel tariff and the problems that that's generated with Russia and the poultry -- backing poultry up. All of a sudden it starts to affect pork, starts to affect beef, and I think we're going to continue to suffer from that. "
Long term, the ripple effect could also manifest itself in higher prices for breast meat to compensate for the hindquarter waste. The grain market, already burdened from domestic overproduction, could suffer from the loss of demand for chicken feed. And, the disappearance of cheap U-S chicken from the Russian marketplace could cause a revitalization of the Russian poultry industry which had been steadily declining as a result of the availability of Bush Legs.
Officially the Russian ban is due to health issues, including antibiotics in chicken feed. That same issue has surfaced in Europe where the European Commission has proposed ending the use of most antibiotics in livestock feed by 2006. The recent proposal also would force new regulatory approval for existing feed additives.
If approved, the regulation would end the use of antibiotics commonly used to promote livestock growth. The action follows recommendations from the European scientific community, which advocates phasing out the use of antibiotics in animal feed. It argues that use of the antibiotics in animals compromises the effectiveness of the drugs in humans, primarily because bacteria build resistance to the antibiotics more quickly.
The Europeans say the proposed rules also will apply to imports, which raises the possibility the new regs will be challenged before the World Trade Organization. Last year, the U-S last year shipped more than a half-billion dollars in feed and fodder to the E-U