Oklahoma Rancher in Russia Threatens U.S. Beef Exports
Anthony Stidham, a 48-year-old third-generation rancher from Oklahoma, is at the forefront of President Vladimir Putin’s plan to cut Russia’s $3 billion annual bill as the world’s biggest beef importer.
At the country’s largest beef farm about 400 kilometers (250 miles) southwest of Moscow, Stidham is passing on cattle- rearing skills to locals in a drive toward self-sufficiency that’s already involved shipping in about 60,000 Aberdeen Angus cattle from the U.S. and Australia.
With incomes rising and beef sales set to increase, Russia has been cutting import quotas to revive a cattle-breeding tradition decimated under the rule of dictator Joseph Stalin. Putin wants the country to meet 85 percent of its meat and poultry needs by 2020, threatening to curtail sales by Tyson Foods Inc. (TSN) of Springdale, Arkansas, and Brasil Foods SA.
“There’s no place in the U.S., Australia or anywhere in the world that will have cattle as good as what they are putting together here,” said Stidham, recruited from Ada, Oklahoma, after answering an advertisement in a farming publication.
At least 30 steakhouses have sprung up in Moscow since 2004, according to the Federation of Restaurateurs and Hoteliers, attracted by a growing middle class and average wages that have tripled. A ribeye steak at Goodman, Russia’s largest steakhouse chain, costs 1,480 rubles ($45).
Miratorg Agribusiness Holding, the country’s biggest meat importer, received state support to start the $800 million farm project in Bryansk. Set up by brothers Alexander and Viktor Linnik in 1995, the company became Russia’s largest pork producer in 2010 and has also moved into poultry. It sold 3 billion rubles of bonds last year and may sell more this year, Chief Financial Officer Vadim Kotenko said. An initial share sale is also being considered.
The imported Aberdeen Angus, a Scottish breed of hornless black beef cattle, have had to cope with winter temperatures that can plummet as low as minus 35 degrees Celsius (minus 31 Fahrenheit) after making the four-week journey by sea and road from the U.S. and Australia.
“This breed can adapt perfectly to any climate, it just grows as much hair as needed in a certain temperature and then passes on this genetic trait to calves,” Kotenko said in an interview.
At Bryansk, the plan is to almost double the size of the parent herd by the end of 2013. With new calves, the integrated operation, which involves slaughterhouses to meat-processing facilities, will expand more than fourfold to 250,000 by 2014. It will be able to produce 104,000 meat bulls a year and supply 30,000 metric tons of boneless beef to the market.
“The production cycle takes 40 days for poultry, six months for pork and a whole 16 months for beef, which makes it the most capital-intensive,” Kotenko said. “We’ve been working on a feasibility study for two years, and at least five banks declined to fund the beef project, labeling it too risky.”
Bankers had cause for concern. In the U.S. and other developed countries, beef consumption has been declining since the mid-1970s in favor of cheaper pork and poultry, according to the U.S. Department of Agriculture. Russia consumes only 17 kilograms of beef per capita a year, or half the U.S. equivalent, and domestic consumption is set to rise, according to the Moscow-based National Meat Association.
VEB, Russia’s state development bank, agreed in 2010 when Putin was its chairman to finance Miratorg’s beef project, which also benefits from state subsidies. Beef imports are subject to quotas as Putin seeks to shore up domestic production to reduce dependence on imports.
Miratorg’s 2014 ruble bonds yielded 13.3 percent today in Moscow. OAO Cherkizovo Group (CHE) and Ros Agro Plc (AGRO) are among other Russian producers to have invested in domestic meat output to replace imports, focusing on poultry and pork. On a recent visit to Bryansk, Prime Minister Dmitry Medvedev was photographed in conversation with a U.S. rancher and his family.
“This can be seen as the first step for the Russian cattle industry to regain its lost position,” said Albert Vernooij, an industry analyst at Rabobank International in the Netherlands. “However, with strong competition for land and continuing high feed costs, this might be a long process.”
Russia purchased 1.1 million tons of beef and veal from abroad last year, according to USDA data, the equivalent of about 3.3 million fattened steers. Beef imports were valued at $2.6 billion in 2011, according to the National Meat Association, making up about 33 percent of domestic consumption.
The Tsarist tradition of breeding meat cattle was lost when Stalin enforced a drive toward collective farms in the 1930s, according to Sergei Yushin, head of Russia’s meat lobby. The country has mainly slaughtered retired dairy cows for meat since that time.
“A steak out of a 7-year-old milk cow is tough and thin,” said Igor Bukharov, president of the Federation of Restaurateurs and Hoteliers.
Miratorg runs 16 beef farms around Bryansk that are set to rise to 33 by the end of 2013, in addition to three in Kaliningrad on the Baltic Sea. Each operation has about 3,000 breeding cows. Stidham, one of 10 U.S. ranchers employed at Bryansk, said his students are willing to work around the clock.
“A lot of them had never pulled the calf when the cow was having trouble,” he said, referring to the birthing process. “And just the excitement they have when they see the brand new calf, that they helped save its life.”
Tyson Foods, Brasil Foods, Cargill Inc. and JBS SA (JBSS3) are among the biggest suppliers of beef to Russia, according to the U.S. Meat Export Federation. Russia distributes import quotas to domestic companies including Miratorg that obtain supplies from abroad. Foreign producers stand to lose out as the domestic industry expands to meet local consumption.
As the example of Bryansk is replicated elsewhere in Russia, the hope is one day the country will be able to export beef for the first time.
“Russia has all opportunities to be a big beef exporter in 10 to 15 years,” Kotenko said.
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