Russia temporarily bans MHP’s poultry

Russia’s Federal Service for Veterinary and Phytosanitary Surveillance imposed a temporary restriction on animal product imports from a number of international producers, including Myronivsky Hliboproduct (LSE: MHPC LI), effective November 4, 2010. In response, MHP defended the high quality and security of its products, which are regularly tested in its own laboratories and by Ukrainian veterinarian authorities. MHP said it planned to work closely with the Russian authorities to monitor product quality and ensure restrictions are removed as soon as possible. Ruslan Patlavskyy: Given growth in grain prices, a major cost component for chicken meat producers, responsible for 60-70% of their production costs, we see the ban on Ukraine’s poultry exports as protectionist, aimed at supporting Russian poultry producers in the short-term. According to our estimates, the restrictions will not have a material effect on MHP’s financials in 2010 as frozen poultry exports to Russia should total to less than 1% of the company’s chicken meat output this year. However, considering MHP’s willingness to enter European and the US markets, we see allegations against the quality of the company’s products as potentially hampering the process of entering those markets.