Rising tensions between Russia and the U.S. over Ukraine are giving a boost to Brazilian meatpackers in the bond market.
Russian officials called on countries including Brazil to boost food exports after President Vladimir Putin countered U.S. and European sanctions by banning their agricultural exports. Marfrig Global Foods SA and Minerva SA will probably take advantage of the standoff to boost shipments to a country that already is Brazil's second-largest market for beef, according to Quesnell Capital SA and Andbanc Brokerage LLC.
"Russia has been an important client for Brazilian meatpackers and this ban can clearly benefit them," Carlos Gribel, the head of fixed income at Andbanc, said by telephone from Miami. "I see it as positive for them."
Yields on $850 million of 2019 notes issued by Marfrig, a supplier of hamburger meat to Oak Brook based McDonald's Corp., fell 0.1 percentage point yesterday, the biggest drop in six weeks, to 7.26 percent. Yields on notes from Minerva due 2023 decreased 0.06 percentage point to 6.85 percent for the first decline in nine days.
Press officials for Minerva and Marfrig, who asked not to be identified in accordance with policy, declined to comment on the impact of the Russian ban on U.S. and EU products.
On Aug. 7, Russian Prime Minister Dmitry Medvedev unveiled import restrictions on agricultural items including beef, fish, fruit and cheese. Last year, the country imported $25 billion of products on the banned list.
They are intended "to protect national interests" of Russia, according to a decree signed Aug. 6 by Putin.
The Commonwealth of Independent States, which includes Russia, accounted for 19 percent of Minerva's exports in the 12 months ended in June, Chief Executive Officer Fernando Queiroz said on a conference call last week.
Marfrig got about a quarter of its sales from exports in the first three months of the year, data compiled by Bloomberg show.
While Russia's move is positive for the Brazilian meatpackers, it's too soon to gauge how much it will add to sales, according to Revisson Bonfim, the head of emerging-market analysis at Sterne Agee & Leach Inc.
"With everything that's going on with Russia, you also have higher risks," he said in an e-mail.
Beef exports from Brazil totaled $6.66 billion last year, with Russia accounting for $1.2 billion. Brazil sees an opportunity to boost beef, pork, poultry, corn and soybean exports to Russia because of the ban, agriculture policy secretary Seneri Paludo told reporters in Brasilia yesterday.
"Exports are an important percentage of all of their revenues, and with less competition going into Russia they will have some ability to increase prices," Ian McCall, a money manager at Geneva-based Quesnell Capital, said by e-mail. "There's a high prospect of increased revenues as a consequence of the Russian moves."