Moscow Times reports that talks on the US poultry trade have stalled out since the government froze imports on 1 January, but while Russia hopes to make up the difference, at first by imports and later domestically, prices are likely to rise in the foreseeable future.

Imports were frozen at the beginning of the year after long-planned regulations went into effect that forbid the import of poultry treated with chlorine – a production method used by many US producers. The Federal Consumer Protection Service signed the measure in June 2008, but the measure’s starting date was later pushed back to 1 January 2010.

But US poultry, which supplied 750,000 metric tons last year – or 20 per cent of the market – is unlikely to ever regain its old market share.

At the beginning of February, President Dmitry Medvedev signed a new 'food security' doctrine, which called for, among other things, 85 per cent of all meat consumed in the country to be produced domestically.

The Cabinet, meanwhile, is taking an even more aggressive stance on poultry. In January, Prime Minister Vladimir Putin said Russia should be able to cease all poultry imports by 2015, while Agriculture Minister Yelena Skrynnik said last month that the amount of poultry imports should be cut to zero within just three years, by 2012.

Domestic poultry producers are confident that the industry will be able to make up for the missing imports.

Curbing poultry imports is economically justified, as Russia has enough grain and manpower to afford it, said Galina Bobyleva, head of the Russian Poultry Union, which represents Russian poultry producers and suppliers.

She said: "We are a country that has good grain crops, which is one of the main prerequisites for developing animal farming. And it is natural for us to produce poultry on our own, as it is a sector where we can perform well."

The country will produce 3.1 million metric tons of poultry per year by 2012, according to the ministry's forecast – up from 2.5 million metric tons in 2009.

But the task of boosting poultry output will require more than just stepped-up efforts on the part of producers. The Agriculture Ministry said it is in the process of developing a program that would help producers meet the 2013 deadline for phasing out poultry imports.

"We're currently preparing documents setting the terms of preparation and financing of the programme," a spokesperson for the Agriculture Ministry said in e-mailed comments to Moscow Times. "State support will be carried out via subsidies from the federal budget to partially cover loan interest, as well as subsidies for pure-strain stockbreeding and customs and tariff regulation of imports."

As a whole, the notoriously state-dependent agriculture sector has benefited from a huge uptick in government support for its various modernisation programmes, including highly subsidized interest rates and federal targeted programmes.

The sector received 776 billion rubles (RUB; $25.5 billion) in loans in 2009, including RUB340 billion allocated by Rosselkhozbank and RUB362 billion by Sberbank, the ministry said last month. The government plans to spend an additional RUB107.6 billion in stimulus programs on agriculture in 2010.

Ms Bobyleva said: "Currently all poultry farms are taking advantage of the loans the government allocated to modernise the agriculture sector. New cages are installed, new equipment is acquired using these funds, and the industry has had a surplus of 320,000 metric tons of meat in 2009 and aims at another 300,000 metric tons boost this year."

But in the short term, there is a good chance that poultry prices are going to rise as long as no deal is reached with the United States.

Dmitry Rylko, head of Agricultural Market Research Institute of Russia, commented: "I can't think of a single country that would be able to cover the missing 600,000 of US imports in the total 780,000 metric tons quota set for 2010. Even Brazil, a major supplier, will not theoretically be able to cover this quantity, while domestic producers may only provide an additional 300,000 tons."

And government plans to replace US imports with those from Turkey and Thailand are not very realistic, he said.

He added: "Turkish poultry is non-competitive, as it will cost significantly more. Turkey imports soy beans and grain from abroad, and therefore its poultry will not become an alternative to cheap-priced US chicken or domestic chicken. Thailand does not export fresh poultry due to restrictions caused by bird flu epidemics. They only export cooked chicken. Now tell me, who – and what for – will buy thousands of tons of cooked Thai chicken in Russia?"

Thailand and Turkey are in the process of working out veterinary arrangements that would allow the countries to start importing poultry into Russia, said Alexei Alexeyenko, a spokesperson for the Federal Veterinary and Phytosanitary Inspection Service. He declined to comment on how soon the countries could begin making supplies.

He said a number of other foreign suppliers, such as Brazil, France, Spain and Germany, which already have valid veterinary certificates, may increase supply volumes to cover the future demand.

The Russian Poultry Union does not foresee a price increase because of the ban on US imports, as the market currently has enough poultry to sell, Ms Bobyleva told Moscow Times.

She said: "The ex-manufacturer price for chicken today has declined to 60 rubles per kilogram, down from 70 rubles in December. The market is saturated, and this is due to import tendencies whereby the prevailing quantity of food is imported in the fourth quarter, which was also the case at the end of 2009."

Meanwhile, negotiations with the United States remain stalled, but "an understanding of positions has been reached," Mr Alexeyenko said.

He added: "No practical result has been reached so far, as you can see from the news, but we agreed to continue our consultations soon. The resolution of the conflict depends on whether the United States is ready to reorganize its poultry industry in order to get rid of chlorine usage."

US officials have been somewhat combative about the topic. US Secretary of Agriculture Tom Vilsack said in January after talks had stalled that the restrictions Russia placed on poultry imports were "not scientific," adding that Russia's entry into the World Trade Organization may be "tough, if you can't recognise the value of science" in trade.

The US Poultry & Egg Export Council did not reply to requests from Moscow Times for comment.

But the United States may not be scrambling to re-fashion their production lines in response to the ban. The government has been gradually reducing the quota of poultry imported from the United States over the past several years. If the ban were resolved, the United States would still only be able to export 600,000 metric tons of chicken to Russia in 2010 – down from 1.3 million tons in 2001.

Mr Rylkov said: "The importance of the Russian market for US producers fell drastically over the recent years, from 50 per cent to 20 per cent. But I still wouldn't rule out the possibility that US importers may sort it out with the Russians. If so, the US will have a hard time supplying all the volumes they failed to import at the beginning of the year."

Deputy Prime Minister Victor Zubkov, who is overseeing the talks with the United States, said the dialogue is continuing and that the Americans may find a way to stop using chlorine, according to Moscow Times.

He said: "The American side is ready to work in our direction: They may quit using chlorine and take up new technologies already used in Europe. They have agreed to continue talks on this issue, and may likely ask for a transition period."

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