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Russia sees rapid fall in prices

By Vladislav Vorotnikov , 19-Feb-2013

Related topics: Industry & Markets, Pork, Poultry, Russia

Meat and poultry prices in Russia have fallen dramatically in the wake of the country’s accession to the World Trade Organization (WTO), producers’ unions have warned.

According to the latest data, poultry prices in Russia reached RUB65-70 (US$2.15-2.32) per kg in carcase weight in the middle of February, with pork prices down to RUB63-65 ($2.09-2.15) per kg. Both these levels are the lowest Russian consumers have ever seen and, according to experts, they are threatening to devastate small and medium-sized producers in the country.

The fall in prices appears to be due to the competition of domestic products with cheaper imports, whose share in the Russian market grew significantly after the country joined the WTO in August 2012.

“Prices for poultry have fallen by 10% since since the beginning of 2012, while pork prices dropped by 25% in the fourth quarter of 2012 after a rise in the volume of imports and a sharp increase in supplies from domestic pig farmers,” said Alexander Kostikov, spokesperson for the country’s largest agricultural holding Cherkizovo.

“The fall in pork prices began with the accession of Russia to the WTO at the end of August 2012. Duties on imports of pork within the quota were reduced from 15% to 0%, and out of quota decreased from 75% to 65%. Prior to joining the WTO, pork prices in Europe were about 30% lower than in Russia, and now Russia’s price has dropped to the European level,” commented Yuri Kovalev, head of the National Union of Pig Farmers.

The fall in prices comes amid rising production costs for Russian farmers, resulting from the increasing cost of feed. According to official statistics, prices of feed for poultry have doubled since August 2012 to RUB12,000 ($400) per tonne and the situation with pig feed is similar. Thus, the cost of pork production rose from RUB55-60 ($1.82-1.99) per kg in carcase weight, to RUB70-75 ($2.32-2.49). The cost of production of poultry meat is standing at the level of RUB70-80 ($2.32-2.65) per kg in carcases weight. So almost all Russian producers of poultry and pork are currently suffering losses.

Kostikov characterised the current situation in the industry as critical.

“If we had not the higher prices for grain, then the producers could possibly deal with the falling prices on meat. However, the current situation with [feed] grain brings into question the existence of many companies in the industry. There is a feeling that many of them have already decided to fully cull all their livestock and go out of business,” he said.

However, the director of the livestock department under Russia’s Ministry of Agriculture has promised to support national pork and poultry producers.

“Indeed, the drought increased the cost of grain by almost two times and the cost of production has risen significantly both for poultry and pork. The Ministry of Agriculture is currently considering mechanisms to support manufacturers. It will not be compensation for losses, but a one-off support to keep investment in the business attractive,” he said.

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