Russia’s meat industry worried by oversupply

By Vladislav Vorotnikov

- Last updated on GMT

Meat production in Russia has seen an increase, while imports have dropped
Meat production in Russia has seen an increase, while imports have dropped
Russia could face major meat oversupply problems if it continues to increase meat production by current rates, according to experts.

The country increased meat production volumes by 13.5% to 792,000 tonnes (t) from January-April 2016, compared with the same period last year, according to a recent report from Russia’s State Statistical Service.

Sergei Ushin, head of the executive committee of the National Meat Association, speaking at the ASEAN forum in Sochi, indicated that, over the past decade the share of imported meat in Russia had dropped from 40% to 10%, while the pace of growth in Russia’s own meat industry is currently exceeding the overall global rate by four times.

Shifting focus of state support

At the beginning of 2016, several Russian meat companies applied to the government with a request to stop subsidising the meat industry, as the continual commissioning of new projects (related to meat production) was affecting prices, as the market was already saturated with pork and poultry.

On 17 May, Russia’s Agriculture Ministry published a report indicating a sharp drop in meat prices last year. According to the paper, the price for beef dropped 20.3% to RUB192,100 (US$2,877) per tonne. Pork prices decreased 30.8% to RUB149,600 (US$2,241) per tonne, while poultry prices dropped 15% to RUB86,700 (US$1,298) per tonne.

As a result, market participants are advising the government to shift subsidies away from new infrastructure projects towards supporting the construction of facilities to produce higher-value products required by the meat industry.

“Any jump in exchange rates has not resulted in a sudden rise in production costs,​said Mushegh Mamikonyan, president of the Meat Board of the Common Economic Space of the Customs Union. ​Only projects that enhance the entire supply chain of added-value food products in Russia should be financed.”

“It is necessary to direct support to improve local production in sectors such as hatching eggs, seeds, feed enzymes, amino acids and other veterinary products,”​ he explained.

Equal competitive conditions

Meat industry representatives welcomed the comments, claiming that, with a further two-digit rise in meat production, which would mostly be accounted for by investment projects from Russia’s largest manufacturers in the next five years, several hundred meat farmers would go bankrupt.

“The government continues to pump money into large agricultural holdings, which plan to create capacity for the production of one million tonnes of pork within the next five years,​said a spokesperson from one pig producer, who wished to remain unnamed. ​Executives from these giant firms admit that they expect that ineffective pig farms, accounting for an overall capacity of one million tonnes of pork, would leave the market during this period, giving them additional space for development. We believe this is unfair.”

“With soft government money, we would be as efficient as they are, especially given the fact that small farms can offer organic production,​he added. ​However, it is impossible for us to receive investment money under the same conditions as they do. We would really back the complete removal of state support, so that competitive terms would be equal for all market players.”

Related topics: Industry & Markets, Russia

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1 comment

High Cost Producer

Posted by Alex,

Low budget consumer. If sanctions are lifted fifty years from now the Russians will still be hungry.

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