Russian meat sector profits soaring, says government

By Oscar Rousseau contact

- Last updated on GMT

Russia's government does not think the meat sector has been hurt by economic sanctions
Russia's government does not think the meat sector has been hurt by economic sanctions

Related tags: Meat sector, Livestock, Meat, Russia

The profitability of Russia's meat sector rose by 2.2 times between 2013 and 2016, actually benefiting from the tit-for-tat sanctions imposed by Russia and its Western trading partners, according to the Russian Ministry of Agriculture.

In a report released on 11 August, the ministry said state support for Russia’s meat industry increased following the imposition of sanctions. It grew production as a result, so much so that the meat sector (including poultry) was not only able to meet domestic demand, but had spare capacity to sell to more lucrative export markets.

A spokesman for Agriculture Minister Alexander Tkachev said: “In 2016 the ratio between profits and costs for domestic meat producers was 16.4%, which is 2.2 times more than in 2013, when this figure was only 7.3%. The level of profitability in the first quarter of 2017 exceeded last year’s figures and reached 16.9%. There is a possibility that these figures will further grow by the end of the current year.​”

Profits meeting targets

The spokesman added that the end of meat imports from the EU and the US in 2014 had boosted Russian purchases by volume from domestic meat processors. This had resulted in an increase in profitability for local producers.

The biggest rise in profits has been observed in the pig meat segment, where profitability was 19% last year. For poultry, it was 13-14%, with the domestic market commanding lower prices, while feed prices rose. Beef and turkey producers have also seen profits rising.

While Agriculture Ministry analysts have predicted that profit rates across the meat sector will continue to grow in the second half of 2017, Russian meat producers are less optimistic. Vyacheslav Smauts, head of Voronezh-based Smauts & Partners, a major central Russia food producer, said meat producers expected profit rates to fall later this year because of an anticipated drop in wholesale meat prices.

Smauts added that a further increase in exports would be limited by existing veterinary restrictions in overseas markets and the strengthening of the national currency, the rouble, in foreign exchanges. As a result, he predicted: “The majority of domestic production will continue to be supplied to the domestic market.​” And he noted this would limit the ability of the industry to immediately expand profits further.

Ministry officials have claimed profits are meeting targets in Russia’s state agriculture development programme to 2020, forecasting the ratio between profit and production costs within Russian farming and livestock producers should be 15% by 2018 and 16% in 2019.

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

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