| About us | Our news | Our services | Contacts
GRAIN | FLOUR | CEREALS | SUGAR | OILSEEDS | FEEDSTUFFS & INGREDIENTS | MEAT | DAIRY
IKAR in Mass and Industry Media
Russian meat industry looks favourably on impact of sanctions
Forecasts estimate that, by the fourth quarter, the Russian market will have replaced supplies with those from alternative destinations – mostly countries in South America – while domestic producers will enjoy rising prices.
Speaking at a press conference last week, agriculture minister Nikolai Fyodorov claimed the embargo would help Russian producers "to become more competitive".
"Rosselkhoznadzor [the Russian veterinary watchdog] has done its best to obtain guarantees for the supply of lost imports [of meat] from alternative countries. It is easy to understand that, at one time, this would not have been possible – it takes time. But I think the replacement of goods from countries that came under the sanctions with goods from alternative countries can probably happen by the middle of the fourth quarter," said Sergei Yushin, president of the National Meat Association of Russia.
Joint estimates from the National Meat Association and Russian Union of Meat Producers, along with the other farming associations, show that, due to the decision by the Russian government, the volume of domestic production during the coming one-and-a-half years could increase by RUB281 billion (US$7.7bn) in monetary terms, as prices are also set to rise by about 10-20%.
At the same time, market obervers aired concerns that the trade disputes might negatively affect the level of investment in the industry.
"Import substitution is a long-running process, where the most important factor is the legal and financial support from the government," commented Moushegh Mamigonyan, chairman of the Russian Meat Union.
Yushin added: "Import substitution is possible only by creating the right conditions for investment in the agricultural sector, as well as an increase in the investment itself, which has substantially decreased over the past two years. If, a couple of years ago, it was enshrined in law that the farmers did not pay income tax, then the big concern now is the government’s plan to impose relevant regional taxes," he said, adding that this measure would decrease the investment attractiveness of the industry itself.
Fyodorov also admitted that there were still some concerns over the investment attractiveness of the industry as, to keep the balance of the market, the government needs to allocate an additional RUB137bn (US$3.77bn) in support to farmers over the next three to four years.
Banned supplies still possible via Belarus
According to the agricultural and industrial department of non-commercial association Business Russia, about 10-20% of banned meat supplies could still get into Russia via Belarus.
"Suppliers would still be able to declare the goods to be imported into the territory of Belarus, and than deliver it into Russia due to the common Customs space. However, that would be classified as an administrative offence," said Vsevolod Sazonov, chairman of the law firm Sazonov and Partners.
"This product would be free to get into Russia, but retail chains probably would not take them on-shelf," added Andrey Danilenko, chairman of the agricultural and industrial department of Business Russia.
"But the authorities have failed to completely block black imports. About 10-20% of prohibited goods [of the total amount of banned supplies] will still be supplied to Russia. It will be a case of repackaging products in Belarus or even in Russia itself. We used catch out Belarusians on such issues – sometimes the shipments retain traces of the old packaging, which shows the real country of origin."
Losses were already being felt
Shortly before the ban was announced last week, Russian experts warned that the embargo on meat imports from the (EU) was bringing heavy losses to both sides and, in the near future, the situation could become critical.
According to the European commissioner for agriculture Dacian Cioloş, losses accrued by European manufacturers following restrictions on the supply of pork to Russia, during the first five months of 2014, have already reached €580 million, and industry observers are sure that, by the end of the year, this figure will grow significantly.
Russian businesses have also felt the consequences of these prohibitions. Since the bans were introduced, there has been a shortage of bacon and pork, which led to a rise in the price of raw materials for production, such as cooked sausages. According to data from the Russian Federal Statistics Service, in the first half of 2014 the price of pork in Russia jumped by almost 20%.
"However, it would be wrong to talk about losses for Russian meat producers. In general they are happy with the situation as they have got rid of strong competitors from the EU, and have received a very favourable price," commented Russian agricultural analyst Eugene Gerden.
"However, there are losses for meat processors in Russia, and it is very difficult to calculate them, as there is no official information on this point. However, taking into account reports from these companies, it can be assumed that their losses could reach tens of millions of euros."
Price changes have also affected the structure of consumption, with pork and beef falling, while poultry meat has reached record levels.
"The price of pork in Russia has been rising since the start of the year and has now reached its highest possible level. Any further growth will lead to an extreme drop in consumption and a shift by consumers to other types of meat. So manufacturers have to freeze the current prices," said Elena Turina, director of the Russian Institute of Agricultural Marketing Studies.
All viewing: 528
Grain | Cereals | Sugar | Oilseeds | Feedstuffs & Ingredients | Meat | Dairy
© 2002-2019 IKAR. Institute for Agricultural Market Studies
24, Ryazansky str., off. 604, Moscow, Russia
Tel/Fax: +7 (495) 232-9007 | email@example.com | Feedback