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Monday, November 20, 2017

Russia will feed the meat to China and Transcaucasia


In the field of production of meat in Russia import substitution, as it turned out, there is a faster pace: the country not only feed him pork and poultry, but is preparing to enter the foreign markets. Provide export technologically and legally, if you do it in a short time will fail again production can plummet.

Domestic meat producers this year may reach key markets in Asia – China and South Korea, preliminary “practice” in Transcaucasia. Export is a good opportunity to maintain momentum in a situation where the saturation of the domestic market of meat of own production in some segments approached one hundred percent. However, in the struggle for China and other Asian countries, Russian companies will have to compete fiercely with producers from the European Union and Latin America in their local markets now face the same problems as Russia.

External arguments

“To fully meet the domestic demand of China has no plans. One reason for this is the huge damage that the pig gets environment

“If you work hard, then this job in this year can complete it,” said Deputy Prime Minister Arkady Dvorkovich during the recent Asian economic forum in Boao, China, commenting on the prospects of meat exports from Russia to China. The main objective at the moment is certification of Russian companies and obtain the necessary permits. The Deputy Minister also reported that during 2016 is planned for completion and approval certificates for the export of Russian meat and grain in South Korea.

About the interest in the supply of meat in China and other Asian countries (Iran, Iraq, Turkey, Vietnam) Russia announced in late 2014, when because of the sanctions war had frozen the negotiations with the European Union, Canada and Japan. A year later, after the visit to China by Prime Minister Dmitry Medvedev, set up a special working group. “Work on the Chinese direction is a continuous process”, – assured in the middle of February the Deputy Minister of agriculture of the Russian Federation Sergey Levin. The next step in this direction will be the visit to the Russian poultry enterprises of Chinese experts, to be held in April.

The main arguments in favor of increasing the export of beef at least three. First, Russia for a relatively short time has been able to provide import substitution in the two segments of the meat market – poultry and pork. At a recent meeting on livestock development in the Ministry of agriculture were considered the following data: over the past four years the total import of meat to Russia has decreased in two times, and self-sufficiency in 2015 reached to 88.4%, which is above the target indicator laid down in the government programme. In particular, the level of pork self-sufficiency was the last year for 94.4%, and on poultry meat and 97%. From 2007 to 2015, imports of pork declined from 917 to 300 thousand tons, and this year it is planned a further fall of up to 200 thousand tons.

Meanwhile, full import substitution is not a limit of dreams of the largest Russian agroholdings – their investment programme focused on the production of much larger amounts than the domestic market can “digest”. The representatives of agribusiness, said the Minister of agriculture Alexander Tkachev in the last year – on the first nationwide Forum on food security, held in Rostov-on-don. In particular, the head of Executive Committee of National meat Association Sergey Yushin said that the sole reason for the build-up of further investments in the pig industry is exported, and the President of holding “Miratorg” Victor Linnik has urged the agriculture Ministry to take a more active part in the work on opening foreign markets.

A second consideration, which forces manufacturers to rely on exports, a fall in domestic demand for meat products. Due to the economic crisis the purchasing power of Russians has declined markedly: for example, peak consumption of pork in Russia – 3,267 million tons – fell on 2013, but last year the volume decreased to 2,929 million tons.

The drop in demand is already reflected in prices. At the recently held in Krasnodar regional conference meat packers almost all speakers stated that the power industry is underutilized, and this entails considerable losses. A number of major meat processing plants in the Kuban region in General was in a state of bankruptcy, some businesses have reported a possible reduction in staff. A similar situation exists in other regions. For example, in the Kaliningrad region in January – February the production of meat and meat products fell by 40% compared with the same period last year, and in the Nizhny Novgorod region – by 21% for the year as a whole. In this situation, exports could become, if not salvation, then the ability to maintain liquidity at the acceptable level.

Finally, the third factor is the significant depreciation of the ruble in comparison with desanctions period. “Now there is great interest in the Russian meat from the countries of the Caucasus, which due to exchange rate differences. So our products are very competitive,” said at a conference in the Krasnodar meat packers, the head of the Department for the sale of production of the company “Agrocomplex” to them. N. I. Tkachev Alexander Semerenko. However, according to him, all manufacturers who are looking at export markets, in this case we are interested in the question of which exchange rate to consider long-term trends, given that the ruble in recent weeks once again has strengthened significantly.

For the will to pork

How are the plans for the replacement of imported goods rossiiskaiia promising external market for the Russian manufacturers look to South-East Asia – South Korea, Hong Kong, Taiwan, the Philippines, in the future Vietnam, but especially China. That China is the world’s largest consumer of pork, without which it is impossible to provide traditional Chinese cuisine. According to the Food and agriculture organization of the UN, the average Chinaman eats per year 39 kg of pork – five times more than in the late 1970’s, when China began a steady increase in the consumption of meat. Since then, according to the American Institute policy in relation to Land, the need of pork in China increased from 7.5 to 50 million metric tons – the last digit is more than five times the annual consumption in the United States.

Despite the huge volume of own production (annually in China gets more than 700 million pigs, or about half of the world total), fully meet the domestic demand of China has no plans. One reason for this is the huge damage that the pig gets environment. Per year, this industry produces about 5 billion tons of waste and is China’s main source of water pollution. Therefore, every year China increases the import of meat from 2007 to 2015, it has grown from 182 to 845 thousand tons a year, i.e. 4.6 times. The main suppliers are countries with overcapacity. For example, Spain, according to the newspaper El Mundo, in 2015, has exported pork to China at 327 million euros. Large shipments were also made to Japan, South Korea, Hong Kong and the Philippines. In General, Spanish pork exports grew last year by 8.4%, while a year earlier by 22%. The reason is simple: in the country for many years there has been serious over-production, own consumption due to the economic crisis grows, and as a result the meat has to be sent to foreign markets. Currently, the export takes about 48% of Spanish pork.

In a similar situation in Brazil, another major player on the world market. Last year there were record volumes of slaughter pigs and poultry, respectively 39 million and 5.7 billion heads. To increase production of Brazilian producers also induces the weakening of the national currency, the real. In particular, the export of pork from Brazil last year increased by 13%, while manufacturers also focused on Asia. Currently in the final stage are the negotiations about the opening for the Brazilian pork market in South Korea, which could bring the country more than $ 150 million.

On the background of the world’s leading exporters of meat Russia so far looks modest. Last year, according to the head of the agrarian portal Analytics Agro2b Leonid Sobolev, domestic manufacturers took only 10-15 thousand tons of pork and 70 thousand tons of poultry meat. On the one hand, it’s a drop in the ocean of world exports, on the other – a precedent-setting event, because earlier, the Russian selhozagregat mainly limited to grain. But the Outlook for the new segment directly depend on how active effort will be made to the authorities to open new markets.

Not less important is the issue of export infrastructure. “It’s hard to tell where Russia will face, and where not. In any case, the development of export markets is hard work, – says Leonid Sobolev, citing the example of such typical country of export agriculture, Uruguay. – To make this small country has become one of the world leaders in the export of beef, had to solve a huge number of issues related to the organization and certification of Khudobin, Association of ranchers and processors in actually operating the industrial unions, promoting them through new standards of production, the organization of free export and production areas. All this occurred over many decades and required not only administrative resources, but also a long-term strategy and significant investments.”

From this point of view, according to the analyst, Southeast Asia looks to the Russian meat, long-term perspective, because the main problems of this market is obvious – it’s the distances that increase the cost of logistics and makes it difficult to establish business relations. As a first step for the Russian export of meat can be the already mentioned countries of South Caucasus. Their demand, Sobolev believes, will ensure the growth of export infrastructure (warehouses, ports, refrigerators, car refrigerators databases), which would be useful for the development of more distant markets. Good opportunities (especially for export of poultry meat) and open countries in the Middle East, especially for the Russian republics with Muslim majority, since the promotion of food production in this region plays a big role not only the quality but also the cultural-religious component (in other words, the meat should be Halal).

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