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Saturday, December 3, 2016

Russia will feed the meat to China and the Caucasus


In the production of meat import substitution in Russia, as it turned out, there is a faster pace: the country not only fed pork and poultry, but also preparing to enter the foreign markets. It remains to provide the export of technologically and legally, if this is done in a short time will fail again production can fall sharply.

Domestic meat producers this year may reach in key Asian markets – China and South Korea, pre – “workout” in the Caucasus. Export is a good opportunity for them to maintain momentum in a situation when 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 the Russian companies will have hard to compete with producers from the European Union and Latin America, which in their local markets now face the same problems as Russia.

External arguments

“To fully ensure the domestic demand of China is not planning. One reason for this is the huge damage that causes the pig to the environment

“If hard work, then this job in this year can be completed,” – 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 Prime Minister also said that in 2016 it is planned to complete and the approval certificates for the export of Russian meat and grain to South Korea.

About the interest to supply meat to China and other Asian countries (Iran, Iraq, Turkey, Vietnam) Russia said at the end of 2014, when due to sanctions and the war had frozen talks with the European Union, Canada and Japan. A year later, after a visit to China, Prime Minister Dmitry Medvedev, set up a special working group. “Work on the Chinese direction is continuously”, – said in mid-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. Firstly, Russia in quite a short time has been able to provide import substitution in the two segments of the meat market – pork and poultry. At a recent meeting on livestock development in the Ministry of agriculture identified the following as the data: over the past four years, the total volume of meat imports to Russia decreased two times, and self-sufficiency in 2015 reached 88.4%, which is above the target indicator laid down in the government programme. In particular, for pork self-sufficiency was the last year of 94.4%, and poultry meat and 97%. From 2007 to 2015 the volume of imports of pork decreased from 917 to 300 thousand tons, and this year will fall further to 200 thousand tons.

Meanwhile, full import substitution is not an accomplishment of major Russian agricultural holdings, their investment is focused on the production of much larger amounts than the domestic market can “digest”. The representatives of agribusiness, told the Minister of agriculture Alexander Tkachev in the last year – on the first national 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 enhancing investment in pig farming – this is a exports, and the President of holding “Miratorg” Victor Linnik has urged the agriculture Ministry to more actively engage in work to open foreign markets.

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

The demand is already affecting the financial status of manufacturers. At the recent conference of the Krasnodar regional meat processors, almost all speakers stated that the power industry is underutilized, and this entails considerable losses. A number of major meat processing plants of the Kuban region in General was in a state of bankruptcy, some businesses have reported a possible reduction of staff. A similar situation exists in several other regions. For example, in the Kaliningrad region in January – February production of meat and meat products fell by 40% compared to the same period last year, and in 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 the pre-sanctions period. “Now there is a great interest in the Russian meat from the countries of the Caucasus, which due to exchange rate differences. Therefore, our products are very competitive,” – said in Krasnodar conference of meat processors head of the Department for the sale of products holding company “Agrocomplex” to them. N. I. Tkachev, Alexander Semerenko. However, according to him, all manufacturers who are looking to export markets, in this case interested in the question, which of course long-term trends to consider, given that the ruble in recent weeks again strengthened significantly.

For the will to pork

What are the plans for the replacement of imported goods rossiiskaiia promising external market for the Russian manufacturers looks 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 imagine traditional Chinese cuisine. According to the Food and agriculture organization of the United Nations, the average Chinese person eats in a 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 information from the American policy Institute in relation to Land, the Chinese demand for pork has increased from 7.5 to 50 million metric tons – the latest figure is more than five times greater than the annual consumption in the United States.

Despite the huge volume of own production (annually in China hammered more than 700 million pigs, or about half the world total), fully meet the domestic demand of China is not planning. One reason for this is the huge damage that causes the pig to the environment. Per year, this industry produces approximately 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, he rose from 182 to 845 thousand tons a year, i.e. 4.6 times. The main suppliers are the 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%, and the year before – by 22%. The reason is simple: in the country for many years, there has been serious over-production, self-consumption due to the economic crisis grows, and the resulting meat has to send to foreign markets. Currently the export leaves about 48% of Spanish pork.

In a similar situation it was Brazil, another major player in the global market. Last year there were a record volume of slaughter pigs and poultry, respectively 39 million and 5.7 billion heads. To increase the 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 to Russia while that looks modest. Last year, according to the head of the agrarian portal Analytics Agro2b Leonid Sobolev, domestic producers have taken only 10-15 thousand tons of pork and 70 thousand tons of poultry meat. On the one hand, a drop in the bucket of world exports, on the other – a precedent-setting event, because earlier, the Russian SEL is mainly limited to the grain. But the prospects in the new segment directly depend on how active effort will be made to the authorities to open new markets.

Not less important question of the export infrastructure. “It is difficult to say where Russia is waiting for, and where not. In any case, the development of export markets is hard work, – says Leonid Sobolev, citing the example of such a typical country of export agriculture as Uruguay. – To ensure that this small state has become one of the world leaders in the export of beef, had to solve a lot of issues related to the organization and certification of Khudobin, Association of ranchers and processors in actually operating the industrial unions, the promotion of using these new production standards, organization and production of free export zones. All this occurred over many decades and required not only administrative resources, but also 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, since the major problems of entering the market is obvious – it is the distances that increase the cost of logistics and impede the establishment of business relations. As a first step for the Russian export of meat may be the already mentioned countries of South Caucasus. Their demand, Sobolev believes, will ensure the growth of export infrastructure (warehouses, ports, refrigerators, car refrigerators bases), 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 a predominantly Muslim population, since the promotion of food production in this region plays an important role not only the quality but also the cultural-religious component (in other words, the meat must be Halal).

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