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Friday, March 16, 2018

Food import substitution turned out to be extremely profitable

Four billion dollars – that amount to Russia has replaced the imported products since the beginning of the embargo, said the Ministry of agriculture. Three years ago it launched a number of positive trends in every grocery market. However, for further growth of domestic production of goods is no longer enough. What is a brake?

“Almost $ 4 billion Russian domestic produced products is what we call import substitution. That is, domestic cheeses, sausages, and other products that had been imported from abroad, were substituted by Russian production,” – said Deputy Minister of agriculture Evgeny Gromyko after the opening of the exhibition “Prodexpo”.

“The main obstacle for further development of meat production in Russia will be low income of the population”

Russia has reduced imports of food because of bradenburg in 2014 from 60 billion to $ 20 billion, said earlier the Minister of agriculture Alexander Tkachev. According to him, domestic products occupy 80-90% of the assortment in stores.

The food embargo is in force in Russia since August 2014 in respect of a number of countries. A ban were meat and meat products, milk and dairy products, fish and fish products, vegetables and fruit.

Cold saturation

According to the National meat Association, last year the production of poultry, pork and beef, with the exception of meat of small cattle, continued to grow by 5.1% in comparison with 2015. Most successful shows the swine – an increase of 10%, while poultry meat production has slowed somewhat. “The reason for the low prices for poultry, which are kept for a long period of time. Last year of price growth were observed in comparison with the year 2015, while production costs grew due to the increased cost of imported components,” explains chief expert of the National meat Association Diana Nizovtseva. In particular, Russian companies use imported soybean meal, imported veterinary drugs, and imported hatching eggs.

Beef production remains the most problem segment of the meat market. However, here there is progress. In 2016 for the first time in a long time, fixed a small but increasing production of beef – by 0.5%. This was made possible thanks to the implementation from 2012 of the subprogram of the state program of development of animal husbandry. The share of livestock beef cattle already exceeds 15% of the total cattle (dairy plus beef cattle). For comparison: in 2012 its share was less than 5%. In the dairy sector observed long-term decline in livestock numbers.

“In 2017, the trend of reduction in imports of meat will continue. But this is not to be critical and to exert any influence, including on prices. Poultry meat import, for example, is insignificant 4.2 percent,” says Diana Nizovtseva.

Overall, however, limit growth in the meat market have been exhausted. Russia can allow for a few pounds a year for meat production is more difficult. The fact that the rate of meat consumption in the country reached a pretty decent figures – 73 kg per person, explains Nizovtseva. The highest was in 2013, when Russians consumed 75 kg of meat per person per year.

The Russians, by the way, eating meat is much more than the world average. The world average is 45 kg per person. However, until the United States, Russia is still far away – where per capita consumption is more than 100 kg of meat per year.

The main obstacle for further development of meat production in Russia will be this year’s low income population. That is due to the internal market will be difficult to ensure high rates of meat production. One solution is to look for export markets.

However, the General Director of the Institute for agricultural market studies (IKAR) Dmitry Rylko sure that Russia is unlikely to succeed because the Russian meat production is expensive and is not competitive. Therefore, in the meat sector in the preservation of the achieved result will be already achievement.

Russian herring, shrimp and salmon in the black

Of bradenburg has led to a number of positive trends and a fish market. The fishing industry shows not only the increase in catch but also a drop in imports with growth of export of Russian products. Imports last year fell nearly 9% to 511,6 thousand tons. Russia has become much less buying abroad frozen capelin, frozen herring and frozen salmon. Imported canned Russians also were less likely to buy, preferring the Russian, including sprats. Although it is necessary to increase the purchase of imported mackerel and trout (also frozen).

The Russian fishermen were able to increase exports, including due to the growth of export of ready-made and canned fish products.

As explained by the President of the Russian Association of fishery enterprises, entrepreneurs and exporters Herman Zverev, counter-sanctions have led to a significant increase in the supply of Pacific herring on the domestic market (from 35 thousand tonnes to 190 thousand tonnes). In addition, the increased supply of products from Pollock in 2014 is 250 thousand tons, in 2016 – 320 thousand tons.

In General, the retaliatory sanctions have increased the attractiveness of the Russian shrimp, herring and salmon. “Now, almost the whole catch of far-Eastern shrimp – 15 thousand tons goes to the domestic market,” says Zverev.

The main problem this year will also be associated with a reduction in the purchasing power of the population.

Requires belorussiaya

Dairy market shows a heterogeneous situation. On the one hand, domestic agricultural companies for three consecutive years, increasing production volumes, also continues to increase the productivity of dairy livestock.

According to the Institute for agricultural market studies (IKAR) at the end of 2016, the overall total milk production is reduced. But the production of marketable milk still shows a small increase up to 17.8 million tons. The main volume – 80% – produced agricultural enterprises. Yes, and the milk yield of cows in 2016 is growing and will reach a record 5,800 kg per year while reducing the number of cows by 1%.

On the other hand, there is a strong shortage of raw materials, which led to record high prices for raw milk.

What are the plans for the replacement of imported goods Rossiiskiye, Russian dairy producers complain that the main beneficiary of steel not they, and Belarusian producers. Belarusians and until 2014, also has a significant share of the Russian market, but now even more strengthened their positions. According to the representative of Soyuzmoloko Mary Rebit, if our processors were a lot of raw materials, the Russian producers could displace imports. And so instead of import substitution on the background of bradenburg fit to impose targeted belorussiaya.

Russia remains one of the largest importing countries of dairy products: in terms of raw milk, the ratio of imports to the volume of marketable milk is about 40%, reports “Agroinfo”. On Belarus in the total volume of import of a butter in Russia accounts for 82%, cheese – 87%, dried milk and dried whey – 85%, dairy products – 99%.

The shift in consumer demand towards cheaper products and compete with Belarusian products in General leads to a drop in the production of dairy products. So, falling production in Russia creamy mass and milk powder, and cheese. But a growing manufacture of dairy products. Milk in crisis drink more than buy expensive cheese and curd. Cheese production has slowed significantly (an increase of only 2% last year).

To improve the situation in 2017, experts do not expect. To prohibit the export of dairy products from Belarus, which is part of the EEU, Moscow can not. Only if we manage to catch the Belarusians in the non-compliance of phytosanitary and veterinary norms and rules on the background of aggravation of relations between the two countries in recent years. On the other hand, dairy producers have the leverage to lobby for itself special preferences and government support. Russian dairy producers still rely on her and on the growth of real wages of Russians.

Greenhouses and gardens is a Paradise for investors

But the fruit and vegetable market is still far from saturation, and he is waiting for good news in 2017. Last year had already received a record gross harvest of vegetables of 5.42 million tons, 200 thousand tons more than last year. Agricultural crops such as onions, carrots, zucchini, Russia has already reached the level of self-sufficiency, cabbage the figure is 62%, on cucumbers – 78%, tomatoes – 56%, cites the Director of the Department of crop production, mechanization, chemicalization and plant protection Pyotr Chekmarev. According to his estimates, the average profitability of the sector in the past year was 10%. This is an important fact which gives reason to expect further investment growth in the sector.

The greatest hope this year to increase fruit and vegetable production, primarily due to the growth of the areas of greenhouses and intensive orchards.

One of the main achievements of bradenburg is the growth of the greenhouse industry. Only in 2016 was expected to be introduced 185 ha of greenhouses, and in the next five years it is planned to build 400 greenhouses with a total area of 2 thousand ha.

Vegetable growing in greenhouses after the introduction of predamage has become one of the emerging investment sectors. According to the Association “Greenhouses of Russia”, by the beginning of 2017 the total area of greenhouses in the country reached approximately 2.3 hectares Of which 600 hectares built over the past five years, including 300 hectares – with svetokultura (light provide electric lamps). Greenhouses with svetokultura it is important to develop, to provide the Russians with vegetables in the winter. Now in winter, we provide ourselves with vegetables less than one-third, the rest have to be imported.

But the situation is changing. Only in 2016 in the construction and modernization of greenhouses in Russia invested more than 33 billion rubles, said the President of the National Union of vegetable producers Sergei Korolev. The contribution is made not only for the core market players, investors come into this business even from the oil industry, telecommunications and with the alcohol market. Vegetable production due to the predamage becoming lucrative, in addition, this market is far from saturation. According to expert estimates, to cover the needs of Russia in the greenhouse vegetables, production should grow to 1.8 million tonnes per year, i.e. by 1 million tons (now more than 800 thousand tons). It may take another three to four years.

Interestingly, the situation in the cucumber and tomato is very different. Because of the higher profitability of cucumber production, their share of the greenhouse is almost 70%. Tomatoes is 25% and only 5% – peppers, eggplants and herbs.

The cucumber market is approaching its saturation. This means that soon investors will have to turn their attention to the establishment of greenhouses for growing tomatoes, and then move on to the peppers and other vegetables. To prevent this will only full the return of the Turkish tomatoes to the Russian market. But Russia is in no hurry to satisfy the desire of Ankara.

Plus Russia keeps the state of the greenhouse industry at the level of 3-3,5 billion rubles annually. The Ministry of agriculture said that by the end of last year the office has received 31 project on development of vegetable production by almost 40 billion rubles in loans.

As for fruits, it is said in the investment boom. Investors, again from different sectors of the economy, began to invest in the orchards, mainly Apple orchards. Literally in the beginning of the year approved the project of laying of the orchard on 100 hectares in the Belgorod region. The investor is a “PromSvyazCapital”. It is clear that citrus and other exotic fruits of Russia is not necessary and to begin to deal with imports. But to provide apples she obliged. The more that this industry promises a good profit. According to expert estimates, Apple production more profitable than grain production. The investments required are not as significant. To lay the garden required significantly smaller area of land and not so much expensive equipment.

The problem is that the orchards are, in fact, only started last year. Therefore, a serious result is not yet visible. To predamage a lot of apples imported, and now quite a lot of imports. Only changed the supply. If before the apples went directly from Poland to Russia, now it’s all done via Belarus, where the goods perefasovyvayut and withdrawn from the ban. So, in 2015 the share of imported apples was more than 70%, although there was a reduction in imports by 15%.

But given the announced investments in the period of 2016-2017 years in the intensive gardens in Russia, more seriously, the situation could change for the 2019-2020 years. Here the main risk is the undo counter.


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