22 Russian Federation to Increase Meat Production by 2–2.5% in 2019

The breakthrough made by Russian meat industry during the last years allowed the country not only to switch from import dependency to intensive development in providing domestic meat, but also to launch product export.

The National Meat Association (NMA) forecasts that the progress will continue and the meat production growth will reach 2–2.5%. The Association doesn’t support the forecasts of some experts that the industry growth rate will significantly decrease this year. Margarita Brazhevskaya, Deputy Chief Officer on NMA, told “Interfax” that over the last 15 years, the production of cattle and poultry for slaughter in Russian Federation increased 2.1 times – from 5 mln tonnes on a carcass weight basis in 2004 to 10.6 mln tonnes in 2018.

“One of the main contributing factors was the state policy aimed at investment promotion in the livestock industry”, she said. “In 2005–2018, the industry received investments of 1.1 trillion rubles, including 500 bln rubles in the poultry industry and 450 bln rubles in the pork industry. Modern plants were built which meet the highest international safety and quality standards.” She believes that the modern Russian poultry and pig farms are just as good as the American, Canadian and European producers.

“Under the best case scenario, this year, the meat production growth, including poultry, will reach 2–2.5% in Russian Federation. This corresponds to the last year’s growth”, Brazhevskaya forecasts. NMA’s Deputy Chief Officer believes that poultry production will increase by 1.5% this year.

She said that the pessimistic forecasts of some experts (who suggested that the growth in this sector would hit a 10-year low) were based on the poultry production decrease in the first two months of this year. “It was based on objective reasons: the business problems of two leading poultry producers (“Eurodon” and “Belaya Ptica”) and among some medium-sized poultry companies”, Brazhevskaya added. However, the situation has stabilized since March.

According to Rosstat, in March, 2019, the poultry production in agricultural organizations rose by 12.2% versus February, 2019, while in April it increased by 1.3% compared to March. In May this year, the growth was 0.9% versus May, 2018. The expert said that the decline in production during the first two months was not compensated for now because during 5 months of this year the decline was 1.1% versus the same period of the last year, “but the positive trend in March, April and May allows us to make positive predictions.” Brazhevskaya says that currently there is an active recovery of the problematic enterprises. Some companies also plan to increase their production volumes.

“As of year-end 2019, the poultry production is expected to grow by 1.5% versus the previous year, including through new projects in production of turkey meat which becomes increasingly popular among consumers”, she added. According to the NMA data, over the last 10 years, the turkey meat production in Russian Federation has increased 10 times – from 28,000 t in 2008 to 271,000 t in 2018. The popularization of this kind of meat stimulates the inflow of investments into the industry.

The expert says that in the next three years, an annual growth of 20% is expected in this sector. According to NMA’s forecast, this year, the pork industry, which continues its stable growth, will retain its leading position in the meat market by increasing its production volumes. The growth is estimated to be 5%. Brazhevskaya says that currently, there is a number of investment projects in their final stage. According to Rosstat’s data, during the first five months of the year, the pork production growth in the agricultural organizations was 5.9% versus the same period of the last year.

“Given that about 15% of all pork is produced by subsidiary individual holdings and peasant farm enterprises where a decrease in production volumes is seen in the last few years, overall in 2019, the pork industry may grow by 5%”, she said. Beef production, however, has not shown a strong growth: in January–May, the cattle production (for slaughter) is estimated to be 0.9%, including the agricultural organizations – 2.2%, according to Rosstat’s data. “At the end of the year it may add another 1%”, the expert said.

She says that the inflow of investments into the sector and more dynamic development are smothered by long production cycle and the need of a big working capital. However, Brazhevskaya believes that there are positive structural changes in the industry. The growing cattle production in the agricultural organizations and the increasing share of beef cattle in the total number of cattle lead to higher effectiveness of the industry. In 2009, the share of beef breed and mixed bred cattle was about 5%, while in 2020 it is expected to rise over 20%.

Over the last few years, there is also an increasing interest in mutton and lamb. The expert says that the implemented large investment projects in this segment make it possible to predict that at the end of 2019 the production of mutton and lamb will grow by 2–3% versus last year. Speaking of meat prices, Brazhevskaya said that in view of the current economic and social situation, at the end of the year the wholesale prices are not expected to grow. “Despite the increased costs of production, one of the major constraints will be the high competition in the poultry and pork market, as well as the limited consumer purchasing power”, she explained. “Consumers, of course, want to see low prices in stores but it is not always good neither for producers, nor for the meat consumers themselves”, Brazhevskaya said.

The disproportional changes in costs of production and cost prices force companies to work with a zero and even negative cost efficiency, which eventually may lead to their closure. This, in turn, may lead to supply decrease and one-time price surge, which already happened at the end of the last year.” However, the average per capita consumption of meat in Russian Federation remains high. In 2019, it may reach 76 kg per person per annum.

“15 years ago, in 2004–2005, the average per capita consumption was less than 55.kg, and 40% of this indicator were held by the import. Today, the volume of imported meat in consumption is less than 10%”, the Deputy Chief Officer of NMA said. In view of the domestic market saturation, Brezhevskaya forecasts that in the next few years the meat and poultry production growth will be moderate but stable – within 1.5—2% per annum. “At the same time, the growth rate will depend, among other things, on the domestic consumption volumes, opening of new export markets and epizootic welfare”, she said.

She also said that in the last few years a lot has been done for export market expansion and animal disease prevention. In 2018, Russia exported 290,000 t of meat and meat products to countries, such as Vietnam, Saudi Arabia, UAE, Hong Kong, Iran and other countries. “However, the domestic consumption increase is far from being fully used for attracting investments and production growth”, she said.

“With the decrease of the real disposable income of the general population and a large number of low-income people (which, according to Rosstat’s data, were 19 mln people in 2018), the deterioration of consumer purchasing power is a serious limitation for further development of the livestock industry and other industries as well. “Over the years, the Federal authorities have been discussing the domestic food support but unfortunately, this useful initiative hasn’t been implemented”, Brazhevskaya said.

“Today, some regions implement their own food support programs, however, they are not widely used due to the inadequate legal frameworks, regional budget constraints and lack of government support incentives on a Federal level.” She thinks that this program is important not only because it solves the problem of economic availability of safe and high quality products to those most in need.

It creates an additional demand for agribusiness products. “Particularly in the meat sector, by most modest estimates, it can create an additional volume of about 350,000 t per annum, or additional 3% growth of production volume per year”, Brazhevskaya explained.

Source: milknews.ru