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Report Highlights: 

FAS/Moscow forecasts Russia’s imports of cattle to decrease by approximately 15 percent in 2014 because of increasing debt carried by livestock importers and delays in related subsidy payments. FAS/Moscow also forecasts a decrease in domestic beef production next year given the anticipated rate of slaughter in 2013 and the resulting decrease in beginning cattle inventories. Total 2014 live swine imports are forecast to fall by 17 percent in 2014 as a result of increased domestic production and trade restrictions due to disease outbreaks in Europe. Russian pork production is forecast to increase by five percent in 2014 which, in turn, is anticipated to lead to a five percent decrease in imports.

Executive Summary:

Cattle and Beef 

FAS/Moscow forecasts 2014 year-end cattle inventories to decrease slightly (to 18.935 million head) as Russian dairies are expected to continue to slaughter less productive cattle which are aging out, and, in certain circumstances, slaughter younger, less productive cattle to be replaced by imported and/or domestically produced breeding animals capable of producing greater yields. Because 2013 year-end inventories are marginally decreased as slaughter rates are estimated to increase by nearly four percent over the course of the year, FAS/Moscow forecasts a corresponding decrease in domestic beef production in 2014 (down less than two percent to 1.38 MMT). 

FAS/Moscow forecasts Russia’s imports of cattle to decrease by approximately 15 percent in 2014 (to 110,000 head) because of increasing debts being carried by Russian livestock importers and delays in related subsidy payments. Moreover, 2014 beef imports are forecast to increase slightly over 2013 levels (by two percent to 1.02 MMT) as importers are expected to make better use of available TRQ volumes and as neighboring CIS countries (e.g., Belarus), who are able to export beef to Russia duty-free, attempt to compensate for decreased domestic production. Consumption is expected to remain relatively flat (16.7 kg per capita) due to decreasing domestic production.

Swine and Pork 

FAS/Moscow forecasts 2014 year-end swine inventories to grow by nearly seven percent (to 21.5 million head) and domestic pork production to increase by five percent (to 2.3 MMT) due to the increased availability of affordable feed during the latter half of 2013, and production support measures outlined in the State program for “Pork Production Development in 2013-2015” (hereinafter referred to as the 2013-2015 Pork Program). Increasing domestic pork production is expected to lead to further consumption increases in 2014 (i.e., to 23.1 kilograms per capita from 22.7 kilograms per capita in 2013). 

FAS/Moscow forecasts 2014 swine imports to decrease by 17 percent (to 120,000 head) due to increased domestic production and continuing live swine import restrictions instituted by the Russian Veterinary Service because of disease outbreaks in Europe (e.g., Schmallenberg virus in the European Union and African Swine Fever in Belarus). Overall 2014 pork imports are also forecast to decrease (by approximately five percent to 1 MMT) as a result of anticipated growth in domestic production and TRQ limitations on the volume of imports.

Production: 

Cattle and Beef 

FAS/Moscow forecasts 2014 year-end cattle inventories to decrease slightly (to 18.935 million head) as Russian dairies are expected to continue to slaughter less productive cattle which are aging out, and, in certain circumstances, slaughter younger, less productive cattle to be replaced by imported and/or domestically produced breeding animals capable of producing greater yields. 

In addition to burgeoning imports over the last several years, domestic pedigree cattle breeders increased sales of breeding heifers to agricultural establishments (selling 266,000 between 2008 and 2012) and reportedly increasing the percentage of pedigree cattle at these establishments from eight percent in 2008 to 13 percent in 2012. Despite the increase in the local production of high quality cattle, domestic production still cannot satisfy the growing demand to replace lesser quality animals. 

FAS/Moscow has slightly increased the estimate for 2013 beginning cattle inventories based on the Russian Ministry of Agriculture’s publication of final 2012 calf production statistics which were slightly higher than previously anticipated. However, 2013 year-end inventories are marginally decreased as slaughter rates are now estimated to increase by nearly four percent over 2012 levels due to the impact of the high price of feed on producers early in the year. The small increase in estimated slaughter in 2013 has led FAS/Moscow to comparably increase domestic beef production during the same period.

Because of the increased rate of slaughter in 2013, which is anticipated to result in a small decrease in year-end inventories, FAS/Moscow forecasts a corresponding decrease in domestic beef production in 2014 (down less than two percent to 1.38 MMT). Nevertheless, the Russian Federal and regional governments continue to offer a series of support programs meant to stimulate Russian livestock development over the next seven years which will reportedly be funded at hundreds of billions of Russian rubles (almost $10 billion). Monies have been earmarked for the construction of new farms and the modernization of existing facilities, as well as the purchase of domestic and imported high quality breeding dairy and beef cattle, semen and embryos. For additional information on the ongoing livestock support programs, see, e.g., RS1323 and RS1335. 

The largest producers of Russian beef in 2012 were: the “Klinskiy" meat processing establishment (Moscow region), which accounted for slightly more than three percent of total Russian beef production, “Penzenskiy” meat processing establishment (Penza region) - 2.8 percent, and "Ulyanovskiy" meat processing establishment (Ulyanovsk region) - 2.4 percent. 

The National Union of Beef Producers (NUBP) reports that Russian meat produced from beef cattle breeds has grown over the last several years, from two percent of Russian production in 2008 to 10 percent in 2012. However, the Russian Ministry of Agriculture states that Russian beef produced from beef cattle only accounted for four percent of production in 2012. Nevertheless, the State Program for the Development of Agriculture and the Regulation of Agricultural Commodity Markets for 2013-2020, discussed in greater detail in RS1335, has an objective of beef cattle breeds accounting for 23 percent of Russian beef production by 2020. 

Swine and Pork 

Total 2014 year-end swine inventories are forecast to grow by nearly seven percent due to the increased availability of feed supplies during the latter half of 2013 as a result of increased grain production in 2013 (see, e.g., RS1347), and production support measures outlined in the 2013-2015 Pork Program funded at RUR 222.1 billion ($6.85 billion). Annual financing for the program will increase from RUR 68 billion ($2.1 billion) in 2013, to RUR 75 billion ($2.31 billion) in 2014, and to RUR 79 billion ($2.44 billion) in 2015. The 2013-2015 Pork Program envisages an increase in the number of pigs in all farm categories (i.e., at agricultural establishments, private farms, and backyard farms), from 17.9 million head in 2012 to 19.6 million head in 2015. In addition, the 2013-2015 Pork Program’s goal is to increase production of pigs from 3.3 million tons (live weight) in 2012 to 3.6 million tons in 2015 (for slaughter at all farm categories). 

The primary activity of the 2013-2015 Pork Program is to improve the macroeconomic conditions for pig production through financial support under the framework of World Trade Organization (WTO) requirements in the following areas: 

• subsidizing interest rates on investment loans and leasing operations for the reconstruction and construction of new pig production, slaughtering, meat processing and feed production facilities; 

• subsidizing brood stock for pig breeding, genetic and hybrid centers. The Ural, Siberian and Far East regions are priority areas for the development of such centers. Leading genetic companies from the European Union, Canada and the United States should be used to accelerate the development of parental stock; and, 

• development of measures of support falling under "green" and "amber" boxes in accordance with WTO rules. (In WTO terminology, subsidies are identified by “boxes” which are given the colors of traffic lights: green (permitted), amber (slow down — i.e., to be reduced), and red (i.e., forbidden). NOTE: The Agriculture Agreement has no red box (despite the prohibition of domestic support exceeding the reduction commitment levels in the amber box), but there is a blue box for subsidies that are tied to programs that limit production). 

While revised slightly lower, FAS/Moscow estimates 2013 year-end swine inventories to be nearly seven percent higher than in 2012 due to a reduction in domestic feed prices as a result of an improved grain harvest, and continued State support for domestic swine producers. According to the State program for “Pork Production Development in 2009-2012” (hereinafter, the 2009-2012 Pork Program) the government provided support funds with a goal of increasing the domestic swine herd to 23.3 million head by 2012, compared to 16.2 million head in 2008. Despite the financial assistance provided over the four year period, Russia’s swine inventory only totaled 18.8 million head at the end of 2012 due to record low levels of feed grains produced in 2010, and reduced feed grain production in 2012. As previously noted, however, inventories are expected to increase over the coming 18 months.

In addition to an increase in swine inventories, FAS/Moscow forecasts Russian pork production to increase by five percent in 2014 due to improved feed supplies resulting from increased grain production in 2013 and State support for producers, as previously noted. 

FAS/Moscow has also slightly increased the 2013 pork production estimate (by nearly two percent) due to improvements in feed availability and governmental compensation for pork producers, distributed at the end of 2012 and during the first quarters of 2013, to lessen the impact that high feed prices were having on the cost of production. Swine slaughter at Russia’s agricultural establishments increased by nearly 30 percent during the first half of 2013, compared to a 13 percent increase during the same period in 2012.

Despite increasing production, the Russian pork industry has complained that increased production costs (including high feed costs in 2012), a 35 percent reduction in farm gate prices for pigs, reduced import duties on live pigs, and a zero duty for in-quota pork have negatively impacted their financial strength. However, the Russian Ministry of Agriculture has stated that it believes the industry’s challenges stem from undeveloped infrastructure, overproduction, and the under-processing of carcasses. The Ministry has estimated that if the entire industry adopted a production process which included the deep processing of carcasses, profitability could increase between 15 and 20 percent. In addition, vertically integrated agricultural establishments reportedly mitigated increases in the cost of production by becoming self sufficient in the production of feeds grains and/or feeding cheaper grains to their hogs (e.g., barley).

Consumption: 

Beef 

FAS/Moscow’s 2014 beef consumption forecast (16.7 kg per capita) is expected to remain relatively flat (when compared to 2013) due to decreasing domestic production. Beef imported under the TRQ system is expected to partially compensate for decreasing domestic production, but out of quota imports are subject to high import duties. The short beef supply in Russia has kept beef prices relatively high when compared to pork and poultry, and consumption is therefore more limited than for other meats. 

Pork 

Increasing Russian domestic pork production has led to increased per capita pork consumption, from 22 kilograms in 2012 to 22.7 kilograms in 2013. Consumption is expected to further increase to 23.1 kilograms per capita in 2014 as a result of continued increases in domestic production.

Russian retail prices for pork decreased significantly in March 2013 following a decline in feed prices in early 2013 and have remained relatively flat since. However, prices are forecasted to increase during the latter half of 2013 due to a 10 percent increase in the price of live pigs in the summer of 2013 (as a result of reduced swine and pork imports which pork processors believe may lead to a deficit in the market). Growth in domestic meat processing has outpaced growth in domestic livestock production and imports. According to Rosstat, the output of total processed meat and meat products produced at domestic processing facilities increased by eight percent in the first half of 2013, when compared to the same period last year (including a 30 percent increase in domestically produced fresh/chilled pork and an 18 percent increase in semi-processed meat and meat products). 

Trade: 

Cattle and Beef 

FAS/Moscow forecasts 2014 Russian cattle imports to fall nearly 15 percent from 2013 levels due to increasing debt carried by farmers who previously took out loans for purchases. Russian media and the NUBP have reported delays in the payment of subsidies for cattle purchases. First, subsidy payments for August through December 2012 were reportedly delayed until the first two months of 2013, and then subsidy payments were delayed again in May 2013 because of an insufficient allocation of support funds as a result of greater than anticipated interest in cattle purchases. 

In June 2013, Sberbank publicly announced that it signed the Russian agricultural industry’s first 15-year loan agreement (valued at RUB 1 billion - $31.3 million) with Miratorg, one of Russia’s largest meat producers. Russian Government Order 1460, adopted at the end of 2012, allows for the repayment of interest on loans used to purchase cattle to be extended up to fifteen years (it was previously limited to eight years, with the possibility of a three year extension) for farms producing beef cattle. 

Investors in the Russian cattle industry are now reportedly looking to amend Order 1460, to include a provision that would also allow banks to prolong the repayment terms for ongoing eight year investment projects to fifteen years. Despite this request to extend the repayment terms, some investors have reported that they are now on the verge of insolvency. According to Russian press, the shortfall on subsidy payments from the Ministry of Agriculture to the livestock industry as a whole in 2012 reached RUR 7.9 billion ($244 million), and total support for Russian agricultural development, including for improving conditions in the livestock industry, is forecast to reach RUR 25 billion ($771 million) by the end of 2013. 

As noted above, the delay in subsidies for cattle importers has had a negative impact on trade in live animals. According to Global Trade Atlas, Russia decreased imports of live cattle to 48,674 head in the first half of 2013, 26 percent less than during the same period last year. Given the trade data, and reported financial challenges facing importers of cattle, FAS/Moscow has decreased its 2013 import estimate by seven percent. 

FAS/Moscow forecasts 2014 beef imports to increase slightly over 2013 levels as importers are expected to make better use of available TRQ volumes and as neighboring CIS countries (e.g., Belarus), who are able to export beef to Russia duty-free, attempt to compensate for decreased domestic production. Despite the anticipated increase in imports in 2014, FAS/Moscow has reduced its import forecast for 2013 by approximately three percent because of trade restrictions placed on several foreign suppliers. According to Global Trade Atlas, Russia imported 249,268 MT of beef in the first half of 2013, 15 percent less than during the same period in 2012. Russia imported 230,967 MT of frozen beef and 18,112 MT of fresh/chilled beef. The largest exporters were Brazil – 134,900 MT, Belarus – 76,710 MT, Paraguay –58,052 MT, and Uruguay -19,953 MT.

In February 2013, Russia instituted a ban on the importation of U.S. beef and associated products until such time as the United States provides guarantees that these products are ractopamine-free. Because of this measure, U.S. exports of beef totaled 41 MT during the first six months of 2013, down 99.8 percent from the previous year. 

Swine and Pork 

FAS/Moscow forecasts 2014 swine imports to decrease by 17 percent due to increased domestic production and continuing live swine import restrictions instituted by the Russian Veterinary Service because of disease outbreaks in Europe (e.g., Schmallenberg virus in the European Union and African Swine Fever in Belarus). 

FAS/Moscow’s swine import estimate for 2013 has been decreased by 44 percent due to the impact that the Russian veterinary service’s prohibition on imports from the European Union has had during the first half of the year. Imports from January-June 2013 were 73 percent lower than they were during the same period in 2012, with trade from Estonia, Germany, Hungary, Ireland, Latvia, and the United Kingdom coming to a complete halt during the period. Exports from Belarus, which accounted for nearly 75 percent of live swine imported into Russia during the first half of 2013, were down eight percent. 

FAS/Moscow forecasts 2014 pork imports to decrease by approximately five percent (to 1 MMT) as a result of anticipated increases in domestic production. FAS/Moscow has also decreased its 2013 pork import estimate by nearly three percent (to 1.05 MMT) due to trade restrictions imposed on several foreign suppliers.

Russian pork imports during the first six months of 2013 were down nearly 17 percent. Even though Russia eliminated a 25 tariff reduction on pork imports from developing countries in early 2013, Brazil (58594 MT, up 26 percent from the same period in 2012) overtook Canada as the largest exporter of pork to Russia during the first half of 2013. Other notable suppliers during this period were Canada (37,777 MT, down 50 percent), Denmark (35,381 MT, up 13 percent) and Belarus (35,343, down 6 percent).

In February 2013, Russia instituted a ban on the importation of U.S. pork and associated products until such time as the United States provides guarantees that these products are ractopamine-free. Because of this measure, U.S. exports of pork totaled 5,828 MT during the first six months of 2013, down 84 percent from the previous year. 

Policy: 

Russian Government Intent to Discuss Reallocation of Tariff Rate Quotas Volumes 

In July 2013, the Russian Ministry of Economic Development issued a press release in which it signaled its intention to contact the governments of the United States, Costa Rica, and the European Union about the possible re-allocation of country-specific TRQ volumes because of the under utilization of their respective allocations

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