Report Highlights: 

FAS/Moscow forecasts Russian imports of cattle to remain relatively flat in 2015 (i.e., 100,000 head) as livestock importers continue to improve the quality of their genetics. FAS/Moscow also forecasts a slight increase in domestic beef production (to 1.4 MMT) next year given the anticipated rate of slaughter. Imports of live swine are forecast to fall off in 2015 as a result of increased domestic production and trade restrictions due to disease outbreaks in Europe and North America. Russian pork production is forecast to increase by nearly 6.5 percent in 2015 (to 2.82 MMT) which, in turn, is anticipated to lead to a nine percent decrease in imports (375,000 MT).

Executive Summary 

Cattle and Beef 

FAS/Moscow forecasts 2015 year-end cattle inventories to decrease (to 18.3 million head) as slaughter is expected to continue to increase due, in part, to Russia’s restrictions on beef imports from several countries, and as Russian dairies continue to slaughter less productive cattle. Because 2015 slaughter rates are estimated to increase by nearly one percent over the course of the year, FAS/Moscow forecasts a corresponding increase in domestic beef production in 2015 (up less than one percent to 1.4 MMT). 

FAS/Moscow forecasts Russia’s imports of cattle to decrease by approximately 10 percent in 2014 (to 100,000 head). Although livestock importers continue to remain interested in improving the quality of their genetics, many existing Russian livestock importers are still carrying debts from previous purchases. New importers supported by federal assistance, however, should help to bolster imports this year and next. 

2015 beef imports are forecast flat when compared to significantly reduced 2014 import levels (by nearly 20 percent to 825,000 MT) as Russia has banned beef imports from several traditional foreign suppliers. In addition, 2015 beef consumption is expected to remain relatively flat (15.6 kg per capita, up from 15.5) due to a small increase in anticipated domestic production.

Swine and Pork 

FAS/Moscow forecasts 2015 year-end swine inventories to grow by nearly two percent (to 19.3 million head) and domestic pork production to increase by nearly 6.5 percent (to 2.82 MMT) due to the increased availability of affordable feed, continued investment in the domestic pork industry, and ongoing production support measures. Increasing domestic pork meat production is expected to lead to consumption increases in 2015 (i.e., to 22.4 kilograms per capita from 21.5 kilograms per capita in 2014). 

FAS/Moscow forecasts the cessation of swine imports in 2015 as a result of increased domestic production and continuing live swine import restrictions instituted by the Russian Veterinary Service because of the detection of African Swine Fever in Europe and Porcine Epidemic Diarrhea virus in North America and elsewhere. Overall 2015 pork meat imports are also forecast to decrease (by approximately nine percent to 375,000MT) as a result of anticipated growth in domestic production and import restrictions placed on several traditional foreign suppliers.

Production 

Cattle and Beef 

FAS/Moscow forecasts 2015 year-end cattle inventories to decrease (to 18.3 million head) as slaughter is expected to continue to increase due, in part, to Russia’s restrictions on beef imports from several countries and as Russian dairies continue to slaughter less productive cattle.

FAS/Moscow has slightly increased the estimate for 2014 beginning cattle inventories based on the publication of final 2013 year-end Russian statistics which were slightly higher than previously reported. However, forecasted ending stocks have been reduced given an anticipated increase in slaughter this year, in part, as new slaughter facilities come online. 

According to the Russian Ministry of Agriculture, government support to increase livestock herds (e.g., cattle) and to develop new finishing facilities and feed operations is based on co-financing from the federal and regional budgets. The development of the national cattle herd is reportedly progressing only in those areas where targeted regional programs have been developed and implemented. The Ministry has stated that other regions, where environmental and climatic conditions are appropriate for the development of this industry, need to establish targeted “matching” programs to provide conditions for enhancing Russian beef production. 

Overall, 2015 Russian beef production is anticipated to increase slightly next year to 1.4 MMT. Miratorg, which also has considerable beef interests given its stock of 130,000 Angus breeding cattle, imported over 30,000 Angus feeder steers from Australia in the spring of 2014. The company is reportedly investing an additional 7.7 billion rubles (approximately $200 million) in Bryansk to increase the size of its herd by another 35,000 head. Miratorg is also reportedly investing 65 million rubles (approximately $1.7 million) in Kaliningrad to reclaim land and increase crop production in the region next year. Although Miratorg plans to begin slaughter and deep processing in the fall of 2014 in Bryansk, with the intention of ultimately slaughtering 400,000 head per year, monthly beef production in Russia has remained relatively flat in recent years.

FAS/Moscow has also increased the 2014 beef production estimate (by slightly less than one percent) due to an anticipated increase in production during the second half of 2014, and reduced import competition which should improve market opportunities for domestically produced beef. The General Director of the Russian National Union of Beef Producers is optimistic the Russian beef industry will continue to grow, stating “{i}n the near future we expect the entry of new players - manufacturers of high-quality beef from specialized beef breeds in Voronezh, Bryansk, the Republic of Kalmykia and other regions which will create competition and lead to price regulation in this market segment.” 

Swine and Pork 

Despite an anticipated increase in slaughter in 2015, year-end swine inventories are still forecast to grow by almost two percent due to the increased availability of affordable feed and continued investment in the industry. The Russian National Union of Pork Producers (NUPP) has estimated that investment in swine and feed production and slaughtering needs to be as high as 2.5 billion rubles in 2014 (slightly more than $60 million), 67 billion rubles in 2015 (nearly $1.7 billion), 99 billion rubles in 2016 (nearly $2.5 billion), and 35 billion rubles in 2017 (almost $880 million) to ensure production targets in 2020 are met (i.e., an additional 1.2 MMT {live weight} of production). Although it remains unclear whether or not all of these funds will be invested into the industry in the next few years, modern, large-scale establishments, which are significantly more efficient than back-yard and private (peasant) farms, are expected to continue their trend of accounting for a larger share of Russian pork production. NUPP forecasts smaller-scale producers will only account for roughly 13 percent of production by 2020. As of 

June 1, 2014, the share of swine at large-scale agricultural establishments across Russia was 76 percent, nearly four percent more than at the same time last year. In fact, the number of swine at these establishments has increased across all of Russia’s Federal Districts.

While revised seven percent lower (in part because of revised, Russian 2013 year-end inventory data), FAS/Moscow estimates 2014 year-end swine inventories to be nearly one-half percent lower than they were at the end of 2013 (19 million head) due to an increase in the rate of slaughter, in part, as a result of Russia’s restrictions on pork imports from several countries. 

According to the Ministry of Agriculture, the rate at which the Russian pork industry is developing varies between different regions. For example, the Ministry reports that the population of pigs increased at agricultural establishments in 35 of Russia’s regions, including: Tambov - by 343.8 thousand, Belgorod– 220.1 thousand, Kursk– 188.6 thousand, Pskov– 154 thousand, and Smolensk – by 77.4 thousand. The Ministry also reports that the pig population declined in Voronezh, Vladimir, Rostov, Krasnodar Kray, and the Republic of Tatarstan due to African Swine Fever and previously high feed prices. 

As a result of forecasted increases in slaughter this year and next, and reduced feed costs stemming from a strong grain crop forecast, FAS/Moscow forecasts Russian pork production to increase by slightly more than six percent in 2015 (to 2.82 MMT). FAS/Moscow forecasts 99 MMT of grains will be produced in MY 2014/2015: 56 MMT of wheat (a 4 MMT increase from the previous FAS/Moscow forecasts and from the 2013 wheat crop); 17.5 MMT of barley (a 1.5 MMT increase from the previous forecast, and 2.1 MMT more than last year); 13 MMT of corn (1.4 MMT more than last year); and, almost 13 MMT of other grains and pulses. 

FAS/Moscow has also increased the 2014 pork production estimate (to 2.65 MMT -- 10.5 percent higher than 2013 production levels) due to reduced import competition, increased output from 17 new or modernized production facilities across Russia in 2013 and, as previously noted, favorable feed prices. The Russian Ministry of Agriculture reported similar production increases across all farm-types in Russia (nearly 10 percent) during the first quarter of 2014.

Consumption 

According to © Euromonitor International, the “{i}ncreasing welfare of consumers lifted the {Russian meat} industry and shifted the consumption pattern from processed to fresh meat,” with 87 percent of meats distributed in Russia via retailers. Large-scale producers have established their own brands and have opened their own stores in recent years to directly cater to consumers. For example, Miratorg has opened more than 50 of its own stores to promote its products and others, and reportedly has plans to continue expansion in the near future. Additionally, Ostankino, a well-known Russian pork product manufacturer, now operates nearly 20 of its own stores in Moscow promoting its goods.

FAS/Moscow’s 2015 beef consumption forecast (15.6 kg per capita) is expected to remain relatively flat (when compared to consumption in 2014) as imports are forecast to remain unchanged while production is forecast to slightly increase. As previously reported, 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. 

Increasing Russian domestic pork production coupled with declining imports has led to a decrease in per capita pork consumption, from 22.9 kilograms in 2013 to 21.5 kilograms in 2014. However, consumption is expected to increase to 22.4 kilograms per capita in 2015 as a result of continued increases in domestic production. 

While Russian retail prices for pork and beef decreased in early 2013, following a decline in feed prices, prices have steadily increased since that time (due, in part, to the import ban imposed on several traditional foreign red meat suppliers).

The average retail prices for grades 1 and 2 beef in August 2014 were 9 and 7 percent higher, respectively, than they were at the same time in 2013. For grades 2 and 3 pork, the price increase was even higher – 17 and 18 percent respectively. The price increases are due to several factors: trade restrictions limiting foreign supplies (e.g., ban on Australian beef imposed in the spring of 2014, ban on pork from the European Union as a result of the detection of African Swine Fever, bans on imports from several countries which imposed sanctions on Russia, etc.), depreciation of the Russian ruble (valued, according to Bloomberg, at 32.855 to the dollar on January 1, 2014, but 39.1696 on September 26, 2014), and supply availability (which is reportedly particularly constrained in the import-dependent Far East). In late September, the Russian Ministry of Economic Development increased its forecast for food price growth from 7.2-7.4 percent to up to 12-13 percent in 2014. 

Trade 

Cattle and Beef 

FAS/Moscow forecasts 2015 Russian cattle imports to remain flat compared to a reduced 2014 import forecast (i.e., 100,000 head). Significant growth in the volume of imports is not anticipated given the debt being carried by farmers who previously took out loans for significant purchases. Nevertheless, new importers supported by federal assistance, however, should help to bolster imports in 2015. It is anticipated that the United States and Australia will remain the preferred foreign suppliers.

According to the Customs Committee of Russia, Russia imported nearly 97,000 head of live cattle in 2013, but only slightly more than 10,000 head in the first third of 2014. However, a review of export statistics from traditional suppliers to the Russian market (e.g., the United States, Australia, and the EU) shows that Russian imports may have reached almost 50,000 head through June of 2014. As such, FAS/Moscow has revised its 2014 import forecast down nine percent to 100,000 head. FAS/Moscow believes, given the forecasted increased rate of slaughter and continuing federal support for purebred cattle purchases, that the demand for imports will continue in 2015. 

FAS/Moscow forecasts 2015 beef imports to remain flat when compared to a reduced import forecast for 2014. If the Russian ruble further weakens, however, it could yield further reduced market opportunities for foreign product. 

In August 2014, the Russian Government instituted a one-year ban on the supply of beef (HS codes 0201, 0202, and 0210 – which accounted for nearly all imported beef during the first third of 2014), among other products, from the United States (which shipped only 56 tons of beef in 2013 and 4 tons from January to April 2014), the European Union (which shipped nearly 32,000 tons of beef in 2013 and slightly more than 7,000 tons from January to April 2014), Canada (which shipped nearly 44 tons of beef in 2013 and none from January to April 2014), and Australia (which shipped nearly 27,000 tons of beef in 2013 and almost 1,500 tons from January to April 2014) in retaliation to sanctions placed on Russia. Note: Norway was also included in the ban, but did not export beef to Russia in 2013 or during the first third of 2014. The restrictions eliminated roughly eight percent of the volume of beef imports in 2013 and during the first four months of 2014. 

Although the restricted countries supplied limited volumes of beef to Russia during the last 18 months, when compared to other foreign suppliers, Russian beef imports during the first third of 2014 were down nearly 19 percent compared to the same period in 2013. On a product weight equivalence, Russia imported 116,157 MT of frozen beef, 44,642 MT of fresh/chilled beef, and only 1,783 MT of prepared, preserved, salted, or brined beef during the first four months of 2014. The largest exporters were Brazil – 71,813 MT (14.75 percent less than during the first four months of 2013), Belarus – 48,475 MT (4.69 percent less), Paraguay – 23,767 MT (19.38 percent less), and Lithuania -3,686 MT (a 16.59 percent increase). Accordingly, FAS/Moscow has reduced its 2014 import forecast by a similar percentage (to 825,000 MT CWE). 

Swine and Pork 

FAS/Moscow forecasts Russia to cease importing live swine in 2015. Russia has restricted imports of live swine from the United States, Canada, Mexico, Japan, South Korea, and South Africa because of outbreaks of porcine epidemic diarrhea virus. In addition, live swine imports from the European Union have been restricted because of the presence of the African Swine Fever in the territory. Given that 2013 live swine import levels were almost 75 percent below 2012 levels, and that January through August 2014 import levels (slightly more than 4,000 head) were nearly 90 percent lower than they were during the same period in 2013, and the policies Russia has in place, it is unlikely imports will continue next year. 

FAS/Moscow’s swine import estimate for 2014 has been increased by 60 percent (from 5,000 to 8,000 head) based on Russia’s importation of slightly more than 4,000 head from January to April, 2014. Nevertheless, FAS/Moscow believes it is unlikely this trend can hold up for the remaining two-thirds of the year given the limited number of countries for which importation is approved. 

As a result of an anticipated increase in domestic production, as well as restrictions placed on certain foreign suppliers, FAS/Moscow is anticipating an almost 10 percent decrease in Russian pork imports in 2015, over a significantly decreased revised forecast for 2014. As previously noted, if the Russian ruble further weakens, however, it could yield further reduced market opportunities for foreign product. 

As noted above, in August 2014, the Russian Government instituted a one-year ban on the supply of pork (HS codes 0203 and 0210 – which accounted for approximately 94 percent of imported pork during the first third of 2014), among other products, from the United States (which shipped only 6,000 tons of pork in 2013 and did not ship from January to April 2014), the European Union (which shipped nearly 380,000 tons of pork in 2013 and nearly 25,000 tons from January to April 2014), and Canada (which shipped nearly 80,000 tons of pork in 2013 and nearly 43,000 tons from January to April 2014) in retaliation to sanctions placed on Russia. Note: Australia and Norway were also included in the ban, but did not export pork to Russia in 2013 or during the first third of 2014. The restrictions eliminated roughly 70 percent of the volume of pork imports in 2013 and 54 percent during the first four months of 2014.

Although Russia has announced that it is seeking increased pork exports from some foreign suppliers during the ban (e.g., Brazil), total Russian pork imports from January-April 2014 were nearly 36 percent lower than they were during the first third of 2013 (before the ban on U.S. and EU product was introduced). Brazil accounted for nearly 19 percent of total Russian pork imports in 2013 and 31 percent during the first-third of 2014. While, Brazil’s exports to Russia were one percent higher in 2013 than they were in 2012, they were 20 percent higher through April 2014 when compared to the same period in 2013. It is unlikely, even with a growth in exports, that Brazil will be able to fully backfill the absent pork. While Belarus might be expected by some to increase exports, Belarusian pork exports to Russia were down 67 percent in the first third of 2014, following a 30 percent decrease in year-on-year trade in 2013. Some foreign suppliers (e.g., Serbia) have recently increased export to Russia, but the volumes of these exports remain small. Therefore, it is unlikely these countries can increase exports to fully replace absent supplies from the United States and EU.

On a product weight equivalence, Russia imported 112,239 MT of frozen pork, 2,684 MT of fresh/chilled pork, 7,591 MT of prepared pork, and only 170 MT of cured, preserved, salted, or brined pork during the first four months of 2014. The largest exporters were Brazil – 44,757 MT (17.67 percent more than during the first four months of 2013), Canada – 42,623 MT (64.92 percent more), Belarus – 6,694 MT (66.72 percent less), and Denmark – 5,613 MT (72.35 percent less). As such, FAS/Moscow has conservatively lowered its 2014 forecasted pork import volume to 410,000 MT CWE (nearly 37 percent less than its previous forecast). 

Policy 

Russian Government Intent to Reallocate Country-Specific Tariff Rate Quota Volumes 

In September 2014, the Russian Ministry of Economic Development issued a news release about the possible re-allocation of country-specific TRQ volumes because of under-utilization. To date, TRQ volumes have not been adjusted, despite the lack of use. NOTE: Pursuant to its WTO commitments, Russia has allocated country-specific TRQ volumes for imports from the United States (60,000 MT for frozen beef), European Union (60,000 MT for frozen beef, 29,000 MT for fresh/chilled beef, and 80,000 MT for de-boned chicken), and Costa Rica (3,000 MT for frozen beef)