Report Highlights:

Russian cattle inventories are expected to continue to decline in 2014, following a pattern of more than 25 years of a shrinking cattle herd. However, cattle imports are expected to recover with the anticipation that government support payments will be distributed more regularly in 2014. Domestic beef production is forecast to increase slightly in 2014, with new slaughterhouses coming online, but FAS/Moscow has decreased its 2014 beef import forecast because of trade restrictions placed on foreign suppliers. Meanwhile, the Russian domestic pork industry continues to shift production from private households to more efficient large agricultural establishments. FAS/Moscow has therefore increased the 2014 pork production forecast, but reduced imports as a result of increased domestic production and trade restrictions imposed on several foreign suppliers.

Production

Cattle

Russian cattle inventories are expected to continue to decline in 2014, following a pattern of more than 25 years of a shrinking cattle herd. The reason for this expected decline in 2014 is a smaller calf crop (due to fewer cows), coupled with a steady level of slaughter necessary to meet consumer demand for beef. Unlike swine and poultry, where the lion’s share of inventories are at large scale agricultural establishments (77 and 80 percent respectively), for cattle producers it remains small at only 45 percent, and animal numbers for these establishments actually fell in 2013. Although the number of modern Russian cattle operations continues to grow, they still only account for a relatively small percentage of the total cattle herd in Russia.
According to the 2013-2020 State program for the development of beef cattle, Russia needs to qualitatively improve domestic beef cattle breeding and establish a beef cattle breeding stock base in Russia that meets the need of domestic agriculture. The Federal government plans to spend 69 billion rubles (nearly $2 billion) in support of that goal in 2014 by supporting the development of breeding and genetic centers, increasing the production of high-quality breeding material, and reimbursing some production costs for some agricultural establishments and private farms. Industry sources report there were approximately 350,000 purebred beef cattle in Russia in early 2014; the most common breeds being Kalmyk, followed by Hereford, Kazakh Whitehead, and Angus.

Year-end 2013 cattle inventories have been revised as a result of year-end Rosstat data. Year-to-year ending inventories decreased between 2012 and 2013 by 2.3 percent to 19.5 million head, including a 2.7 percent decrease in the number of cows -- to 8.6 million head.

Beef

FAS/Moscow forecasts a small increase in domestic beef production in 2014 (up less than one percent to 1.38 MMT CWE) primarily due to new slaughterhouses coming online. For example, in 2014, a new slaughterhouse in Voronezh oblast (i.e. Zarechnoye), which intends to market some of its products under the “Certified Angus Beef” brand, will open and should further increase beef production in the region. In addition, new, modern slaughterhouses are proposed or are under development in Bryansk, Kalmykia, Lipetsk, and Orenburg.

Overall 2013 beef production is revised down as slaughter and, accordingly, domestic beef production, as reported by Rosstat, was slightly lower than previously forecasted. Despite this decrease in national production, some of the main producing regions still showed production growth. For example, while five of the top producing regions decreased production in 2013, the remaining ten showed production growth (three of which showed growth of nearly four percent or more).

Swine

FAS/Moscow has revised forecasted 2014 year-end swine inventories down by nearly 4.5 percent because of an anticipated increase in slaughter this year and lower inventories at the beginning of 2014. Nevertheless, FAS/Moscow still forecasts year-end inventories to be nearly seven percent higher than they were at the end of 2013 as national swine production increasingly moves to more efficient agricultural establishments.

As reported last year, swine inventories fell more than 10 percent at private households in 2012. This trend continued in 2013 with inventories falling another 12 percent on these farms, and all indications are that this trend will continue in 2014.

Private households are poorly positioned to financially compete with large-scale agricultural establishments. Moreover, these farms, which the Russian Ministry of Agriculture has encouraged switch to raising livestock other than swine, are arguably more susceptible to African Swine Fever (ASF) given their lack of modern facilities (where it is not uncommon for their swine to come into contact with wild boar in open pasture) and the common practice of feeding pigs with food waste (i.e. swill feeding). According to the Russian Federal Service for Veterinary and Phytosanitary Surveillance, 600,000 pigs were destroyed between 2008 and 2013 to prevent ASF expansion across the territory of the Russian Federation. As of the beginning 2014, the National Union of Pork Producers estimated ASF-related economic losses at 30 billion rubles (more than $800 million).

Based on newly available year-end official statistics, FAS/Moscow lowered 2013 year-end swine inventories by slightly more than 4 percent. 2013 year-end swine inventories totaled 19.2 million head (2 percent more than realized at the end of 2012).

Pork

As the Russian domestic pork industry continues to shift production from private households to agricultural establishments, FAS/Moscow has increased 2014 domestic pork production forecast to 2.5 MMT (i.e. 9 percent higher than previous estimates). Modern integrated agricultural establishments are capable of improving efficiencies to produce more pigs given economies of scale and, in turn, produce more pork to meet the growing consumer demand in Russia.

According to Rosstat data, pork production increased 25 percent at agricultural establishments in 2013. Production levels at these establishments should be even higher in 2014 with an influx of an additional 75 billion rubles (slightly more than $2 billion) in government support payments from the State program for “Pork Production Development in 2013-2015” to, in part, further modernize pork production facilities and subsidize brood stock for breeding, genetic, and hybrid centers. In fact, the National Union of Pork Producers estimates that by 2020, small-scale producers will account for less than 20 percent of Russian pork production, down from more than 70 percent in 2005.

Based on newly available year-end production data, FAS/Moscow has increased pork production for 2013, by nearly 10 percent, to 2.4 MMT. While pork production grew 10 percent in Russia in 2013, production in Russia’s largest producing region, (i.e. the Central Federal District) showed even more dramatic growth (i.e. up nearly 30 percent to 1.6 MMT on a live weight basis). The top three Russian pork producing companies all have production facilities in the Central Federal District: Miratorg, Cherkizovo, and Agro-Belgorye. 

Miratorg increased its production by nearly 50 percent in 2013. The company was established in 1995 and has become Russia’s largest pork producer (accounting for nearly 10 percent of all Russian pork production last year). Meanwhile, Cherkizovo, Russia’s largest meat producer (including poultry) surpassed Agro-Belogorye as Russia’s second largest pork producer, increasing its annual production by nearly 40 percent. In addition to these facilities, production growth was realized at many of Russia’s other 15 largest pork producers last year.

Consumption

Beef

Despite being one of the world’s leading importers of beef, 2014 beef consumption (16.7 kg per capita) will likely remain flat due to contrained domestic production and trade. Population growth in Russia is minimal and, at present, there does not seem to be any significant consumer shift between meat protein sources as retail prices for red meats have remained relatively flat since early 2013.

Russian per-capita beef consumption is not too dissimilar from that of the European Union (EU) (estimated at 15 kg), but is well below that of the United States (estimated at 36.8 kg), Canada (estimated at 29.4 kg), and Brazil (estimated at 37.8 kg).

Pork

Despite a decrease in imports, increasing Russian domestic pork production has led to increased per capita pork consumption, from 22 kilograms in 2012 to 22.9 kilograms in 2013. Per capita consumption is forecast to exceed 23 kilograms per capita in 2014 as a result of continued industry growth. Nevertheless, Russian per-capita pork consumption is below that of the United States (estimated at 27.6 kg) and the EU (estimated at 38.9 kg) so there is likely more room for growth. 

Trade

Cattle

FAS/Moscow forecasts Russian cattle imports will recover by approximately 13 percent in 2014 (to 110,000 head) based on strong buying interest from modern producers and the expectation that government support subsidies will be regularly issued over the course of this year. According to industry analysts, cattle imports were negatively impacted last year as a result of delayed government support payments. Nevertheless, the government is only one year into a seven year support program that earmarked billions of rubles towards the redevelopment of the Russian livestock sector. 

Based on newly available year-end trade data, and the aforementioned delay in subsidy payments, FAS/Moscow has decreased live cattle import volumes for 2013 by nearly 25 percent. According to the Customs Committee of Russia, Russia decreased imports of live cattle to 96,873 head in 2013, nearly 30 percent less than during the same period last year. The United States and Australia collectively accounted for 89 percent of Russia’s 2013 live cattle imports, with a larger portion of the U.S. shipments comprised of dairy cattle. The United States was the biggest supplier of live pedigree cattle (51,404 head), followed by Australia (34,519 head), Hungary (3,513 head), and Denmark (3,462 head). Live cattle trade from EU suppliers continued to be constrained by the presence of the Schmallenberg virus in the EU.

Beef

FAS/Moscow has decreased the 2014 beef import forecast, by roughly two percent, to 1 MMT, as a result of an anticipated increase in domestic production and because of trade restrictions placed on several foreign suppliers.

Based on year-end trade statistics, FAS/Moscow increased 2013 imports to 1.017 MMT carcass weight equivalent. According to the Customs Committee of Russia, Russia imported nearly 720,000 MT (on a product weight equivalent {PWE}) of beef in 2013 just shy of its total import volume in 2012. Specifically, Russia imported a little more than 580,000 MT PWE of frozen beef and nearly 140,000 MT PWE of fresh/chilled beef. The largest beef exporters to Russia in 2013, on a PWE basis, were Brazil – approximately 308,000 MT, Belarus – nearly 150,000 MT, Paraguay – approximately 140,000 MT, and Uruguay – approximately 35,000 MT.

In February 2013, Russia instituted a ban on the import of U.S. beef and associated products until such time as the United States provided guarantees that these products are ractopamine-free. Because of this measure, U.S. exports of beef totaled 56 MT during in 2013, down 99.9 percent from the previous year.

Swine

FAS/Moscow has decreased its 2014 forecast for live swine imports by 25 percent to 75,000 head due to anticipated increased domestic production and import restrictions on live swine instituted by the Russian Veterinary Service as a result of disease outbreaks in Europe. Due to the detection of the ASF virus in both Lithuania and Poland, Russia has imposed restrictions on the importation of live pigs from the entirety of the EU. If these restrictions remain prolonged, it is likely they will have a major impact on live swine trade to Russia as the EU supplied nearly one-third of Russian live swine imports in 2013. 

Year-end trade statistics for 2013 show Russian live swine imports nearly unchanged from previous FAS/Moscow estimates. Imports from Non-CU countries (i.e. the European Union, Canada, and the United States) were nearly 85 percent lower than they were in 2012, with trade from Estonia, Germany, and Latvia coming to a complete halt last year. According to Customs Union trade statistics, exports from Belarus, which accounted for nearly 60 percent of live swine imported into Russia in 2013, were down nearly 50 percent. In total, Russian live swine imports in 2013 were down almost 75 percent year-on-year largely as a result of disease outbreaks in Europe.

Pork

FAS/Moscow has reduced the 2014 forecast for pork imports by approximately 13 percent (to 800,000 MT CWE) as a result of anticipated increases in domestic production and trade restrictions imposed on several foreign suppliers. If the Russian ruble further weakens over the course of 2014, it could yield increased market opportunities for domestically produced pork at the expense of imports. 

FAS/Moscow has also decreased the 2013 pork import volumes by roughly 3.5 percent (to 868,000 MT CWE) based on year-end trade statistics. Russian pork imports during 2013 were down nearly 19 percent. Brazilian exports (124,151 MT PWE, up 1.5 percent), accounted for the largest import volume, followed by Denmark (88,550 MT PWE, up 45.9 percent), Germany (81,805 MT PWE, down 6.87 percent) Canada (78,446 MT PWE, down 56.3 percent) and Belarus (56,017 MT PWE, down nearly 30 percent). 

In February 2013, Russia instituted a ban on the import of U.S. pork and associated products until such time as the United States provided guarantees that these products are ractopamine-free. Because of this measure, U.S. exports of pork totaled 5,828 MT during 2013, down 93.4 percent from the previous year. However, in early March 2014, market access for some U.S. pork establishments was restored