Report Highlights:

FAS/Moscow has raised its 2013 forecast for Russia’s imports of cattle as a result of continued strong government support for the building of herds. Beef production is also increased marginally as high feed costs are increasing slaughter rates and, thus, meat output. FAS/Moscow’s 2013 forecast for imports of live swine is lowered as a result of increased domestic swine stocks and continued trade restrictions with Europe due to disease concerns. Forecasts for pork production are increased in 2013, and pork imports are also up slightly as improved market access is expected to lead to more purchases of pork and pork products. 

Executive Summary: 

Cattle and Beef 

The Russian Federal Statistics Service (Rosstat) reports cattle inventories at the beginning of 2013 were 19.4 million head. Given the reduction in beginning-of-year cattle stocks compared to past years, FAS/Moscow forecasts 2013 cattle production lower than previous estimates. Forecasted 2013 cattle imports, however, have been revised upward as State subsidies for domestic beef production programs are expected to remain strong. Nevertheless, despite a reduction in historical cattle stocks, slaughter rates are expected to increase marginally due to sustained high prices for feed grains which, in turn, are expected to lead to greater Russian domestic beef production. 

Despite an increase in domestic beef production, 2013 beef imports are also expected to remain strong, and are thus slightly higher than previous 2013 estimates. Access for foreign beef via the tariff-rate quota (TRQ) system, continued modification of existing sanitary regulations, and an updated high-quality beef definition are expected to continue to improve market access conditions for beef imports. 

Swine and Pork 

Rosstat reports 2013 beginning swine inventories were approximately 18.8 million head, a noteworthy increase over past years. The increase in swine stocks is attributed to reduced backyard production (nearly 10% by volume) as a result of outbreaks of African Swine Fever and reduced competitiveness of informal producers compared with modernized agricultural establishments. Increased production at more efficient agricultural establishments has led to an increase in the number of domestic swine, and, given their improved production practices, an increased pig crop. With the increase in the number of domestically produced live swine, and the ongoing trade restrictions on live swine imports from the European Union due to outbreaks of the Schmallenburg virus, FAS/Moscow has revised downward its 2013 forecast for swine imports. 

However, given the increase in domestic swine stocks, coupled with burgeoning feed costs as noted above, Russian domestic pork production is expected to appreciably increase in 2013. An increase in pork imports in 2013 is also anticipated, as compared to previous estimates, because of Russia’s WTO commitments – namely a TRQ with favorable import duties and, as is the case for beef, continued modification of existing sanitary regulations. 

Production: 

Cattle and Beef 

FAS/Moscow forecasts 2013 beginning stocks of cattle to be slightly higher than past estimates as result of year-end Rosstat inventory statistics. Because of sustained high prices for domestic feed grains, which continue to strengthen, FAS/Moscow also forecasts the number of cattle slaughtered in 2013 to increase slightly compared to previous forecasts. 

In 2013, the Russian government will reportedly allocate RUR 8 billion ($260 million) for the support of Russian livestock production and RUR 2 billion ($65 million) to support Russian beef cattle productionvia as yet unspecified programs. According to the Ministry of Agriculture, Russia also plans to allocate RUR 400 million ($13 million) to support the purchase of bulls, embryos and semen of beef cattle breeds, including for imports. The Russian government has also increased the terms of government-backed soft loans for beef cattle producers for a period of up to 15 years and will also subsidize 100 percent of the interest rate beginning this year. 

FAS/Moscow forecasts 2013 beef production at 1.39 MMT, carcass weight equivalent (CWE) in 2013, or approximately 3 percent higher than our previous forecasts for 2013. This increase in FAS/Moscow’s forecast is attributable to an anticipated slaughter increase in 2013 because of increased feed costs, plus improved yields as a result of increased weights at slaughter as a result of improving farm management practices.

According to the Russian National Association of Beef Producers (NUBP), the number of Russian feed lots has significantly increased over the past six years. The NUBP reports there were approximately 340 commercial feedlots in Russia in 2012, compared to just 16 in 2006. 

The largest producer of high quality beef in Russia is the Bashkortostan region, which produced more than 7.5 percent of Russia’s high quality beef in 2012, or 216,500 MT of beef on a live weight basis. Other major producing regions in Russia in 2012 were Tatarstan (158,900 MT), the Altai territory (122,000 MT), Kuban (116,400 MT), and the Saratov region (107,900 MT). Other beef producing areas in Russia, albeit in a smaller scale that those mentioned above, include: Kalmikiya, Voronezh, Lipetsk, Tyumen, Astrakhan, Rostov, and Orenburg oblasts. 

Swine and Pork 

FAS/Moscow forecasts 2013 beginning stocks of swine to increase by 8 percent over past estimates as result of an increase in year-end Rosstat inventory statistics. Backyard production has been declining inRussia for several years, but inventories at these farms significantly declined in 2012 (falling by nearly 10 percent, by volume). African Swine Fever continued to have a negative impact on backyard production across Russia, and the Russian Ministry of Agriculture has even gone so far as to recommend that backyard producers switch to raising other livestock rather than swine. 

However, increased production at more efficient agricultural establishments has led to an increase in the total number of domestic swine, and, given improved production practices, an increased pig crop.

FAS/Moscow has increased its 2013 Russian pork production forecast by approximately 4 percent to approximately 2.15 MMT, carcass weight equivalent (CWE), because of an anticipated continuation of improving production yields and an increase in the number of slaughtered hogs due to rising feed costs.

Overall 2012 pork production increased across Russia, including considerably in the center of Russia (i.e., by 40 percent to 102,000 MT live weight or 75,000 MT slaughter weight) – in Belgorod, Kursk, Lipetsk, Voronezh and Tambov oblasts. The State Duma has requested the Ministry of Agriculture allocate RUR 9.5-10 billion ($311-330 million) of additional one-time financial support payments, in the form of subsidies from the state budget, to compensate for increased feed prices and support Russian swine production in 2013. If granted, this support is anticipated to help efficient pork producers maintain profitability. 

In an effort to further support Russian agriculture, Russian legislators have approved changes to the Russian Tax Law which fixes a zero tax rate on profits earned by agricultural producers which, in turn, will benefit all branches of the Russian meat industry. Previously, this tax-free status was set to expire in 2020. In addition, in 2012, the Russian Ministry of Agriculture selected 30 support projects for implementation that will help modernize pre-existing facilities and develop new facilities (e.g., slaughter houses, breeding facilities, meat production, etc) as well. The Federal and regional budgets will allocate approximately RUR 9 billion ($300 million) to support these projects. 

Consumption: 

Beef 

FAS/Moscow slightly increased its previous forecasts for 2013 beef consumption due to anticipated increases in domestic production and the continued strength of imports. At present, approximately 90 percent of Russian beef is produced from dairy cattle. Imported and locally produced high quality beef in Russia is utilized by the hotel, restaurant, and institutional (HRI) sector, including in an increasing number of Russian steak restaurants which have become quite popular in Russia’s major cities. Processers reportedly still prefer imported beef over domestic cuts and carcasses which are considered less standardized. Processers have also expressed a preference for lean beef which they report is easier to utilize in sausage and burger production. 

Pork

Pork consumption is forecast to increase by approximately 5 percent over previous estimates for 2013 because of anticipated increases in production and the availability of competitively priced imports. 

Trade: 

Cattle and Beef 

Overall U.S. exports of live cattle eclipsed previous records in 2012, and FAS/Moscow has revised upwards its 2013 Russian cattle import forecast as federal and regional governments continue to offer subsidies to support the further development of Russia’s cattle herds. FAS/Moscow has also raised Russian cattle exports to account for the few thousand head of cattle which have been shipped from Russia to Azerbaijan over the past few years. 

Despite an increase in domestic beef production, FAS/Moscow anticipates 2013 beef imports will also remain strong, even slightly higher than previous 2013 estimates. Access for beef via a tariff-rate quota (TRQ) system, continued modification of existing sanitary regulations, and an updated high-quality beef definition are expected to continue to improve market access conditions for imports. 

Russian beef imports in 2012 increased by 3.3 percent to 730,805 MT (PWE) from 707,503 MT in 2011. Imports from Brazil accounted for 39.6 percent, Paraguay – 19 percent, and Belarus – 16.6 percent. However, FAS/Moscow believes Belarusian imports may have actually accounted for a larger percentage due to underreported intra Customs Union trade. Imports of beef to Russia from the United States accounted for 46,292 MT-- 7.4 percent of total beef imports, an 18 percent increase from 2011. 

Swine and Pork 

Russian import duties on live swine were decreased (from 40 percent but not less than 0.5 Euro/kilo) to five percent in August 2012. Despite the positive impact that this tariff reduction should have on import volumes, FAS/Moscow lowered its 2013 swine import forecast to 400,000 head due to an increase in domestic swine stocks and ongoing trade restrictions with the European Union related to continued outbreaks of the Schmallenburg virus. 

Despite an anticipated increase in production, 2013 pork imports are expected to be higher than previous estimates, because of Russia’s WTO commitments – namely a TRQ with favorable import duties and, as is also the case for beef, continued modification of existing sanitary regulations. 

FAS/Moscow has also revised 2012 pork imports to reflect full year trade data which has recently become available. Russia increased pork imports in 2012 by 10.2 percent to 822,961 MT (PWE), 77 percent of which was frozen. The largest pork exporters to Russia were the EU – accounting for 37 percent of Russia’s pork imports, Canada – 21.8 percent, Brazil –14.8 percent, the United States –approximately 12 percent, and Belarus – 9.6 percent. The United States exported 87,942 MT of pork to Russia in 2012, a 52 percent increase over 2011. 

Policy: 

In 2013, Russia instituted a ban on the importation of U.S. beef, pork, and beef and pork by-products until such time as the United States provides guarantees that these products are ractopamine-free. As of the end of January 2013, Brazil, Paraguay, and Argentina had increased the volume of beef theyexported to Russia, when compared to the same period in 2012. As of the end of January 2013, Brazil, Chile, Ireland, France, Hungary, and the Netherlands had all increased the volume of pork they exported to Russia, when compared to the same period in 2012