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Review of the Russian Market of Fish and Fish Products

Research by the Company NeoAnalytics
Fish farming plays an important role in the livelihood of the Russian population, is a city-forming segment in coastal regions, and serves as the main occupation of the local population in the Far East and the Far North along with fish and seafood processing.
The fishing industry in the Russian Federation includes:
* the fleet;
* onshore production facilities intended for processing and storing fish products;
* production infrastructure providing port and vessel repair services within the fleet;
* shipbuilding and machine building;
* packaging and fishing tool production.
In 20082009, as a result of state support in the industry, volumes of fish production began to increase.
According to Rosrybolovstvo (the Federal Agency for Fishery), the fish industry is currently being restructured due to the need for import substitution. As a result of declining imported raw material volumes, a reduction in fish processing is possible, and production at a number of fish processing companies may be stopped without sufficient investments.
All in all, in 2016 the following trends were observed in the market of fish and fish products: low prices globally, decreasing consumer activity within the country and the end of the effect of ruble devaluation. This concerns both finished products and raw materials. Export-oriented producers have to reorient themselves to the domestic market (in 20152016 exports were extremely profitable). Prices in the domestic market are lower, and consumption was decreasing in it, leading to lower profits.
In August 2014, the Government of the Russian Federation adopted a resolution On measures to implement the Decree of the President of the Russian Federation dated August 6, 560 On extending certain special economic measures in the interest of ensuring the security of the Russian Federation. According to the resolution, starting with August 7, a ban on agricultural product imports and raw materials from the USA, EU countries, Canada, Australia and Norway into Russia is imposed for the period of one year. The list of goods includes the following codes of fish products 0301, 0302, 0303, 0304, 0305, 0306, 0307, and 0308.
On June 25, 2015 the Government of the Russian Federation prolonged the embargo until August 6, 2016, and a Decree of the President of the Russian Federation dated June 29, 2016 prolonged it again, until December 31, 2017. Said measures had a significant effect on the industry. For instance, according to Rosrybolovstvo, in 2016 the share of domestic fish in sales increased to 83% within the programme for import substitution.
In 2016, the overall catch of fish and other aquatic biological resources in Russia amounted to 4,812 thousand tons, having increased by 6.8% compared to the similar period of the previous year.
A significant share in the catch structure falls on fish in 2016 said product type occupied 94.3% in physical terms, amounting to 4,525 thousand tons. In the structure of overall catch, the largest share is occupied by pollock 37.9%, whereas the shares of cod and herring equal 10.8 and 10.6% respectively. The share of other fish varieties amounts to 40.7%.
The volume of production of live, fresh and chilled fish dropped by 23.1% in 2016 compared to the similar indicator for 2015, amounting to 901,944.53 tons. This was primarily due to the decline in prices for pollock, since more than third of the catch volume falls on this species. In the first half of 2017, the share of pollock in the overall catch amounted to 30% compared to the first half of 2016.
It should be noted that the main share of imports is re-exported fish caught by Russian ships and initially supplied to foreign producers as raw materials. Upon being processed, said fish returns to the Russian market in a form of fillets or mince, for higher prices.
The share of exports amounts to 3040% of the total production volume. The high share of fish product exports stimulates imports of the same produce from abroad, but for higher prices instead. At the same time, growth in prices occurs, as it is not profitable for producers to supply goods to the domestic market for lower. Supplies of products for exports are more profitable since calculations are not made in rubles. In this sense, ruble devaluation was beneficial for fish exporters.
Throughout 20102014 a gradual decline in fish product import volumes was taking place. In 2015 a significant drop was observed, affected by bans on fish imports according to the Decree of the Government of the Russian Federation On measures to implement the Decree of the President of the Russian Federation dated August 6, 560 On extending certain special economic measures in the interest of ensuring the security of the Russian Federation.
In 2016, the total volume of fish and fish product imports amounted to 512 thousand tons. According to the Federal Agency for Fishery of the Russian Federation, the share of fish, crustaceans and mollusks is dominating in the overall structure of imports in the previous year it equaled 85.66% in physical terms, or 438.61 thousand tons. The share of finished or canned fish products amounted to 14.34% in physical terms, or 73.4 thousand tons.
In 2016, the overall volume of fish and fish product exports reached 1911.6 thousand tons. At the same time, the share of fish, crustaceans and mollusks is also dominating in the overall exports structure it accounted for 99.15% of supplies in physical terms, or 1895.3 thousand tons. The share of finished and canned fish produce amounted to 0.85% in physical terms, or 16.3 thousand tons.
In the previous year, the volume of the Russian market of fish and fish products reached 3,650 thousand tons in physical terms, having increased by 0.4% over the year. According to forecasts by NeoAnalytics, by 2018 the indicator may reach 3,720 thousand tons (+2,3% to the level of 2015).
In 2016 consumption of fish in Russia dropped from 22.3 to 19 kilograms per capita compared to the similar period of the previous year. Said indicator is lower than the minimum consumption rate recommended by the Ministry of Health of the Russian Federation. The increase in prices for fish products in 2015 served as the main reason for the consumption reduction. Imported fish became 30% more expensive on average due to increased costs on delivery as well as the changes in currency exchange rates. Increased prices for imported produce encouraged domestic producers to raise their own prices as well. Prices for domestic fish grew by 15% on average.
The reason for declining consumption in 2016 was a decrease in consumer activity. However, in the first half of 2017 the level of consumption began to recover, according to Rosrybolovstvo.
The key factor affecting growth of the Russian fish market size in 2015-2016 were exports, namely the volume of exports in monetary terms. Ruble devaluation played an important role, as it allowed exporters to increase their profit.
The price increase was also contributed to by the ban on fish imports from a number of countries, some of which used to be the main suppliers of said product type in particular, Norway, Turkey and Spain.
Up until 2018, development of the Russian fishing industry will be affected by the state programme For development of the fishing industry for the period until 2020. In the medium term, development of the fishing industry will be achieved through implementation of a number of measures aimed to solve the following tasks:
* further improvement in the mechanisms of stable and long-term management of aquatic biological resources;
* sufficient state support in the field of reproduction and protection of aquatic biological resources, navigation safety, scientific research in the fishing industry as well as implementation of complex measures for the development of the artificial reproduction system in aquaculture;
* state support for companies in a form of subsidising parts of the costs on paying interest on loans received for construction, acquisition and modernisation of fishing vessels;
* maximum use of leasing advantages for fishing fleet renewal;
* development of solution in terms of measures of customs and tariff regulation of imports of ship equipment, processing and fishing equipment as well as equipment for aquaculture businesses;
* expansion of international cooperation in fishing, creating conditions for a developed domestic market of fish products.
In addition, the abolition of the unified agricultural tax in the fishing industry that is being discussed may become an important factor negatively correcting the Russian market the tax is applied by around one third of companies active in fishing today. If the tax is abolished, the tax burden will increase for a number of companies.

Olga Lutseva-Er,
General Director
Research Company NeoAnalytics
MSc in Social Management