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Review of the Russian Pork Market

Research by Information-Analytical Company VVS
Livestock numbers in Russia tend to reach their maximum value in the summer months. As of July 1 of the current year, the total number of the main types of farm animals in Russia (that is, not taking into account deer, camels and other exotic animals) reached 33.148 million, which is 1% higher than in the summer of 2016. At the same time, livestock number growth rates remained the lowest in the past 7 years.
Pigs serve as the main and, in recent years, the only driver of growth for domestic animal husbandry, and their number in Russias total livestock exceeds 58.55%.
By early July, 2017, the number of domestic pigs in Russian pig farms has exceeded 19.41 million, which is 3.1% higher than in the previous year. This animal farming sector has been steadily growing since 2008, and during the past 9 years it has increased by 122%. Average growth rates amount to 9.3% per year. In reality, however, the situation is not as linear.
The first wave of growth was a result of the 5-year programme for agriculture development adopted in 2007, which involved a substantial increase in state support for the Russian agroindustrial complex. In 2009 and in the first half of 2010, a large number of new pig farming facilities were launched, and therefore the industry demonstrated such substantial growth.
In late 2012, there was a sharp increase in pork imports due to Russia having joined the WTO, and feed for pigs became 2 times more expensive. Therefore, in order to support domestic pig farming, 15 billion rubles from the federal budget were allocated as a one-time subsidy to compensate for the growth in pig feed prices in 2013. The Ministry of Agriculture also took all measures allowed within the WTO in order to regular imports. As a result, pig livestock in agricultural enterprises demonstrated record growth of 16%.
The increase in 20152016 was also logical and expected. The programme for import substitution announced in 2014 bore fruit, and meat producers began to increase volumes. Now that solvent demand has been satisfied, it is time to develop exports however, the strengthening of the Russian ruble and veterinary restrictions corrected the case, and as a result, growth rates in the number of pigs in 2017 turned out to be the lowest in the past 9 years.
As of July 1, 2017, Belgorod region is the leader in the number of livestock pigs, with the figure of 4,282.706 thousand. A year earlier the number amounted to 4,216.406 thousand. The share of Belgorod region in the overall number of pigs in the Russian Federation equalled 22.1%. The number of pigs in Kursk region equalled 1,645.297 thousand (8.5% of the total number), which is 17.6%, or 246.253 thousand, higher than in the previous year. Tambov region is third with the number of 972.773 thousand, which exceeds the figure for the same date in 2016 by 5.25% or 48.525 thousand. The share of Tambov region in the total Russian livestock number amounted to 5%.
According to the Russian Federal State Statistics Service, meat production in Russia in the first half of 2017 increased by 7.8% to the similar period of the previous year, reaching the value of 1,111.4 thousand tons. Said increase was mainly due to increased pork production, the share of which in the overall meat production volume occupied more than 93% in the first half of this year. During the first half of 2017, Russian companies produced 1,039.2 thousand tons of pork, 8.1% more than in the previous year.
Along with the number of pigs, pork production in Russia has been steadily growing since 2008. Its growth rate substantially exceeds the growth rate of the livestock number. The number of pigs has increased by 122% (by 2.22 times) during the past 9 years, whereas pork production has grown by 326% (by 4.26 times). Average annual growth rate equals 17.4%. However, growth in production is expected to slow down this year. According to preliminary data, 2,269.6 thousand tons of pork will be produced in 2017, which is 11.1% higher than a year earlier.
It is easy to notice that the dynamics of growth in pork production virtually follow the dynamics of growth in the number of pigs. Just like livestock numbers, the former sector is demonstrating a significant drop in production rates. Therefore the pork production boom is close to its end at this point. Profitability has been dropping, and ineffective companies are exiting the market.
Imports of pork into Russia began to decline in 2014. The main reason for this was ruble devaluation, as a result of which imported meat became almost 2 times more expensive. Naturally, the latter affected consumer demand. In 2015 the situation worsened due to counter-sanctions. As a result, pork import volumes over the past 4 years plummeted from 625.2 thousand tons in 2013 to 258.7 thousand tons in 2016. According to preliminary data, pork imports in 2017 will decrease by 30%, reaching 180 thousand tons, which is an almost 3.5-fold decrease to the level of 2013. In 20072013, pork import volumes were relatively stable. Russian importers (especially in the western part of the country) were attracted by the cheapness and consistent quality of European pork.
Nevertheless, the share of imported pork in the total consumption volume has been steadily declining since 2008. Back then, almost 60% of pork in the Russian market was imported, but domestic production has been growing year by year, whereas average annual volumes of imports were stable and even declined after 2013 the share of imported meat in the Russian market kept decreasing. On July 1, 2017, the share of imported pork amounted to around 6%, and it is likely to reach 78% by the end of the year.
Regarding pork exports, their volumes are extremely low there were virtually no exports before 2015. However, the cheap ruble made Russian pork competitive in foreign markets. As a result, in 2016 the share of exports in the overall production volume increased and reached 0.9%. However, this year exports declined to 0.8% and are showing a trend for a further decrease.

Vadim Pashin,
Information-Analytical Company VVS