The presence of meat in the diet plays an important role in human life. Meat products provide our body with a set of essential nutrients, such as proteins, minerals (potassium, calcium and magnesium phosphates; zinc; copper; and iron), and vitamins A, B and D.
In 2017, consumption of meat in Russia increased to 75.4 kilograms per capita, reaching its peak value observed back in 1990 and 2013. In the first half of 2018, consumption of pork increased by 1.1%, poultry demonstrated 1.3% growth, and consumption of meat of all varieties increased by 0.9%. Such significant growth was achieved largely through a systematic decrease in wholesale and retail prices for pork and poultry. This was happening in the conditions of expanding domestic production as well as tightened competition in the domestic market in the context of import substitution. Provided that the rates achieved are maintained, preliminary forecasts for 2018 suggest that average per capita consumption of meat in Russia may amount to 77 kilograms, thus breaking the country’s record.
OUTPUT VOLUME AND MARKET STRUCTURE
One of the key trends in the development of the Russian meat market is a significant increase in pork and poultry output. Compared with 2010, production of pork in 2017 was almost 2 times higher (194% growth), whereas poultry output increased by 58%. According to the latest data, in January–August 2018, beef production reached 183 thousand tonnes, whereas pork production increased to 1,714 thousand tonnes, which is, respectively, 18 and 15% higher than in the similar period of 2017. As long as the current rates persist, one may expect beef output and pork output to reach 309 thousand tonnes and 2,759 thousand tonnes respectively in 2018.
In January–August 2018, the largest share of meat production in the country was occupied by poultry and equaled 58%. Pork production was second with the share of 35%. The rest was accounted for beef and other meat varieties: the shares of 4 and 3% respectively. Lamb and mutton make up around 0.1% in total meat production volume.
The poultry market is one of the most developed segments of the Russian meat industry. Poultry production in January–June 2018 demonstrated an increase by 3% to the similar period of 2017. Imported goods occupy only 5% of the market in question. However, small batches of Russian poultry end up being exported. In 2017, Russia exported 164 thousand tonnes of poultry. The country’s main poultry purchasers are Ukraine, Vietnam, and Kazakhstan; together, these countries received 77% of all Russia’s poultry exports. Further growth in poultry exports is forecasted for 2018, and the volume is expected to reach 190 thousand tonnes; imports, on the other hand, may decline by 10%. The forecast involving reduced imports of poultry into Russia has to do with weakened prices in US dollars, which leads to increased competitiveness of Russian goods on both the domestic and global markets.
Domestic production of pork is well-developed in Russia. In 2017, pork output in the country increased from 2,042 thousand tonnes to 2,391 thousand tonnes, or by 17%. Imports only increased by 8%, however. Production of pork during the first 6 months of 2018 demonstrated 10.5% growth against the similar period of 2017.
Exports of pork from Russia are largely oriented at the CIS countries, namely Ukraine and Belarus. The volume of pork exports from Russia in 2016 equaled 19 thousand tonnes, whereas in 2017 the indicator jumped to 27 thousand tonnes. In 2018, supplies of Russian pork abroad may increase by 15% compared with 2017.
Ukraine was remaining the main purchaser of Russian pork in 2016–2017. Last year, 59% of exports within the category fell on this country. In the future, Ukraine’s share is expected to drop (as a result of weakening economic ties with Russia), whereas supplies to China and certain countries of Southeast Asia are expected to grow.
Given that there are currently no preconditions for rapid growth in exports and that demand for imported goods remains, a 10% increase in imports is forecasted for 2018.
Foreign turnover in the beef market has not been favorable for Russia. This is connected to a number of factors: first and foremost, the significant negative balance of trade. In addition, the Russian market is currently fully dependent on imported supplies.
In January–June 2018, beef production demonstrated an increase by 6.4% to the similar period of 2017.
It should be noted that the volume of beef imported dropped to 362 thousand tonnes in 2017, although it remains higher than the volume of domestic production. This year, imports of this meat variety have been gradually declining. Beef has mainly been imported from Paraguay and India, the two countries accounting for 44 and 14% of supplies respectively.
The volume of exports from Russia is rather low and amounts to just 2 thousand tonnes. The main purchasers of Russian beef are Kazakhstan, Belarus, the Republic of Korea, Hong Kong, and Ukraine; their total share makes up 94% in Russian exports.
No considerable growth in beef exports from Russia is forecasted for 2018. Any possible production expansion will be primarily oriented towards and taking place in the domestic market.
Against the bans on meat supplies from Brazil, Russia is expected to have its volume of beef imports reduced to 280 thousand tonnes in 2018. Since December 1, 2017, supplies of meat from this country to the Russian Federation have been restricted due to ractopamine (banned feed additive used to increase the animals’ muscle mass) content detected in it.
Lamb and Mutton
Foreign turnover in the lamb market has not been positive for Russia either:
1. The balance of trace is negative, and significantly so.
2. The dependence of the market on imported supplies is rather high as well.
The share of imports in the structure of the Russian lamb market remains high: in 2016 and in 2017 it was staying at around 30%.
During the first 6 months of 2018, lamb exports demonstrated record growth and amounted to 4.1 thousand tonnes, having exceeded imports for the first time in history. By the end of 2018, exports may reach 10 thousand tonnes. Iran will be the main consumer of Russian lamb during the time period in question. In May 2018, the Eurasian Economic Union and Iran signed an agreement enabling the creation of a free trade area between them, which implies that import duties for the products in question will be no higher than 5%.
In 2018, the volume of lamb imports into Russia is expected to decline by 7.3% and to amount to 2.8 thousand tonnes. The main reason for this is the ongoing reduction in supplies from Australia and New Zealand as well as the declining ruble exchange rate, which results in imported goods becoming considerably more expensive.
With the help of the information analytical system Globas by information agency “Credinform”, a rating of Russia’s top 5 companies with the highest revenue indicators was formed. The leading player in the meat market in 2017 was “Svinokompleks (Intensive Pig Farm) “Korocha” CJSC (Belgorod region), part of “Miratorg” Group. The three leaders also included “Agrokompleks” JSC named after N.I. Tkachev (Krasnodar Krai), and “Prioskolye” CJSC (Saint Petersburg).
In conclusion, we would like to highlight high dependence of our country upon imports in the segment of beef. Russia produces less than the volumes consumed locally, and therefore gradually establishing and developing domestic production of this meat variety constitute a critical task.
In the segments of poultry and pork, import substitution has been apparent, which allowed domestic goods to virtually supersede foreign players in the Russian market.
Deputy Head of Analytical Group
“Credinform North-West” LLC