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Food embargo impact on the situation with swine and poultry in Russia

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Three years ago, the government approved a list of agricultural products and foods banned from being imported into Russia from states that imposed sanctions on our country or joined them. The day before, on August 6th, 2014th, President Vladimir Putin signed a decree on the application of special economic measures to ensure the security of the country and protect its national interests.
According to Alexander Tkachev the Minister of Agriculture, after limiting the import of food products, Russian farmers received carte blanche. «This opened a» window of opportunity «for the industry. The market does not tolerate emptiness; therefore the place of importers was taken by domestic agricultural producers. Domestic food products became dominant on the Russian shelf, while imports of imported food almost halved in three years: from $ 43 billion to $ 25 billion in 2016th», quotes him press-service of agrarian ministry. According to Rosstat, the share of imported food in retail trade resources declined from 34% in 2014th to 23% in the first quarter of 2017th, the same figure was present for the entire 2016th.

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As a whole the embargo contributed to the growth of domestic production: Were it not for import restrictions, many investors would not risk investing in the development of a number of directions since it would be extremely difficult for them to compete with western, primarily European products. However, the importance of retaliatory sanctions is also not to be exaggerated: the country is still open to foreign products, which are now supplied from other countries, and because of longer logistics it is often more expensive than before. In addition, it is important to take into account that in the autumn of 2014th the dollar began to rise — in January 2015th its rate exceeded 65 rubles against 36 rubles in August 2014th, which led to an increase in prices for imported products. Due to the population falling real disposable incomes and because of the difficult macroeconomic situation in the country, the sale of foreign goods would still have declined even without the introduction of a product embargo.

According to the words of Senior Consultant of AIK consulting group “NEO Centre” Roman Khristoforov swine and poultry producers benefited from the introduction of the food embargo.
In 2013th the import of swine from the sanctions countries amounted to almost $ 1.6 billion (74% of total swine imports) or 455,000 tones (73%). Total supplies of this type of meat in 2013-2016th decreased by 58% — from 620 thousand tons to 259 thousand tons. At the same time, swine production in Russia during this time increased from 2.9 million tons to almost 3.4 million tons in slaughter weight (plus more than 550 thousand tons), Khristoforov compares. So, in three years, the volume import of swine from countries that have been banned has been replaced, and the effect of the embargo in this sector has already been won, he concludes. The import of poultry from countries that were subject to restrictions in 2013 was $ 506 million (60% of its imports) or 378,000 tons (72%), Khristoforov continues. Total supplies for 2013-2016th decreased by 63% to 316 thousand tons. Production in Russia increased from 3.8 million tons in slaughter weight to 4.5 million tons (plus 763,000 tons), thus, it was also possible to replace the dropped volumes of foreign products in this segment.

The head of the Executive Committee of the National Meat Association, Sergei Yushin, believes that the prohibitive measures did not significantly affect the development of the meat sector since the import substitution process began long before the embargo was imposed. Swine import from Europe was closed as early as the beginning of 2014th due to the outbreak of African swine fever in Lithuania. In fact, only Canada was affected by sanctions, as swine was not bought in the US: state enterprises could not fulfill the requirements of the FSVPS for lack of trace amounts of fodder additives, in particular, ractopamine. In the segment of poultry meat, the ban was mainly restricted to the USA, since small amounts of mechanically deboned meat were mainly supplied from Europe. American chicken thighs left the Russian market, but by the time the food supply was introduced, the need for them was already insignificant, they were replaced by meat from Brazil and Argentina, Yushin said.

The share of imports in swine consumption decreased from 26% in 2013th to 8% in 2016th, poultry meat — from 12% to 5%. According to the Federal Customs Service from January to May 2017th, Russia imported 242.6 thousand tons of cattle and swine meat (including 106.9 thousand tons of the latter), as well as 87.7 thousand tons of poultry. For the same period of 2014th, the volume of import of fresh and frozen meat was at the level of 340 thousand tons, poultry — 159 thousand tons.

Source: Agroinvestor

11.08.2017