Economic crisis may force Russians to cut meat consumption
As such, it is expected that 2015 will be especially hard for the country’s meat industry, as devaluation of the Russian rouble increases the cost of feed, fuel and, in general, the cost of meat production, while soft loans will become unavailable for the most projects.
An official report from the Cherkizovo group of companies, one of Russia’s largest producers of pork and poultry, said the domestic meat market was already experiencing the negative effect of the devaluation of the rouble, which brought with it the risk of a fall in meat consumption, due to the acceleration of inflation and a reduction in the real incomes of the population.
Meanwhile, Miratorg has so far refrained from any comment on how the current situation could affect Russia’s meat consumption. The company is currently implementing a large-scale beef project in Bryansk Oblast and needs to see good demand for beef – which is the most expensive type of meat in Russia.
"On the one hand, devaluation of the rouble is a positive factor for the industry, as the prices for all RusAgro products are tied to world dollar prices," said Sergey Tribunkiy, deputy director for investment at Russian meat producer RusAgro. "But on the other hand, it reduces the purchasing power of the population. In addition, banks actually raised rates on loans, and RusAgro will take on loans," he added.
"In the fourth quarter of 2014, Cherkizovo pointed to a number of trends that could put pressure on the country’s meat market in general, as well as the financial performance of the group. For example, a significant fall in the exchange rate of the rouble against the dollar and euro led to a sharp increase in the cost of components for production (for example, feed additives), contracts for which are fixed in the foreign currency, and to higher prices in the grain market," said the company’s representatives.
"In addition, an acceleration in inflation and the projected decline in real incomes are likely to lead to stagnation or a reduction in meat consumption," added the firm.
The fall in consumption is also connected to a rise in retail prices for the main types of meat in the country. Official statistics showed that, during the first three quarters of 2014, the price for meat jumped by 25%. Sergei Yushin, head of the executive committee of the country’s National Meat Association, also pointed to an increase in spending by meat companies, which could potentially push prices up further.
RusAgro CEO Maxim Basov said the Russian meat market had already experienced a fall in demand in recent months. However, in his opinion, the latest issues would not lead to Russian consumers shifting from pork to cheaper poultry meat in 2015 and that the share of the main types of meat consumed would remain the same.
