Market participants also believe the fall in imports may be beneficial to domestic producers.
Total imports of meat to Russia in January 2015 totalled 10,200 tonnes (t) excluding trade deals within the Customs Union. Imports of pork dropped by 11 times year-on-year to 1,730t, imports of beef decreased by 5.2 times to 1,790t, while poultry meat fell by 1.6 times to 5,800t.
According to the Russian National Meat Association (NMA), the decrease was not related to sanctions implemented by the Russian government in the middle of last year.
“Pork imports from the European Union (EU) were stopped at the beginning of 2014, due to the outbreak of African swine fever (ASF), while supplies of beef and other products from the US, Canada and a number of other countries were stopped due to use of illegal drugs [ractopamine]. Meanwhile, poultry meat in Russia has almost reached self-sufficiency,” explained NMA executive director Sergey Yushin, adding that the main reason for the decrease in meat supplies was the fall in the exchange rate of the Russian ruble against most world currencies.
NMA estimates indicated that, in the second half of 2014, importers were losing, on average, about US$1 for each kilogram of imported meat in Russia, so their losses totalled around US$300 million. And importers currently selling stocks in Russia are also working at a loss.
“Business will become profitable again only when prices in Russia rise, providing a profit of at least 10%. However, given the fall in demand, this may not be possible in the near future,” said Yushin. One exception may be beef supplies, as this type of meat is in great deficit in the Russian market.
Meanwhile, market participants said the current situation could stimulate the development of Russian meat exports. And analysts promised that there would be no deficit on the domestic market – mostly due to the decrease in demand, as the real incomes of the Russian population are also falling.
“Despite the drop in imports, there will not be any meat shortage [in the domestic market]”, stated Mushegh Mamikonian, head of Russian Meat Union. “Firstly, a fall in the purchasing power of the population has led to a drop in meat consumption. Secondly, domestic production is growing, thanks to investment projects launched in the past few years. The average growth rate for pork and poultry production in 2014 was 6%. In 2015, growth will continue, although the pace will slow down,” he added.
A report from the Institute for Agricultural Market Studies also asserted that the current situation was beneficial for domestic meat producers. It stated: “Domestic producers are enjoying rising prices on the domestic market, while the currency fluctuations make them more competitive compared to imported meat, both in Russia and the global marketplace.”