The rise in Russian pork consumption has been the main factor behind an overall increase in meat sales. These amounted to 73.4kg per capita in 2016, increasing 1.8kg compared to 2015, noted Kovalev.
One important trend was that, over the past few years, the share of imported pork in the overall levels of pork consumption has reduced from 26% in 2013 to 8% in 2016, he said.
Changes to consumer basket
According to RUPP’s estimates, pork’s share in the total levels of meat consumption by the average Russian consumer rose 2% this year compared to both 2014 and 2015, to 34%. Poultry’s share remained at 45%, although, in this segment, consumption rose slightly from 32.4kg per capita last year to 32.7kg per capita in 2016.
Meanwhile, consumption of beef has been falling for several years. In 2016 it amounted to 13.8kg per capita, compare to 14.3kg last year, according to RUPP’s estimates.
Consumption of pork this year rose after two years of slight decline, said Kovalev, adding that the main reason for this trend was a reduction in the purchase prices of pig meat. In 2016, they fell 11% and, in 2017, are likely to fall by another 5%, fuelling a further potential 2-3% rise in consumption, Kovalev predicted.
Imports sink below 1 million tonnes (t)
Meanwhile, in an important milestone for Russia’s meat industry, imports of meat are set to dip below 1 million metric tonnes this year, dropping 12% compared to 2015, said Kovalev. In particular, imports of pork are forecast to fall by 13% to 300,000t.
Import flows were somewhat uneven this year, as in the first half of 2016 they jumped 20-30% compared to the same period of 2015, primarily due to the devaluation of the Brazilian real, Kovalev said, suggesting that Brazil now accounted for 95% of pork supplies to Russia.
He described the import growth in the first half of 2016, as “scarring”, but pointed out that, in mid-2016, this was resolved legally, so that, in the second half of the year, pork imports from Brazil dropped by 50% compared to the first six months of the year.
No more payback on pork projects
Russia’s Ministry of Agriculture has approved numerous projects for pork production, amounting to an overall capacity of 700,000t, while several other projects, with a capacity of 500,000t, are in the final stages of negotiation. As the result, by 2020, pork production in Russia will rise by 21% or at least 469,000t.
This growth will constrain any rise in prices and will completely cover domestic demand for pork, even allowing the country to offer exports of up to 200,000t per year, Kovalev said.
As a result, investors should be very careful when it comes to any plans to launch new pork production projects as, given the current market situation, these projects would have virtually no payback, he claimed, adding that this didn’t necessarily mean complete suspension of any investment in pig farming.