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Market Access Issues, Other Factors Squeeze Russia’s Meat Supplies

Russian-Hog-Prices

The Russian meat market continues to be impacted by several key factors, including market access issues. The African swine fever (ASF)-related ban on pork imports from the EU has now lasted nearly three months. Combined with highly restricted access for pork from other regions, this has contributed to a steep increase in the price of domestic live hogs – up about 50 percent in the past two months and about 70 percent year-over-year. Prices in late April averaged 125 rubles/kg (or $1.59 per pound). Trends for imported pork vary by cut, but in March half carcass prices were up about 25 percent, while ham prices were up 16 percent from January levels. Prices for domestic pork have not risen quite as dramatically as prices for live hogs, but were still up about 30 percent in the past two months. Prices have moderated in recent weeks due to limited consumer purchasing power.

The shortage has prompted Russian regulators to consider approval of alternative suppliers – including China – but this has not yet occurred. Russia’s pork/pork variety meat imports through March were down 28 percent to 88,000 metric tons (mt), with Canada and Brazil each providing about one-third of the total volume. Pork fat and pork variety meat imports were down even more sharply, falling 52 and 62 percent, respectively. With the EU as Russia’s main supplier of pork fat, prices for fat increased more than 150 percent (from 90 rubles/kg to 226 rubles/kg) in just two months. Fat prices are up more than 250 percent year-over-year.

Russian veterinary authorities continue to target backyard pork production as a major factor in the spread of ASF. It is expected that upcoming technical regulations (to be effective May 1) will restrict slaughter outside specialized units which will further hamper backyard producers and encourage even stronger growth for commercial units. In February, Russia produced 160,600 mt of pork (slaughter weight) – which is nearly a 20 percent increase over February 2013.

Daily-Exch-Rates

Russia’s imported beef prices also vary by cut, but prices for forequarters are up about 11 percent since the beginning of the year. Combined with the sharp increase in the price of pork raw materials, meat processors expect the price of ready-made meat products to increase 15 percent and demand to drop by 5 to 7 percent. These price increases suggest a shift toward other proteins, though chicken prices are also up nearly 5 percent in the past month.

Unlike pork production, Russia’s domestic beef production continues to stagnate. Through February, Russia produced 78,500 mt of beef – down 3.5 percent from a year ago. Domestic beef prices are up 9 percent since the beginning of the year. Through March, Russia imported 82,200 mt of beef – down nearly 25 percent from a year ago. The volume came mainly from Brazil (56 percent of the total) and Paraguay (24 percent).

With imports of Australian beef now suspended due to trenbolone and U.S. beef out of the market for more than a year, Russia’s hotel, restaurant and institutional (HRI) sector is facing a severe deficit of high-quality beef, with buyers scrambling for limited supplies from Uruguay, Argentina and Europe. Regulators have reportedly considered granting access to beef from Japan, but Japan’s beef exports tend to be extremely expensive. To address the need for lower-priced beef products, access for buffalo meat from India is under consideration.

Devaluation of the ruble has also added to the cost of imported meat in Russia. The chart above shows the recent strengthening of the U.S. dollar, the Canadian dollar and the Brazilian real against the ruble. Note that the U.S. dollar has strengthened by nearly 20 percent against the ruble in the past 15 months. The Canadian dollar and the real have not risen as sharply against the ruble, but are still up significantly.

Sources: Global Trade Atlas, USMEF-Russia