SUMMARY: Russia offsets decline in pork imports with domestic production increase - NMA
MOSCOW. Aug 16 (Interfax) - A reduction in pork imports in the first seven months of the year has not led to shortages, because domestic production increases have filled the gap.
No shortage
Despite a substantial decline in pork imports, the consumer market situation is stable and wholesale pork prices are 10%-20% lower than one year ago, Sergei Yushin, the head of the executive committee of the National Meat Association (NMA), told Interfax.
Imports of refrigerated and frozen pork to Russia declined 13% to 267,000 tonnes in the first half of the year, pork fat imports were down 6% to 126,000 tonnes, and slaughterhouse by-products fell 29% to 48,500 tonnes (excluding deliveries from Customs Union members).
"But there was no deficit on the market. The reason is the continuing rise of output of hogs at new, high-efficiency hog farming complexes, which have been added in recent years under the national project to develop the agricultural sector and the state program to develop agriculture in 2008-2012," Yushin said.
Development of slaughterhouses and processing enterprises has played a crucial role in offsetting imports, he said.
300 bln rubles invested
An estimated 300 billion rubles has been invested in hog farming overall in the last seven years.
In an effort to support investment activity in the sector and bolster finances at producers, the government has earmarked 5.7 billion rubles this year to compensate for the higher cost of hog feed and the decline in wholesale prices in 2012.
"An important step in stabilizing the market was the Eurasian Economic Commission's decision in March to eliminate customs preferences for pork imports in excess of quotas from a number of developing countries," he said. "Now all suppliers must pay an import duty of 65% of the customs value on deliveries in excess of the quota, instead of the 48.75% in effect previously."
Not the small-hold farmer's best friend
Pork production in Russia rose 11.3% to 1.590 million tonnes (live weight) in the first half of 2013. Output from large-scale producers increased about 28%, while production by proprietors of private plots (known by the Russian acronym LPKh) declined 20%, according to preliminary data.
"Previously the NMA forecast that the decline in LPKh hog production would accelerate, from 3%-4% a year to 8%-10%," he said. "Given the seasonal nature of production in this segment, one can reckon that the decline in production for the full year will not exceed 15%, although the compulsory destruction of animals from epizootic causes may alter that picture," Yushin said.
Numerous outbreaks of African swine fever, the quarantines enacted to eliminate them and stiffer penalties for violations of veterinary statutes, are the main causes of the decline in LPKh hog production, he said. Changes to the rural demographic landscape also play a role, including the appearance of well-paying jobs that has accompanied development of the agricultural sector and growth of the food processing industry and the low productivity of small-scale farms, which do not have the means to employ modern technologies.
Yushin predicted that within a few years, LPKh hog production would decline to 20% of the total, from 65% seven years ago. It is a trend that increases the competitiveness and overall stability of Russia's hog production sector, he said.
Problems remain
The main challenge facing the hog industry in Russia in coming months remains the unfavorable situation with the spread of dangerous animal diseases (African swine fever, hood-and-mouth disease) and uncertainty over delivery of hogs for slaughter from the European Union following Russia's entry into the WTO, when the import duty will fall to 5% from 40%.
Another difficulty is a looming shortfall in federal subsidies for loan interest to producers in the hog and other livestock segments, which are tentatively expected to reach 25 billion rubles in 2012-2013.
