In-depth: Russia- a sleeping pig meat giant?
As Russia extends its current import embargo until the end of 2018, reports suggest that its domestic pork production is set to soar. With this in mind we explore what impact this could have on the global pig meat market.
At the end of June, the Russian president signed a decree to extend the current Russian import embargo until 31 December 2018. This is the third extension of the original embargo enforced in August 2014, which originally prohibited shipments of certain agricultural products including pork, for one year, from origins including the US and EU, amongst others – click here to read more.
From January – May 2017, Russia imported 107 thousand tonnes of fresh/frozen pork, with around 91% of that being shipped from Brazil. While imports to date (Jan-May) are 7% up on the same period last year, compared to the same period pre 2015 or the introduction of the embargo, shipments are considerably lower.
While the embargo is set to remain for at least the next 16 months, demand for pork in Russia is reportedly rising. According to the Russian Union of Pork Producers (RUPP), in 2016 per capita consumption of pork reached 25kg, close to a 25 year high. Furthermore, according to the RUPP, the share of imported pork consumed in Russia has shrunk from 26% in 2013 to 8% in 2016. The USDA peg domestic consumption of pig meat in Russia to reach 3.28 million tonnes in 2017, the highest since 1990.
While Russian pork imports have been declining, domestic production has been climbing. The USDA currently has Russian pig meat production for 2017 pegged at 3 million tonnes, 130,000 tonnes higher year on year and 600,000 tonnes higher than in 2013. Furthermore, if achieved, the current forecast for 2017 would be the highest on records going back to 1988. With this in mind, the current USDA consumption and production forecasts suggest that Russia will be around 92% self-sufficient in pig meat in 2017, compared to 73% in 2013.
It’s not just the embargo on imports from certain destinations that has spurred Russia to increase its pork production. At the end of last year the Russian government announced that it aims to be self-sufficient in most agricultural products by 2024. At the end of 2016, Russia had approved a number of pork production expansion projects, with an overall capacity of 700,000 tonnes. Likewise, other expansions in production were in final stages of approval, which would account for a further 500,000 tonnes. This growth in production will likely supress prices and more than fulfil domestic demand, even giving Russia an exportable surplus. The question then arises, how long will it actually take for Russia to become self-sufficient in pig meat?
This is very much dependant on a number of factors, including future investments in the Russian pig industry as well as its overall financial state, amongst others. However, looking at previous growth trends, if Russian pig meat production and domestic consumption both continue to grow in line with the 10 year average annual growth, then Russia could become self-sufficient in pig meat by 2020. The announced projects would support that as being a possibility. Furthermore, by 2024, Russia could even have an exportable surplus of as much as 650,000 tonnes. Putting this volume into perspective, it would be the equivalent of around 70% of total UK pig meat production.
So where would Russia’s surplus of pig meat go? It is likely that Russia will aim to trade any surplus of pig meat with China; with China already the largest destination for other Russian agricultural products. However, this is very much dependant on its price competitiveness and arguably more importantly disease status. In 2007 African Swine Fever (ASF) hit certain areas of Russia, with outbreaks still being reported to date. It is likely Russia will have to improve its production systems to reduce the risk of further outbreaks of ASF to be able to export pig meat to China. It is also important to remember that Chinese pig meat production is expected to continue to recover over the coming years. This could impact on future import demand from China and therefore reduce the opportunities for Russian pig meat in the future – click here to read more about Chinese import demand.
If Russian pig meat production keeps on rising to the extent that it has been, then the global pig meat market could be weighed down. However, this is very much dependant on a number of factors. Firstly, the extent of Russia’s expansion will obviously influence supply and therefore its surplus for trade. Likewise, Russia will have to gain access to other markets, which will likely be dependent on its disease status as well as production systems. One thing is less uncertain; the current rise in Russia’s pig meat production is likely to reduce its need for imported product, in the short term at least.
Millie Askew, Senior Analyst
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