Russian Pigs Charging Against Canadian Bullocks

17.08.2009 — Analysis

Russia began developing beef farming. The Ministry for Agriculture of the RF is going to spend billions of roubles on importing pedigree bullocks. Meat processors, however, do not consider these actions of the Government efficient. Having surveyed the experts' opinions the RusBusinessNews observers predict decline only in imports of pork in the nearest future.

During the post-soviet Russian history, since 1991, the beef production in the country has dropped roughly 2.5 times. The imports have grown accordingly, amounting to 45% in the sales total. In order to overcome this negative trend the Government adopted a programme for 2009-2012 the goal of which is to double the numbers of cattle of special beef breeds.

The implementation of the programme is going to be extremely difficult, however. There are doubts in that the money will be spent as intended. The Perm Krai, for instance, is going to receive 65 million roubles from the federal budget and is not making a secret of the fact that they are planning to spend the funds predominantly on the development of dairy farming. This is explained by rather a simple logic - according to the 2008 results the average loss of enterprises engaged in cattle raising amounted to 29.7%, having grown by almost 10% in two years.

Meat processors simply do not want to buy Russian beef. Aleksandr Cherkashin, the leader of the Cherkashin & Partner plant (Sverdlovsk Oblast), says that domestic beef is more expensive than imported, but not not as tasty and succulent as beef from Argentine, Brazil, or New Zealand. Specialists from the Ministry for Agriculture of the Sverdlovsk Oblast see the cause of this in the conditions in which animals are kept. It is too expensive to keep the cattle in stall barns, and, due to the climate and geography of the region, putting the cattle out to pasture is not possible in the Urals. The science of feeding the cattle in Russia is well behind the international.

This is why the regions are in no hurry to invest into beef farming. The Chelyabinsk Oblast, for instance, allocates 80 million roubles annually for this purpose, which is 6.4% of the total spending on agriculture. Insufficient funding directly affects the growth of the number of cattle. The number of animals grew by 1,400 in the Tyumen oblast in January-May 2009, which is only 0.5% compared to the same period of the previous year. The number of pigs grew by 2.9% and sheep by 2.6% during the same period.

It is interesting that when talking about the quantities of meat produced the Tyumen Oblast's officials do not separate beef out but add it to poultry which resulted in a 2.2% growth in the Oblast.

There is another cause to treat the implementation of the federal beef farming programme with due circumspection. According to the data provided by Serghey Yemelyanov, the Chairman of Ural Meat Union, the level of consumption of meat products is on decline. Mass redundancies and wage cuts have caused the market to shrink. In January-May this year the quantity of products made by meat processors in the Oblast has dropped by 13% y.o.y. There are changes in the price structure of consumption, consumers are losing interest in commodities of premium and middle categories and go for cheap products.

This trend cannot be any good for the improvement of the Russian meat quality. The first half of 2009 in the Tyumen Oblast, for instance, saw a 1.8% drop in the production of meat and by-products of the category 1. The production of sausage products dropped by 5.8%, but the production of canned meats grew by 32.5% at the same time. The Yalutorovskiy meat plant is doing better than others in this respect; they started making a new type of canned meat, the "Horsemeat Stew". It is obvious that meat processors are not interested that much in pedigree bullocks purchased abroad for the federal money.

It is easy to understand the Yalutorovskiy meat plant, they have the goal of the preservation of sales market. There is a certain interest in the region, the Talina Group (the Republic of Mordovia) made plans to come to the Oblast clear in July; the company intends to build a meat processing plant with annual capacity of 10-11 thousand tons of ready products.

Cherkashin & Partner (the Sverdlovsk Oblast) is thinking about expansion into other regions; this company opened in Ekaterinburg a facility capable of producing 100 tons of processed meats daily. The Sverdlovsk Oblast will not be able to digest these volumes. Experts do not exclude the possibility that some of producers might have to leave the regional market. In the conditions of tough competition meat processing plants traditionally prefer pork to the more expensive beef.

The number of pigs in agricultural companies in the Tyumen Oblast has grown by 14,000 animals (10.4%). The people of the Oblast are actively participating in the pork farming development programme; 1,700 animals were sold with concessions and more than 10 tons of animal feed was handed out since the beginning of the year.

The Ministry for Agriculture of the Chelyabinsk Oblast says that it is planning to increase the annual production of pork in the nearest future - the poultry farm company Uralbroyler is in the process of modernization of yet another pork farming plant with the projected capacity of 216 thousand animals.

The number of animals in the Gornouralskiy pork farm plant alone reached 40 thousand in 2009. In order to supply feed to the plant several kolkhoz farms of the Baikalovo district of the Sverdlovsk Oblast have established the agro company Vostochnaya. The proprietor of Gornouralskiy, the meat processing plant Khoroshiy Vkus (Good Taste), also bought the grain collecting plant with an elevator for 22 thousand tons of grain which will be able to provide animal feed to the pork farm plant and other agro companies supplying meat to Khoroshiy Vkus. The total investment into the establishment of the agro company and the development of arable lands will amount to around 4 billion roubles, according to Serghey Yemelyanov. The investments should reflect most favourably on meat production costs.

Russian Meat Union experts think that the country might stop importing pork this year. The prerequisites for this are the growth of the domestic production and the fall in the consumer demand for red meats. Almost two million tons of pork was produced in Russia last year, 2.75 million tons was consumed. The difference was covered by imports. When the consumption of meats has dropped by 20% there will be a demand for pork of about 2.2 million tons. It is roughly the same amount, taking into account the 8% production growth, that the domestic producers are going to supply. The rouble devaluation, lowering pork import quotes, and other measures will lead, in experts' opinion, to the significant decrease of quantities of meat purchased abroad.

The beef situation is different. The Sverdlovsk and Chelyabinsk Oblast have been, for many years, working on Herefords, the large size Canadian pedigree cattle, acclimatized to the Urals conditions. The continuing selection work and planned investment notwithstanding, officials of the Chelyabinsk Ministry for Agriculture speak with great caution of the beef production prospects.

According to Serghey Yemelyanov investors do not want to invest into beef farming mainly due to the long reproduction times. This is why the state will have to increase the beef quota year in year out until such time when effective practical steps are taken for the beef farming development. The expert opinion is that simple straightforward funding will not help here.

By Yevghenia Yeryomina and Vladimir Terletski