Russian Federation - Livestock and Products Semi-Annual Report 2010

Feed shortages resulting from this year's drought have accelerated the slaughter of cattle, according to Morgan Haas and Mikhail Maksimenko in the latest GAIN report from the USDA Foreign Agricultural Service.
calendar icon 1 October 2010
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Report Highlights:

Slaughter rates have and will continue to increase in 2010 and 2011 as widespread drought throughout Russia sharply decreased current and future feed supplies. As a result, red meat supply will be larger than earlier expectations but adversely impact supply potential in 2011. Red meat imports to date are revised upward, reflecting year-to-date trade and have similar market access potential in 2011.


Cattle Inventory

According to the Federal State Statistics Service (Rosstat), by the end of June 2010, the total Russian cattle inventory was 21.7 million, including 9 million cows. Respectively, this represented a drop of 2.2 percent and 1.4 percent from the end of June 2009. Simultaneously, agricultural enterprises (large producers) decreased cattle inventory 3.1 percent and decreased cows 2.4 percent. Private households owned 48.9 percent of the national cattle herd (49.2 in June 2009).

Russia imports pedigree cattle for domestic breeding stock from Australia, the United States, the European Union, and Canada.


Russian livestock production represented 46-52 percent total agricultural production value during 2000-2008.

Russia produced 4.4 MMT of meat and poultry meat (live weight) in the first half of 2010, 8.3 percent more than the first half of 2009. Agricultural enterprises increased meat and poultry production 14.7 percent (live weight) in the first half of 2010 compared to 2009 (in 2009 – 10.1 percent over 2008).

The Ministry of Agriculture plans that Russia will produce 82 percent of total meat and poultry supply to the Russian market in 2012. According to Ministry figures, Russia currently supplies 69 percent of its beef, 75 percent of its pork, and 75 percent of its poultry.

Feed Supply
Russia will experience problems with feed supplies for the remaining part of 2010 and in 2011 due to the 2010 drought in the Central, Volga, and Ural districts of Russia. In total, 27 regions were declared emergency drought situations in 2010. The grain harvest in 2010 will be lowest since 2003 when 67 MMT of grain was harvested. The drought adversely impacts not only the 2010 feed supply but also the seeding of winter crops for next year‟s feed supply, as well as presents a new threat to Russia‟s developing pork and beef industries.

The GOR has taken several measures to soften the drought‟s impact. The GOR postponed state grain purchases, instituted a grain export ban, and decided instead to release 3 MMT of grain from the state reserves for drought-stricken regions. Grain is being distributed on the basis of a quota system to enterprises in the processing and milling industry. The shares for each region are based on meat and milk production volume. The regions themselves will be responsible for distributing the grain internally. Furthermore, Prime Minister Vladimir Putin said the GOR will provide RUR35 billion ($1.2 billion) in financial aid to drought-stricken farmers, including RUR10 ($300 million) billion in direct payments and RUR25 billion ($830 million) for 3-year discounted federal loans. The money is being disbursed in two stages, the first in August and the second in October-November.

Beef Production

Beef production continues to be the least developed animal protein sector in Russia and animal husbandry concerns as well as economic returns, in particular, start-up costs for new entrants will continue to present challenges. In the short-term, economic returns will be further eroded by high feed costs, causing the cattle inventory to undergo further pressure to contract at a fast enough rate that temporarily boosts production.

Beef Producers
The vast majority of beef in Russia remains a by-product of the Russian dairy industry and produced on private households. Their share was 61.5 percent in 2009 where as agricultural enterprises‟ share was 34.5 percent. Private farms produced 4.1 percent of total beef production.

Agricultural enterprises will be the engine of growth when beef production turns around long-term. However, according to the Institute of Agrarian Problems , the best 100 enterprises (Club-100) produced 1.2 percent less beef compared during the first half of 2010, compared to the first half of 2009. Still, Club-100 beef enterprises increased their share of production from 4.8 percent in 1996-1998 to 10.3 percent in 2006-2008. Club-100 enterprises‟ daily weight gain at feedlots averaged 0.620 kg/day, compared to 0.422kg/day for non-Club members. Production cost of Club members amounted to RUR48,682/MT ($16,200/MT) vs. RUR65,320 ($21,780/MT) for non-members. Revenues totaled RUR5,852 ($1,950) and RUR4,588 ($1,519), respectively.

Andrey Danilenko, Head of the Russian Union of Milk Producers stated beef production in Russia becomes profitable at RUR80/kg (live weight), and prices that averaged 60RUR/kg this spring only covered operating costs. These costs have since increased in line with feed costs.

Less Feed, More Beef… Temporarily
The shrinking dairy cow herd continues to be the leading long-term indicator of beef production. However, in 2010, increased slaughtering of the herd due to feed costs/shortages is further accelerating its decline and will lead to the first, albeit short-term, beef production growth in more than a decade. Regions impacted by the drought represent 47 percent of the total cattle herd in 2010. As shortages and higher prices are already being felt by livestock producers, information from the regions indicate the situation will only worsen in the future.

Therefore, inventory and production expectations for 2011 remain similar to 2010 as feed shortages will again present financial challenges for producers to maintain inventory. While Elena Skrynnik, Agriculture Minister, said that she expected the drought and feed shortage to further reduce beef production, USDA Moscow feels these reductions are reserved for 2012, when feed supplies recover, and after the herd has been dramatically reduced in number. The Minister has further noted the GOR plans to organize transportation of feed to regions that suffered from drought to support the beef and dairy cattle industry at the end of 2010 and the first half of 2011. Musheg Mamikonyan, the President of the Russian Meat Union, has also voiced concern that many cattle will be slaughtered if feedstock is not enough for the winter.

State Development of the Beef Industry
Mr Valentin Denisov, Head of the State Duma Agricultural Committee, believes development of beef production depends on the stabilization in dairy cattle husbandry and improving efficiency. Speaking to members of the Russian Ministry of Agriculture, trade unions, and academia, Mr Densiov also recommended larger state involvement to solve the problems of beef production. He said beef production requires long-term loans at affordable interest rates because in line with its longer production cycle, compared to pig and poultry meat production. As a result, the meeting recommended the Supervisory Board of the Rosselkhozbank (Russian Agricultural Bank) to apply specific credit policies for the beef cattle industry.

To date, the Ministry of Agriculture‟s Beef Cattle Development Program 2010-2012 has set the guidelines for state support in the beef industry. Most notably, this program has resulted in large imports of beef breeding cattle from abroad.

Rosagroleasing, the state company that leases cattle to farmers, recently criticized “ordinary” farms for their higher epizootic risks and therefore higher mortality rates of pedigree breeding cattle. In the future, this stock will only be available to those enterprises applying modern rearing and management technologies.


Supply Control (Import Substitution)
Government support for domestic meat production in Russia has and continues to be primarily provided through methods of supply control. In addition to the introduction of the TRQ regime in 2003, trade outside the quota is subject to largely prohibitively high tariffs. Furthermore, trade within the quota is hindered by highly prescriptive, non-science-based Russian technical and veterinary-sanitary requirements that can at times result in country-specific allocations not being accessible.

Agricultural Development Programs
Federal development programs have served as an additional tool of planned support for Russian poultry production. On December 21, 2005, “Development of the Agro-industrial Complex” was issued as one of four priorities for national development, with a focus on revitalizing Russian livestock and poultry production. To further stimulate domestic agricultural production, the federal law “On Development of Agriculture” was approved in 2006 and came into force on January 11, 2007. Later, the GOR approved the “Program for Development of Agriculture, Regulation of Agricultural Commodity Markets, and Rural Development for the period 2008-2012,” which called for RUR1.1 trillion ($37 billion) to be spent over five years, with funding being split between federal and provincial budgets.

In line with these programs, subsidizing interest rates for investment projects has been Russia‟s primary tool of direct support to the producer. However, these benefits are not universal to all producers, as they service only the largest investors and must be in line with the Ministry of Agriculture‟s vision of the development program.

In an effort to maintain a positive rate of development in 2009 in the wake of the global financial and economic crisis, the Ministry of Agriculture allocated RUR165.1 billion ($5.5 billion) for the implementation of the State Agricultural Development program 2009-2012. The Ministry spent RUR45.0 billion ($1.5 billion) from this sum to increase the authorized capital of JSC Russian Agricultural Bank and RUR17.0 billion ($570 million) to subsidize interest payments. Additionally, Russia extended short-term loans for six months, investment loans for three years, and maximum-term eight-year investment loans to 11 years. The subsidy level for investment loans also increased from two-thirds of the central bank rate to 100 percent for dairy and beef cattle (and to 80 percent for poultry). The Ministry of Agriculture also noted the single agricultural tax as well as fixed prices for fuel and fertilizer amounted to RUR30 billion ($1 billion) in indirect subsidies to the producer in 2009. These programs continued in 2010, and they will continue for the foreseeable future.

The Ministry of Agriculture reported that 2010 investments will not meet the State program due to lower-than-expected profits in the industry.

Government Purchases
President Medvedev has tasked Minister Elena Skrynnik to investigate the state purchases of beef in Rosrezerv, as well as to clarify the feasibility of increasing the production of canned white chicken meat. As noted by the President of Cherkizovo, there is a need consider changes of the state reserve purchases since domestic beef supplies are shrinking while poultry is “oversupplied”.

Development of the Feed Industry
Also in the planning is a draft development project to improve this component of the supply chain through the construction and modernization of feed mills, with the aim of increasing the production of plant-origin protein feeds. Most recently, the GOR has taken action to support producers impacted by the short feed supplies.


Russia maintains a TRQ regime for raw pork (HS-0203) and beef (HS-0201, 0202) products with country specific allocation to the United States, European Union, and “other countries”. The pork and beef quotas for 2011 remain unchanged from 2010.


Russia imported 256,363 MT of beef during January – June 2010, 4.9 percent above 2010. Brazil, Argentina, Uruguay, Paraguay, European Union, Ukraine, Australia, Mongolia, and the United States are the primary suppliers. The European Union is the dominant supplier of fresh/chilled and processed beef. The U.S. share of frozen beef as well as Uruguay and Paraguay has grown substantially over 2009 as the Russian vet service has largely restricted supplies from Brazil and Argentina over sanitary concerns.

The outlook for 2011 remains positive for imports as Russia‟s short-lived production growth returns to the long-term downward trend. As the quota should remain unchanged, Russia will continue to restrict imports through the use of sanitary, veterinary, and technical barriers to trade to the extent they deem it necessary.

Customs Union

Kazakhstan and Belarus, as well as other CIS countries, have duty-free, quota-free access to Russia for domestically produced meat.

Customs Union members recognize equivalency of each other‟s veterinary service. Kazakhstan‟s Ministry of Agriculture has expressed its intent to utilize this advantage to export 4,000 MT of meat (specifically, beef) to Russia in 2010, compared to 400 MT in 2009.

Belarus increased meat and poultry exports to Russia by one-third to 72,000 MT during January-June 2010. The Government of St. Petersburg earlier reached an agreement with Belarus to import 41,100 MT of beef, 11,100 MT of pork and 8,200 MT of poultry meat in 2010.


Development of Livestock Primary Processing for 2010-2012

The Ministry of Agriculture has developed a program for livestock primary processing to support the modernization of the Russian meat processing industry. The program envisages the allocation of state subsidies for meat processors from the federal budget. Subsidies will be spent to compensate interest rates from loans taken for construction and modernization of processing facilities and cold storages as well as for purchasing meat for primary and industrial processing. Planned implementation of the program will allow Russia to increase the collection and processing of the animal to 90 percent of its live weight.

The Ministry believes that fulfillment of the program will also increase per capita consumption of meat and meat products to from 65.9 kg in 2008 to 66.1 kg in 2012.

Further Reading

- You can view the full report by clicking here.

October 2010

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