Falling Ruble Troubles Russian Meat Industry

RUSSIA - The global financial crisis has had a significant impact on Russian agribusiness and agriculture.

5 March 2009

2 minute read

Europe

Declining oil revenues and slumping confidence in the Russian economy have led to strong downward pressures on the ruble, reports a USDA Foreign Agricultural Service GAIN report.

Imports of meat and poultry suffered steep declines in the fourth quarter with December sales falling to a fraction of historic averages. The majority of declines can be attributed to the canceling of contracts due to importers’ inability to obtain credit and the plummeting ruble which has made imports significantly more expensive.

According to the Russian Federal Statistics Service, retail prices for meat and poultry increased in Russia by more than 23 per cent in 2008. Despite the crisis, Russian importers believe imports of the U.S. chicken leg quarters will be limited more by the new quota volume and a stronger dollar rather than credit issues.

While price increases are expected, demand should remain strong as poultry continues to be the cheapest source of animal protein. Russian consumers, coping with lower disposable income and higher prices, are expected to reduce meat consump tion or substitute products (i.e. beef for pork, pork for poultry).

Pork trade has suffered the most drastic declines with softer demand and lower prices. Russian pork importers are beginning to shift away from traditional cuts in favor of cheaper pork offals.

Pork and pork variety meats continued sharply downward in December 2008 for the second straight month. Lower December shipments are expected due to seasonality, however, U.S. monthly pork export volumes have not been this low since December 2006.

While seasonality of trade similar to that of pork was expected for broiler meat, the volume of U.S. shipments crashed in December to its lowest level since April 2002. Out of the three meat products, beef trade has been the most negatively impacted by the global financial crisis. Since late 2008, demand for higher quality beef cuts has fallen dramatically again in favor of cheaper offals.

New investment in poultry, swine, and beef production in Russia has slowed due to the lack of available credit from commercial banks. While businesses continue projects which are close to completion, new projects are being postponed or abandoned. Nevertheless, domestic poultry and pork producers asserted that they will increase production in 2009 benefitting from pre-crisis investment in these sectors, more large government subsidies, and the availability of cheaper animal feed.