Summarizing the results of 2009 fresh meat overall production in Russia increased by 7%, at that, highest growth rate was traditionally observed for poultry meat: 12% increase. Pork production increased by 9%, while beef production reduced by 3% as it was during recent five years. By our estimates, total 6.4 million tons of fresh meat carcass weight was produced in Russia.

Stable growth of poultry meat production in Russia has been observed since 1999, as after 1998-crisis market faced import products deficiency and the result thereof was dynamic process of import substitution. Production has increased more than twice since that time. First of all, this is associated with value of broiler meat market for investors because of short payback period. Moreover, broiler meat is more popular for end consumer, since it is of cost advantage as compared to the rest kinds of fresh meat: it is approximately 40% cheaper than bone-in pork and beef, and this difference is even larger for fillet.

We can conclude that it is cost efficiency, lower production cost and short payback period of investment projects that enabled increasing significantly overall production of poultry meat in Russia. We expect further growth of broiler meat production up to 2012. This growth is assumed to be about 35-40% as against today‘s level.
If talking of pork market, its long-term import orientation should be accounted for. However, 2005 was declared a pork year, hog breeding program was developed, and 2006-2007 were marked by significant growth of investment activity: new investors appeared, number of companies announced projects of building and modernization of hog breeding facilities. The first results were seen as late as in two years: in 2008 overall production start- ed increasing and, as I have already said, this growth was 9% last year.
Leader of today’s market – agro-industrial holding “Miratorg”, as well as such major investors as group of companies “Agro-Belogorie”, “Tcherkizovo” group, agro-industrial complex “Mosselprom”, “Russkaya svini- na” complex, “Exima” agro-holding may be mentioned among major investors.
It should be noted that increase of overall production as seen today is a result of launching the first of two evolution stages of investment projects. According to trends assessment, growth of pork meat production will be 30% by 2012 with further development.
Moreover, nowadays a number of new projects are planned to be implemented. In this connection Thai in- vestment project shall be mentioned, it is already approved by Moscow region administration and it implies construction of complex in Moscow suburbs to breed 35 thousand hogs per year. According to “Expert Online”, reproduction farm and farm for hog fattening will be located at two 40ha sites in Lukhovitsky region. Hogs for the complex will be brought from Thailand. Building investments will be 40 million US dollars. It is planned to achieve estimated capacity in 2011, more than 100 people will be employed. As late as in 2010 budgets of all levels will receive 35 million rubles from entrepreneurs.
According to Regional Minister of foreign economic relations, Tigran Karakhanov, businessmen from King- dom of Thailand “suppose that the products will be both for domestic use and export”. “Our Thai friends

say that they want to make Russia pork exporting country”, – Minister said.
However, such project is more like an exception to the rules. I don’t think European breeders will come to our market. They are very careful and generally suppose that work in Russia is quite risky. Besides high risks there are problems to register ownership for land, absence of privileged credit programs for foreign companies.
I assume that South-East Asia companies are more like to come in the country, and not to the central regions but to Siberia. When mentioning eastern breeders I mean, first of all, China. Even more, there were at- tempts to study the situation in Russian meat market by Chinese companies recently. And if there is some interest – there is some result.

Meanwhile, our agro-industrial complex (AIC) evokes great interest of Russian investors. Implementation of AIC national project and favourable financing terms for projects being part of public register, that, for sure, reduces payback period and increases their investment value are extra incentive for Russian investors.
Several large Russian meat-processing plants have already start- ed projects implementation, i.e. building or modernization of hog breeding complexes, or introduced projects into near-term development programs.
At that, Russian investors, as a rule, have three options: development of its own fresh meat base by meat plant “from zero”, modernization of old hog breeding complex, enabling enhancement of available production facilities, culturing, slaughtering and cutting, construction of new enterprise using modern technologies in building, culturing, slaughtering and processing.
The third option is the most popular, since it provides initial design of site to breed cattle, then construction of animal feed-milling plant, cutting and processing premises, register ownership for land. Nowadays largest enterprises develop on the principle of vertically-integrated production. There are various opinions in respect to efficiency of large, medium-sized and small enterprises, and I believe that complete-cycle hog breeding complexes are the most efficient.
As for beef market, as I have already mentioned, further reduction in overall production with respect to 2008 was observed last year.
However, beef cattle breeding program was developed in 2009 assuming financing of beef complexes in Russian regions. Investment projects of various capacities were selected under this pro- gram: from 300 up to 300 thou- sand beeves. And I hope we’ll in- crease beef production by 10% at least by 2012.
There is one issue to be analyzed separately: risks to do business at Russian meat market. Main risk emerged in context of financial crisis is underfunding of launched projects. Last year, especially in its first half, we doubted that part of cur- rent investment projects would be implemented. Number of projects were suspended, at that some of them – at the stage of breeding stock purchase. At the moment the situation gets better little by little and it is possible to conclude that majority of investment projects start- ed in 2006-2009 will be implemented.
There is one more significant risk associated with geographical aspect of pork production: there are regions suffering from meat overproduction in time of general deficiency thereof in Russia. Higher competition level in such regions reduces cost efficiency of work and extends projects payback period.
Acceptance of Food Safety Doctrine specifying acceptable percentage of imported products has became one of the major events this year. As for meat products the value shall be 15% at most.
For sure, reduction of import quota, increase of customs duties are leading to gradual reduction of dependence on import products. Reduction of their share in the market enables enhancing production by Russian breeders to occupy place that become available. This serves extra incentive for meat market development as well.
Creation of Customs Union this year gave incentive for Kazakstan producers of meat products to consider Russian market as perspective area for supplying products. There are Kazakh projects of meat production and its supply in Russia. I believe that creation of common economic space will contribute to reduction of Russian dependence on far foreign products and will increase trading volumes within Customs Union countries.
Along with reduction of import product share, it is not world market who influences Russian market, but Russian meat market trends govern world situation. Recent example: import ban for US poultry meat induced over- production growth in the country and forced Americans to accept our conditions on chlorine-free production. Or, for instance, reduction of quotas and, correspondingly, meat volumes, traditionally bought from Brazil, results in reduction of world market demand
that can drop prices in its turn. At the same time enhancement of Russian production brings enlargement of product range and a certain decrease of factory price at domestic market because of growth of competition between Russian producers. At the moment the main thing is to do our best to prevent the situation to get worse. And the major is- sue here is state funding and control of meat market, including timely response to any changes in market situation.

Elena Tyurina,
Director General
Agricultural Marketing Institute, tel: +7 (495) 710-11-19;
+7 (495) 710-12-64
e-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Myasnaya Sfera