Russian Federation – Meat sector review – Meat sector Russian Federation Russian Federation Meat sector review FAO INVESTMENT CENTRE COUNTRY HIGHLIGHTS Please address questions and comments to: Investment Centre Division Food and Agriculture Organization of the United Nations (FAO) Viale delle Terme di Caracalla – 00153 Rome, Italy Report No. 15 Report [email protected] http://www.fao.org/investment/en Russian Federation: Meat sector review Report No. 15 - July 2014 I3533E/1/11.13 FAO INVESTMENT CENTRE Russian Federation Meat sector review Dmitry Prikhodko Economist, Investment Centre Division, FAO Albert Davleyev National Meat Consultant, Investment Centre Division, FAO COUNTRY HIGHLIGHTS prepared under the FAO/EBRD Cooperation Rome, 2014 The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations (FAO) or the European Bank for Reconstruction and Development (EBRD) concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. 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For further information on this publication, please contact: Director Investment Centre Division Food and Agriculture Organization of the United Nations (FAO) Viale delle Terme di Caracalla, 00153 Rome, Italy Cover photo: ©Dreamstime TABLE OF CONTENTS Foreword v Acknowledgements vi Acronyms and abbreviations viii Executive summary xi 1 Global medium-term meat market outlook with focus on the Russian Federation 1 2 The Russian Federation meat sector in brief 11 3 Detailed review of the meat sector 25 4 Meat processing 60 5 Meat market concentration 68 6 Meat trade 87 7 Meat prices 96 8 Policy 99 Annex 1 Distribution of poultry, swine and cattle inventories by region and type of farm in 2010 120 Annex 2 Main breeds and crosses 133 Annex 3 Meat production technologies 140 Annex 4 Applicable state standards in the Russian Federation 149 Annex 5 Profitability of poultry, pork, and beef production in various administrative subjects of the Russian Federation 153 Annex 6 Leading meat brands 156 Annex 7 Major agroholdings and meat producers in the Russian Federation 158 Annex 8 Recent investments in the poultry sector 168 iii Annex 9 Broiler meat production (Far East Russian Federation): investment model assumptions, results and sensitivity 171 Annex 10 Recent investments in the pork sector 174 Annex 11 Recent investments in the beef sector 178 Annex 12 Foreign meat trade 180 iv FOREWORD In recent years, the rise of agroholding farms, combined with strong consumer demand, higher incomes and substantial state support, have prompted an increase of meat production in the Russian Federation. Despite its improved self-sufficiency in the sector, the country will remain one of the principle global meat importers in the foreseeable future. The reduced import tariffs following Russia’s accession to the World Trade Organization (WTO) will put pressure on local meat producers to become more competitive. To do so, they will need to invest in the efficiency of primary production and higher food quality and safety standards. This review of the Russian meat sector, conducted by the Food and Agriculture Organization of the United Nations (FAO) and the European Bank for Reconstruction and Development (EBRD), aims to inform policy makers and investors and promote a more efficient and inclusive meat sector. It provides information on the role of the Russian Federation in global meat markets, on production and consumption of meat in the country, as well as relevant trade and policy measures. The review presents international comparisons on meat production efficiency, sector concentration and support measures. It also provides information on major players in the Russian meat market and identifies key sector constraints and opportunities. Readers interested in learning about mid-term prospects in the meat market are encouraged to read the latest version of the Agricultural Outlook jointly produced by the Organization for Economic Co-operation and Development (OECD) and FAO1. 1 http://www.oecd.org/site/oecd-faoagriculturaloutlook/. v ACKNOWLEDGEMENTS This sector review was prepared by the Investment Centre Division of FAO in the context of the cooperation between FAO and the EBRD. It was financed by FAO and EBRD’s Special Shareholder Fund. Dimitry Prikhodko, Economist, Investment Centre Division, FAO, and Albert Davleyev, President, Agrifood Strategies, a Moscow- based agribusiness consultancy company, are the main authors of this report. Mr Prikhodko also led the team of other co-authors that contributed to the study. Inna Punda, Agribusiness Officer, Investment Centre Division, FAO, reviewed the initial version of the report and carried out desk research on Russia’s meat trade with Ukraine and within the Customs Union of Belarus, Kazakhstan and the Russian Federation. Vasyl Hovhera, Economist, Investment Centre Division, FAO, provided inputs on meat consumption and on the profitability of broiler meat production. Arianna Carità, Economist, Investment Centre Division, FAO, assisted in reviewing the study and prepared the executive summary. On the EBRD side, Marta Bruska, Operational Leader for this project, provided leadership and coordination. The FAO/EBRD team would like to express its sincere gratitude to Natalya Zhukova, Senior Banker, Agribusiness, EBRD, Moscow, and Oona Schreiner, Banker, Agribusiness, EBRD, for their constructive comments on current issues and trends in the Russian meat sector. The authors would also like to thank Eugenia Serova, Director, Rural Infrastructure and Agro-industries Division, FAO, for her guidance and inputs at the initial stages of the review. The report benefited from useful comments by Pedro Marcelo Arias, Economist, Trade and Markets Division, FAO. Specials thanks are extended to Hsin Huang, Secretary General of the International Meat Secretariat (IMS), for his careful review and valuable suggestions. The authors would also like to thank Emmanuel Hidier, Senior Economist, Investment Centre Division, FAO, and Claudio Gregorio, Chief, Europe, Central Asia, Near East, North Africa, Latin American and Caribbean Service, FAO, for their support and guidance, and Genevieve Joy, Sarah Mercadante and Maria Ricci, vi Communications support, Investment Centre Division, FAO, for assisting with the finalization and publication of the report. Maaike Loogman, Joana Maison Aidoo, Eleonora De Feo and Monica Romanelli, Investment Centre Division, FAO, provided excellent administrative support throughout the course of this project. vii ACRONYMS AND ABBREVIatIONS AI avian influenza AMS aggregate measurement of support ASF African swine fever EBITDA earnings before interest, taxes depreciation and amortization EBRD European Bank for Reconstruction and Development EU European Union FAO Food and Agriculture Organization of the United Nations FAPRI Food and Agricultural Policy Research Institute FIRA First Independent Rating Agency FMD foot-and-mouth disease FOB free on board FSSS Federal Service of State Statistics GDP gross domestic product GK group of companies GNI gross national income GOR Government of Russian Federation HACCP hazard analysis and critical control points HORECA retail, hotel, restaurant and catering services HS harmonized system IMS International Meat Secretariat IRR internal rate of return KMPP Kornshtadt meat processing plant LSE London Stock Exchange MPS market price support NPC nominal protection coefficient NPV net present value OECD Organisation for Economic Co-operation and Development OIE World Organisation for Animal Health OJSC open joint-stock company viii OKVED Russian Classification of Economic Activities PPP purchasing price parity PSE producer support estimate PSF private subsidiary farming RAAS Russian Academy of Agricultural Sciences RUR Russian rouble SANPIN sanitary norms and rules SCT single commodity transfers SPS sanitary and phytosanitary (measures) TCI Investment Centre Division of the Food and Agricultural Organization TRQ tariff-rate quota USDA United States Department of Agriculture VAT value added tax VNIIMP All-Russia Scientific Research Institute of Meat Processing Industry VNIIMS All-Russia Scientific Research Institute