Russian meat prices still below production costs

Purchase prices for meat and milk in Russia are still significantly below the cost of their production, even in the most efficient enterprises, analysts from the Russian Ministry of Agriculture believe.

According to the analysts, despite huge investments provided by the state in the development of the Russian meat industry, the production costs (primarily for energy and feed) has increased substantially since the start of the national project "Development of Agriculture" in 2006.

Moreover, cheap subsidised imports from abroad are making Russian meat noncompetitive even in the domestic market.

Some Russian analysts believe that there is a need to further restrict meat imports and to inspect some local processors and traders, whether they do not violate anti-trust laws. Otherwise, it is difficult to explain the reason of ever increasing retail prices for meat.

Fixing purchase prices for meat between its producers and the government could be considered as one way to solve the problem; however the local authorities are still not ready for setting prices for a particular period of time.

Meanwhile, the Russian government has promised farmers to invest RUB5 billion to compensate for the increased feed prices; however the major part of these funds will be probably divided only among effective producers.

In this regard such decision carries some risk and can result in further consolidation of the market, when several large producers will be able to fix prices by themselves.