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December 13, 2011

 

Russia's pig farmers prepare for transitions in trade
 

 

Russia's longest transition period to reduce its import duties in compliance with WTO commitments will be for pork, but pig farmers do not feel secure.

 

According to reports, imports could grow from this year's 23% of the market as soon as Russia joins the World Trade Organisation, a move expected by the middle of next year, said Yury Kovalyov, chief executive of the National Pig Farmers' Union. This would stem chiefly from the government's agreement to reduce import duties for live pigs, he said.

 

While Russia won a transition period of eight years to reduce pork duties, a cut in live pig imports from the current 40% to 10% will take effect immediately, he said.

 

"This is an opportunity that could prompt construction of new farms abroad, say, in the neighbouring Baltic states," he said.

 

Foreign competitors are willing to operate at a profit rate of 5%, which threatens renascent Russian farms that need a higher rate to repay loans they took in recent years to grow their business.

 

"We need to break free of the loans," Kovalyov said. "We have started from scratch."

 

By 2005, pork production from corporate pig farming had fallen to just a quarter of its 1991 level, he said. Output then began rising, thanks to state support and protective import duties. Import duties on live pigs shot up to 40% in 2009, following record foreign deliveries.

 

Corporate output has risen three-fold since 2006 to measure 1.2 million tonnes this year, Kovalyov said.

 

Under WTO commitments, Russia will reduce the import duty to zero in 2019 from 15% now for pork entering the country within a government quota. Outside the quota, the duty will slide to 65% from the current 75%.

 

As of 2020, the country will scrap pork quotas and introduce a flat duty of no more than 25%.

 

The government will maintain the right to set quotas for poultry and beef. Import duties will remain at 25% for in-quota poultry and 15% for in-quota beef. Outside the quotas, the duty will go down for poultry, from 95-80%, and up for beef, from 50-55%.

 

In other changes that have been announced, Russia will open its market wider for sugar imports, Interfax reported. The sugar price at the New York Mercantile Exchange will have to fall to US$0.09 a pound - half of the current US$0.18 - to offset the lower-end duty of US$140 a tonne, thus allowing less expensive foreign sugar into the country.

 

The duty will gradually rise to US$270 a tonne if the price continues to fall and reaches US$0.045 a pound in New York.

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