May 20, 2005

Russian meat supply falls short of demand

Where meat in the days of the Soviet Union was cheap, prices now have gone to astronomical heights with much of the produce of the frozen imported variety.

Meat consumption in Russia fell by half after the collapse of the Soviet Union as disposable incomes shrank in the years of economic chaos and instability. But it has picked up in recent years as supermarkets and fast food restaurants mushroomed across the country.

Despite strong demand, the supply chain remains depressed, and farmers are still incapable of facing foreign competition.

The number of cattle fell last year to 23 million head from 25 million in 2003, and the pig population dropped to 14 million from 16 million.

Soaring meat prices at 25 percent year on year in March are showing signs of a negative economic impact, which finance officials attributing the 10 percent inflation last year to more expensive meat.

Many provinces had to survive on food coupons to obtain meat, which was openly available only in big cities like Moscow, and lines and poor quality marked the last days of the regime. Another problem is the low rates of investment in livestock farming, while ineffective government policies to lift the sector has only made matters worse. 

Analysts say that a more centralized approach could benefit the sector now. Sectors such as pork and poultry, where players are keenly implementing market economy mechanisms, have already started to show some signs of revival.

Poultry is currently the star among the nation's livestock industries. The poultry industry is expected to expand output by up to 250,000 tons this year from 1,202,500 in 2004, according to the Russian Poultry Breeders Union. This offers a great opportunity to key global exporters like Brazil and the United States.