July 3, 2009

Russian pork producers face challenge from live pig imports

Russian pork producers are facing a growing challenge from importers of live pigs who are using a loophole in customs regulations to avoid quotas and higher tariffs.


Ostankino Meat processing plant general director Mikhail Popov said that in May alone, 110,000 live pigs were brought into Russia for slaughter.


Popov said about 8,250 tonnes of live pork is imported into the country every month, which comes out to almost 100,000 tonnes of pork annually, or 19 percent of the 2009 pork import quota of 531,000 tonnes.


He said that while pork imports are normally subject to a 15 percent duty, those in excess of the quota are subject to a tariff of 40 percent to 75 percent of their customs value, adding that live pigs, however, are only subject to a 5 percent import tax.


Sales of all types of meat fell by 16.5 percent to US$933 million for the period between January and April, compared with the same period in 2008.


Importers first attempted to avoid the quota with live pigs in 2004, when 55,000 pigs were brought into the country in the first eight months of the year, compared with only 25,000 in all of 2003.


Companies said at the time that importing a live pig from Poland and slaughtering it in Russia was 20-percent cheaper than buying frozen Russian pork.


Meat producers did not see the imports as a threat, believing that the number of pigs brought into the country would be kept in check by a lack of modern slaughtering methods.


In the last three years, however, Russia's slaughterhouses have become 30 percent more efficient, said Musheg Mamikonyan, president of the Meat Union.


By 2008, pork imports rose to 603,000 head of swine, and the first five months of this year have shown that this trend is continuing, said Alexander Nikitin, head of the Miratorg meat processing plant.


Nikitin said that up to 367,000 pigs have already been imported this year, and the main company importing them, Agrogalimeks, was doing so in 2004 as well.


The difference in price between domestic and imported pigs has not changed, said Sergei Yushin, head of the National Meat Association.


The average cost of a live Russian pig is US$2.40 per kilogramme, compared with up to US$1.95 per kilogramme for imported pigs.


In 2007, then-Agriculture Minister Alexei Gordeyev, now governor of the Voronezh region, proposed raising the tariff on live pigs up to 35 percent, but a final decision on the matter was never made.