July 30, 2009

Analysts estimate that in 2009 the livestock production output in Russia may be reduced by 12 percent and the consumption may be down to 2.1 million tonnes.

The reason behind the fall in demand is the reduction of the purchasing power of the citizens, whose income does not allow them to regularly buy beef as it has been before. The demand is expected to shift to chicken meat which is cheaper.

Over the past years the Russian cattle-farming has been in distress. The main factor behind that is low production profitability of beef compared with other meats and, as a consequence, the lack of investments to the sector.

The lack of investments involves the decrease of stock and reduction in meat quality, resulting from procedural violations and poor housing conditions, as well as the price growth due to products deficiency. Apart from 2007, the beef output in Russia was constantly reducing 5 percent as an average.

The key importer of beef in 2008 was Brazil accounting for almost half of the total beef import. However, imports from Argentina - another key beef import market - are periodically banned due to outbreaks of foot-and-mouth disease.

Unlike the poultry and pork markets, under the conditions of constant reduction of beef production, the policy of import substitution is out of question for the coming 5 to 7 years.

The poor quality of the Russian domestic raw materials as well as unstable conditions and supply schedules interfere with the introduction of import quotas.

Bans for beef import imposed from time to time on supplies from different countries are the only restriction for the growth of import in Russia. With an average import share 28 percent for the last 4 years, and domestic production constantly reduced, it can be said that the quality beef is gradually becoming deficient.