September 1, 2003
Tariff on Beef and Pork in Russia Expected to Reduce Trade Opportunities in 2004
Increasing investment and higher efficiency in the Russian pork sector is expected to continue to boost production growth in the medium term. Pork production is forecast to increase by four percent in 2004, to 1.6 MMT.
However, beef production is forecast to decline for the 14th straight year as the sector continues to struggle with the lack of investment and inadequate infrastructure. In 2003, the Government of the Russian Federation implemented Tariff Rate Quotas (TRQs) on beef and pork. These protective measures are forecast to cause a decline in beef and pork consumption and reduced trade opportunities in 2004.
Production of meat in Russia is forecast to remain almost unchanged in 2004. While swine and pork production are forecast to continue to increase solidly, by four percent, cattle numbers and beef production are forecast to fall again in 2004. The introduction of TRQs on beef and pork will cause a decline in consumption of meat in Russia in 2004. Price increases have been minor during the first half of 2003, as the large stocks of meat that arrived prior to the TRQs have provided a solid buffer stock. However, prices are expected to rise in the second half of 2003 and in 2004 as meat stocks are used up.
However, in this rising tide of good news for processors, producers, and importers, the Russian Government has taken action to try to make sure that domestic producers gain a larger share of this growing market. On April 1, TRQs were introduced for imports of fresh beef and pork, on May 1 a quota was introduced on poultry, and on August 1 a TRQ was introduced for chilled beef.
These import limiting measures are forecast to lead to a decrease in the consumption of beef by two percent and pork by one percent. The amount of reduction for beef is greater because producers are currently not in a situation to respond immediately to the domestic price increases due to the serious situation with herd size and the normal delayed response due to the growth and life cycle of beef cattle. However, Ukraine, the largest supplier of beef to Russia, is not included in the quota, which creates an import safety value if supply becomes too low. Pork consumption is only expected to decrease by one percent due to the increase in domestic production and the lesser role that imports play in the pork market. Future consumption will depend on changes to the size of the quota and the rate of domestic production increase.
Naturally, trade in meat products will become much more constrained due to the introduction of the TRQs. The over-quota tariffs are sufficiently high that very little trade will happen outside of the TRQs. Therefore, there will be quite heavy competition by exporting countries to maintain market share and client relationships.