Pork Industry Overview, February 2003: Russian Federation

By USDA, Foreign Agricultural Service - This article provides a summary of pork industry data from the USDA FAS Livestock and Products Semi-Annual 2003 reports for Russia. Links to the full report is also provided. The full report includes all the tabular data which we have omited from this overview.
calendar icon 10 March 2003
clock icon 11 minute read
Russian Federation - Market Outlook 2003

Executive Summary

On January 23, 2003, the Russian Federation announced the creation of tariff rate quotas (TRQs) on beef and pork imports to go into effect on April 1, 2003.

The yearly TRQs were set at 450,000 MT for imports of pork and 420,000 MT for beef, though the pro-rated 2003 quota will equal 337,500 MT and 315,000 MT, respectively.

Russian production of pork is forecast to increase by six percent in 2003, to 1.73 million metric tons (MMT), due to continuing investment into infrastructure and better animal management practices. As imports are forecast to decrease and domestic production is not expected to be able to completely substitute for the import decline, consumption of beef and pork is expected to fall slightly in 2003.


All aspects of pig production are forecast to grow in 2003, with the pig crop, slaughter, and ending inventories up by eight, eight, and four percent, respectively. Consequently, pork production is forecast to grow by six percent in 2003.

Pork production is currently realizing the benefits of the significant investments that have gone into the industry in the past few years. These investments have been primarily in the areas of ration/nutritional improvement, capital investment, and management.

Russian pig producers are making strong improvements in breeding and animal husbandry resulting in higher pig birth and weaning rates. Additionally, expertise in developing better feed rations is also helping the productivity of pig raising enterprises. However, room for more improvement is evident.

While a handful of the best producers are starting to reach Western levels of efficiency, there are many large and medium producers that are just beginning the long process of step-by-step efficiency gains and herd increases. However, it also must be noted that about 50 percent of pork production is still on small scale farms and household plots. These are often small rural plots or owned by workers of bigger livestock or other agricultural enterprises who maintain their personal production as a safety net against wage arrears and general economic hardship in the agricultural sector. Recently, this group has not increased production ( it has even reduced slightly) because many of the bigger farms are now paying salaries on time and providing workers and local markets with pork on a consistent basis.

In terms of efficiency gains, no real improvement is expected from these small producers because efficiency is not the goal, rather family food security. Thus, a gulf between the large-scale efficient producers and small scale producers is growing in terms of modern production methods and profitability.

If the large scale Russian livestock sector stabilizes and can become a consistent supplier of meat in sufficient quantities to the domestic market, the role of small and family farm produced pork will likely be smaller.

Industry Developments

Eksima, a multi-profile agriculture company based in Moscow, is developing a program to increase meat product output by investing $120 million. Part of this investment will be used to develop the company’s Mikoyan meat processing plant in Moscow which currently holds about eight percent of the Russian meat market, but is aiming for a 20 percent share by 2010.

Mikoyan produced 90,000 tons of meat products in 2002, versus 74,000 in 2001. By 2005 and 2010, production is projected at 180,000 tons and 300,000 tons, respectively. To achieve this increased production, the company will introduce new production facilities and start producing meat products at its Cherkizovsky dairy combine.

Eksima is currently holding talks with five regional meat producers in order to increase its raw product base. Currently, Eksima includes the Mikoyan, Filonovsky (Volgograd), Buturlinovsky (Voronezh) and Svetlograd (Stavropol) meat processing plants.

Agros, an agribusiness company founded by Russian holding company Interros last year, has decided to sell the hog farming company "Ilyinogorskoye" in Nizhny Novgorod to the Russian company Planeta Management. Planeta Management is one of the biggest players on the Nizhny Novgorod food market. Planeta Management was set up in April 2001 by former managers from the Sibneft oil company. It pursues investment projects in the meat and dairy industry, and in retail trade. The money Agros received from the sale will be used to modernize and acquire meat processing plants and chicken farms in southern and northwestern regions of Russia.

The value of the deal has not been disclosed, but Ilyinogorskoye has capacity to raise 216,000 hogs and produce 25,000 tons of meat per year.


Consumption of beef and pork in Russia is forecast to decrease in 2003 as TRQs limit the ability of imports to fill the gap in domestic supply of meat products. Pork consumption is forecast to decrease, by two percent, as growth in domestic production falls short of replacing imports that are constrained by the TRQ. However, with the introduction of the poultry quota and meat TRQs, it is difficult to determine the consumption picture for 2003.

Prices will be in flux between the three main meats (beef, pork, and chicken) and the relative prices will play a significant role in determining consumption patters. Consumption trends also will depend on several other factors, including the size of stocks created in the time period prior to the quota, the ability of domestic producers to fill the void, the increase in imports from Commonwealth of Independent States (CIS) suppliers who are not subject to the TRQs, and the demand shift to fish or other protein sources. Nevertheless, as demand is expected to exceed supply in 2003, a rise in the price of all meats is expected.

Consumption of meat and meat products continued to grow in 2002, by 12 percent for pork and four percent for beef, as real household incomes rose. This, along with an increase in domestic meat production and imports, allowed Russian meat processing plants to continue raising output of staple meat products. The strongest growth was in production of sausage products, which are traditionally popular in Russia.

Consumption growth was expected to continue at a rapid pace due to three key factors: price, processing, and income growth. According to Russian State Statistics Committee, meat prices in 2002 rose significantly slower (two percent) than overall food products (eleven percent). Thus, meat was more competitive relative to other food products.


Trade in 2003 will be severely affected by the TRQs that are scheduled to be introduced on April 1.

Russian imports of pork are forecast to decrease by 20 percent, to 600,000 MT, in 2003 as a result of the TRQ. Pork imports will be affected more severely than beef under the import restrictions because fresh beef is excluded from the quota, while there is no such exemption for pork.

Experts suggest that there is no fresh pork exemption because pork production in Russia is already rising and some level of import substitution can already take place, whereas beef production would obviously not be able to compensate for lower beef imports.

Thus, this scenario reinforces the perception that the Russian government desires a more fluid import situation to try to limit price increases.

Russian pork imports in 2002 are estimated at 750,000 MT, a 34 percent increase over 2001 and seven percent greater than previous estimates. The main reasons for the increased pork imports was a very strong processing sector and the extremely brisk sales of Brazilian pork.

In 2002, the proportion and absolute volume of imports from Brazil continued grew faster than expected, jumping to almost 50 percent in the first seven months of 2002 from a 28 percent import market share in the first half of 2001. Imports from the EU, meanwhile, shrank to 25 percent from 34 percent of overall pork imports.

(Note: This report uses both official Russian import data and exporter driven data to develop the best possible picture of total Russian imports of meat.)


No changes are expected for stocks of pork or beef.


On December 30, 2002, a committee on trade measures in the Ministry of Economic Development and Trade (MEDT) recommended to the Russian Government that TRQs be placed on beef and pork.

On January 23, 2003, the Government of the Russian Federation adopted Resolution No. 49 and 50, changing the customs tariffs on beef and pork, thereby creating de facto TRQs. The Resolutions enter into force on April 1, 2003.

The full year TRQs will be 420,000 MT for beef and 450,000 MT for pork. In 2003, the pro rated volumes for the beef TRQ will be 315,000 MT and the pork TRQ will be 337,500. The Russian Government has stated that it expects these TRQs to remain in place until 2010.

The in-quota rate for pork will be 15 percent, but not less than 0.25 euros per kilo, while the out-of-quota rate will be 80 percent, but not less than 1.06 euros per kilo. The customs changes creating the TRQ will affect most tariff codes in the 0203 HS category for pork (see Table 6 for tariff codes excluded from the TRQ).

The legislative basis for applying TRQs is not currently in place. The relevant Tax Code and Customs Tariff amendments are under Duma consideration and are expected to receive final approval in the first quarter of 2003. However, the TRQs will be initiated using existing authority to adjust customs duties. No breakouts within the TRQs, as in the case of the poultry quota, are currently being considered.

The customs code will be changed so that a new tariff line is created for each of the affected codes. In effect, one code with a lower rate and a quantitative restriction is created in addition to another code with a higher rate without a quantitative restriction. While this will not technically be considered a TRQ by Russian law, it will act as one. However, there is still impetus to finalize the relevant legislation to create a more stable legal basis for the measures. Ninety percent of the TRQ volumes will be allocated on a pro-rated basis to historical importers.

Each importer will receive a pro-rated share of the quota based on the company's imports during the past three years. There will be no country allocation. The importer with a licence can buy the product from any country.

The remaining ten percent will be auctioned, using a method to bid down the price of an import licence, rather than bid up the price (so called Dutch system).

The pork auction in 2003 will equal to 33,750 MT in 34 separate lots, while the beef auction will be 63 lots for a total of 31,500 MT.

Countries, such as the CIS countries, that have preferential trade agreements with Russia will not be included in the TRQs. This will precipitate significant increases in the exports of meat from Ukraine and possibly Kazakhstan to Russia.

The administration of licenses will also be under MEDT's authority. MEDT will conduct an annual review of the effectiveness of the TRQs in the fourth quarter of each year and will make changes as necessary.

No specific description has been given regarding plans for the lowering of the out of quota tariff or the increasing of the volume limitation over time.

Significant uncertainty remains regarding several aspects of the TRQs. First, import permits issued from January 1-30 were cancelled by the Ministry of Agriculture on January 31. This action was reportedly done so that new permits could be issued for the interim period prior to the quota, from February 4 to March 31. Though Russian authorities have stated that product that has left port for shipment to Russia prior to February 4 will not be denied entry based on the old permit, as even a short delay will inhibit the ability of exporters to utilize the short time frame prior to the TRQ.

It is unclear whether the Ministry of Agriculture can re-issue permits quickly enough, though preliminary information shows that import permits are starting to be re-issued in a timely manner. Secondly, TRQ administration is very complicated and a smooth implementation is desirable for imports and Russian consumers.

The acknowledged difficulties the Russian Federation has had with administering the sugar TRQ is not a good example of reaching its established goals of price stability and production increases. Price stability is an expressly stated goal of the Russian Government for the beef and pork TRQs and the poultry quota and this will be key in terms of affecting consumer purchasing power and demand. Third, there is no clarity as to how MEDT import licences and Ministry of Agriculture import permits will interact to impede trade. Lastly, with the implementation of TRQs and quota, the price relationship between poultry, beef, and pork may change and alter the relative demand among the meats.

All of these factors will have a significant influence on the production, supply, and distribution of poultry for the next several years. These issues are significant in terms of internal pressure for the Russian government to change or expand the TRQs in the future in order to limit consumer impact.

To view the PDF report and tables (ideal for printing) Click Here

List of Articles in this series

Pork Industry Overview, March 2003: Russian Federation
Pork Industry Overview, February 2003: Canada and Brazil
Pork Industry Overview, February 2003: Korea, Hong Kong, Japan and China
Pork Industry Overview, February 2003: Netherlands and Poland
Pork Industry Overview, February 2003: Australia
Pork Industry Overview, February 2003: European Union

Source: USDA, FAS - International Agricultural Trade Report - February 2003

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