Moscow, (Vasily Zubkov, RIA Novosti economic commentator) -
Recent developments in the Russian agrarian sector lead to the conclusion that foreign poultry producers and exporters should get ready for difficult times.
First, Russian poultry imports will go down in general. This decision is a result of concerted effort by the authorities on the one hand, and poultry producers and the Association of Russian Chicken Operators, on the other. This year the latter will cut their purchases by one third on their own free will.
In Russia's recent history this is the first graphic example of large-scale cooperation between the government and business community. Senator Sergei Lisovsky, a well-known businessman and the owner of a huge poultry holding producing up to 30 million broilers a year, said that the authorities have improved their approach to the poultry industry. He thinks, though, that restrictions on imports should have been imposed much earlier. "We Russian producers are not against foreign companies, who work honestly on the Russian market, but we are against those who buy cheap stale poultry, evade taxes, export poultry to Russia at dumping prices, and destroy the market," he said.
Secondly, it is time to streamline poultry imports as such. According to available data, last year in addition to the official imports of 770,000 tons of poultry, Russia received more than 250,000 tons of poultry illegally. For this reason Rosselkhoznadzor (Federal Service for Veterinary and Phytosanitary Inspection) recently cancelled all permits for poultry imports with a view to subsequent re-registration and issue of new licenses. Moreover, due to a decline in consumer demand because of avian flu, and growing domestic production, the smuggling of poultry has generated an incredible market glut of 130,000 tons.
Thirdly, in 2005 Russians consumed 2.7 million tons of poultry. The market was expected to grow by seven percent this year to reach 2.88 million tons, with domestic production accounting for 13%, or 1.55 million tons. But now that legal and illegal imports will go down, these figures will have to be adjusted. Domestic production may be the only exception. Recently, it has been making rapid headway, and in five to seven years Russia may start exporting poultry meat. Russian high-tech poultry production is up to modern standards and its output is of high quality.
Incidentally, the majority of Russians prefer domestic refrigerated broilers. Besides, Russian poultry producers do not yet have access to GM products, and their ecologically clean poultry would enjoy higher demand in industrialized countries.
Now let's see how the latest Russian decisions will affect foreign suppliers. Up until now, the United States and EU countries were the leading exporters, accounting for 74% and 18% of total Russian imports, respectively. Therefore, the U.S. producers will be the hardest hit by the quota reduction. In January they dropped poultry factory prices three times. But in the fall of 2005 the U.S. adopted a new program for subsidizing its farmers, which will allow them to keep afloat for a long time, even despite the imposition of a total ban on American poultry by France and Germany. However, the chicken lobbyists are already bringing pressure to bear on the U.S. Administration in a bid to break the Russian defenses before Russia enters the WTO.
The European poultry farmers will have to adjust to the new conditions as well. Judging by all, the Russian imports of their produce will continue going down. Lisovsky said that the time is ripe to start investing in Russian agriculture, and supplying it with new technologies, as some are already doing. The U.S.-Russian Elinar venture is becoming a big player in the poultry meat market. Located near Moscow, it is among the four major Russian broiler producers. Senator Lisovsky particularly likes the way the Dutch have organized their business in Russian agriculture. They may serve as a model for others in many respects. I would just add that if foreigners mark time, the growing Russian business will occupy all free niches in this profitable segment of agriculture.
In the end of the day, this is all about food security. Technically, a country can claim it as ensured food security as long as 80% or more of food it consumes are produced domestically. Russia, with as little as 67% of domestic production last year and import growth four times higher than own production growth, has been clearly insecure for too long. It is now that President Putin has given a prod that things, hopefully, are beginning to change for the better.
