Market Update: Russian Meat Prices Rise Significantly
Russia
Market Update: Russian Meat Prices Rise Significantly
Russian wholesale meat prices increased significantly in the last 12 months, domestic beef by 15 percent, imported beef by 34 percent, domestic and imported pork by 70 percent and 40 percent respectively.
The key factors behind these higher meat prices have been the import quotas and tariff-rate quotas (TRQ) imposed by the Russian government, compounded by an average grain harvest and higher-than-expected grain exports in 2003-2004. Inflation and growing oil prices are also considered factors. Government officials admitted in October that the earlier annual inflation ceiling would have to be revised if the current price growth continues. Inflation has already hit 8.8 percent and is likely to exceed the official annual forecast of 10 percent, analysts predict.
The meat supply has been hit by the epizootic situation with poultry and cattle disease outbreaks in countries that traditionally have supplied the Russian market. Russia’s December 2003 halt to imports of beef from the United States because of a single bovine spongiform encephalopathy case was followed by a ban all uncooked livestock products from China and Brazil, imposed by the Russian Veterinary Service in September 2004 because of concerns about foot-and-mouth disease. Brazil shipped 24 percent of Russia’s total beef, 62.5 percent of pork, and 18.4 percent of poultry imports in January-July 2004. In total, January-September 2004 Russian imports of meats are down by 26 percent compared to the same period a year earlier.
Meat prices will remain high for the following reasons:
• Negotiations between Russia and Brazil on the lifting of the ban have been inconclusive to date, and the Russian Agricultural Minister has said that Russia is not going to lift the restrictions in the near future. There are no plans for Russian veterinarians to inspect Brazilian livestock facilities in the near term.
• Shipments of beef to the Russian Federation from Ukraine — Russia’s largest beef supplier — will decrease in the coming months as a result of supply constraints.
• Domestic meat production will not grow quickly enough to match growing demand without price growth, particularly given the rate of growth of consumer income.
• One consequence of higher prices is a reduction in effective consumer demand. As pork and beef become too expensive, consumers are likely to switch to chicken, with the resulting higher demand forcing poultry prices up another 5 percent.
In the absence of U.S. beef, Russian restaurants and hotels are turning to:
Australian beef, more expensive than U.S. beef. Chefs express dissatisfaction with its marbling, quality and flavor. Australia is selling beef to Japan at very high prices, and is thus little interested supplying Russian hotels and restaurants. Australian suppliers are selling the usual central cuts of beef to restaurants only if they buy other cuts of beef that are in less demand on the Russian market.
Domestic beef, supplying about 10 percent of the beef in Russian hotels and restaurants. Chefs are unanimous that domestic beef cannot compete with U.S. beef. Local beef producers cannot fulfill the requirements of Moscow restaurants. Buying domestic beef means additional work for chefs.
Argentinean beef, 20 percent cheaper than Australian. Beef from Argentine is in strong demand on the Russian market, but Argentinean suppliers say they can’t match U.S. steak standards. Chefs say there is very little marbling in steaks from Argentina.
German beef, can also be found in Russian restaurants. Although priced right — 130 rubles per kilo ($2.05 per pound) — the amount of further processing required by chefs is too much trouble.
Russia
Market Update: Russian Meat Prices Rise Significantly
Russian wholesale meat prices increased significantly in the last 12 months, domestic beef by 15 percent, imported beef by 34 percent, domestic and imported pork by 70 percent and 40 percent respectively.
The key factors behind these higher meat prices have been the import quotas and tariff-rate quotas (TRQ) imposed by the Russian government, compounded by an average grain harvest and higher-than-expected grain exports in 2003-2004. Inflation and growing oil prices are also considered factors. Government officials admitted in October that the earlier annual inflation ceiling would have to be revised if the current price growth continues. Inflation has already hit 8.8 percent and is likely to exceed the official annual forecast of 10 percent, analysts predict.
The meat supply has been hit by the epizootic situation with poultry and cattle disease outbreaks in countries that traditionally have supplied the Russian market. Russia’s December 2003 halt to imports of beef from the United States because of a single bovine spongiform encephalopathy case was followed by a ban all uncooked livestock products from China and Brazil, imposed by the Russian Veterinary Service in September 2004 because of concerns about foot-and-mouth disease. Brazil shipped 24 percent of Russia’s total beef, 62.5 percent of pork, and 18.4 percent of poultry imports in January-July 2004. In total, January-September 2004 Russian imports of meats are down by 26 percent compared to the same period a year earlier.
Meat prices will remain high for the following reasons:
• Negotiations between Russia and Brazil on the lifting of the ban have been inconclusive to date, and the Russian Agricultural Minister has said that Russia is not going to lift the restrictions in the near future. There are no plans for Russian veterinarians to inspect Brazilian livestock facilities in the near term.
• Shipments of beef to the Russian Federation from Ukraine — Russia’s largest beef supplier — will decrease in the coming months as a result of supply constraints.
• Domestic meat production will not grow quickly enough to match growing demand without price growth, particularly given the rate of growth of consumer income.
• One consequence of higher prices is a reduction in effective consumer demand. As pork and beef become too expensive, consumers are likely to switch to chicken, with the resulting higher demand forcing poultry prices up another 5 percent.
In the absence of U.S. beef, Russian restaurants and hotels are turning to:
Australian beef, more expensive than U.S. beef. Chefs express dissatisfaction with its marbling, quality and flavor. Australia is selling beef to Japan at very high prices, and is thus little interested supplying Russian hotels and restaurants. Australian suppliers are selling the usual central cuts of beef to restaurants only if they buy other cuts of beef that are in less demand on the Russian market.
Domestic beef, supplying about 10 percent of the beef in Russian hotels and restaurants. Chefs are unanimous that domestic beef cannot compete with U.S. beef. Local beef producers cannot fulfill the requirements of Moscow restaurants. Buying domestic beef means additional work for chefs.
Argentinean beef, 20 percent cheaper than Australian. Beef from Argentine is in strong demand on the Russian market, but Argentinean suppliers say they can’t match U.S. steak standards. Chefs say there is very little marbling in steaks from Argentina.
German beef, can also be found in Russian restaurants. Although priced right — 130 rubles per kilo ($2.05 per pound) — the amount of further processing required by chefs is too much trouble.