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By John Helmer, Moscow

The report last week of an abrupt ban on kangaroo imports to Russia, issued on July 25, concluded with the statement by Rosselkhoznadzor (RSN), the government’s veterinary and phytosanitary inspectorate, that there had been no phytosanitary problem with the meat, and that with guarantees RSN will negotiate with the Australian exporter, the ban might be lifted.

The Australian exporter, Macro Meats, has reacted with the hope that negotiations with RSN will achieve this outcome soon.

However, a leading trader in the Russian meat market has responded from Moscow, explaining that he views the ban on kangaroo meat imports is part of a broader “restriction on all protein imports being implemented to help save desperate domestic pork farms, many of whom would have to declare bankruptcy if the market does not improve… Russia has been banning meat of all species from all origins to the greatest extent possible this year because of a dramatic fall in domestic market prices which has threatened the survival of the pork production sector.” He said the government has been applying “pretences of all shapes and forms this year in a desperate attempt to somehow push prices up and allow local producers to begin to cover costs.”

The ractopamine case against imported US pork in February was the most obvious example, he noted. For an analysis of RSN’s February 2013 ban on ractopamine and imports of US pork products, and the dynamics of the Russian pork market, read this.

According to the new source, who communicated over the weekend, “the domestic pork market was indeed a disaster for the first six months of the year. Thankfully, prices finally started to go up in July as the glut of product from Q4 2012 had finally worked its way through the market. There are now so many bans in place that it’s difficult to find a country/factory still licensed to supply to Russia. The US, Germany, and Spain are banned in full. Just a few Canadian plants are still certified. If RSN had their way, all imported meat would be banned until the domestic market recovers – and they’ve managed to achieve perhaps 70% to 80% of that goal.”

“The kangaroo ban is merely a manifestation of basic market problems. These are, firstly, massive over-importation of pork in Q4 2012; and secondly, sky-high feed prices due to the drought of 2012. The government will not allow the new pork industrial facilities to go bankrupt because they were established with massive state subsidies and most are bankrolled by Sberbank.”

pork_marketAccording to another source, a producer of pork, there is reason for optimism for the future of the market, but only because of the collapse into bankruptcy of the smallest producers and backyard pig farmers. For these, the peasant producers, with just one or two pigs, there is no relief from the high feed prices and the low price for their products on the market. They are too poor to receive state bank loans or subsidies.

According to this source, “feed prices have reached their peak and, while they won’t come off in the near future, they will fall rapidly as soon as grain from this year’s bumper crop hits the feed mills around now. Herd sizes on old farms and backyard farms have shrunk dramatically over the past year. This is due to the cost of feed, widespread bankruptcies, African swine fever, and government buyback programs to shut down the backyard sector. Over the first four months of 2013, live hog prices fell from Rb90 per kilogram, the break-even point for many industrial producers, if they are to meet their state bank loan payments; to Rb60 per kilogram, the break-even point without having to repay bank loans. Starting in May, however, there has been significant upward pressure on prices as it appears the glut of pork which flooded the market in the last quarter of 2012 (mostly over-quota imports) has finally worked its way through the system. Current live hog prices are around Rb75 per kilogram and rising.”

A third source, a Moscow specialist on the pork sector, says “it’s true that hog populations on new farms are growing slowly, but the rate of growth has slowed significantly as contracts have been cancelled, new projects put on hold, and weak players eliminated from the market through bankruptcy. It’s also true that imports are about to be reinstated, which will have some negative effect on the market.

“Last year 730,000 tonnes of pork were imported (430,000 in quota, 300,000 out of quota) and 100,000 tonnes were produced in backyard farms. The import figure this year is unlikely to exceed 550,000 tonnes. Backyard farming is practically dead. Small local or peasant farming of pigs have been all but eliminated. This means there should be a supply deficit in relation to domestic demand of around 280,000 tonnes this year compared to last year. In this situation the larger industrial operators claim they will be able to continue investment in expanded production, and survive.”

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