Russian meat market prepares for sanctions

By Vladislav Vorotnikov

- Last updated on GMT

Russian meat industry fears impact of trade sanctions
Russian meat industry fears impact of trade sanctions

Related tags: Meat, Russia, European union, Pork

The Russian meat industry may be seriously affected if the US and the European Union (EU) decide to impose trade sanctions against the country due to the situation in Crimea, Russian experts suggest.

According to official data from Russia’s Ministry of Agriculture, the Russian market is going through a difficult period, with a ban on meat imports from the EU leading to an acute shortage of raw meat, resulting in a 20-25% rise in the average price of meat products since the beginning of the year.

The US and the European Union (EU) have already imposed the first wave of sanctions against Russian officials, claiming that if Russia does not take the relevant steps to de-escalate the situation in Crimea as quickly as it can, more serious sanctions may be put in place.

According to the Russian government’s Trade and Services Department, a large number of Russian regions, such as Moscow City, purchase 67% of their meat from abroad, with 40% of that coming from NATO countries.

"When NATO announced the first threats that they would block our supply, we analysed all our suppliers,"​ said Alexey Nemeryuk, head of the Trade and Services Department. "It is possible that a shortage of food supplies in Russia could be reduced via cooperation with the BRIC countries".

"If you look at what is available on-shelf, it is mainly domestic meat,"​ he added. "But the factories that produce sausages and other processed meat products, usually use imported equipment and raw materials. This is because, in our country, not every pig farm makes pork using the technologies employed in Western countries."

As noted by the department, about 20% of current meat imports in Moscow are from Brazil. The official added that the two countries "have normal business relations"​ and that supplies from this country have the potential to be stepped up in response to the trade sanctions from NATO.

"Brazil may even benefit from this political situation,"​ said Nemeryuk. "If the sanctions are imposed, we will refocus and make greater use of the potential of South America."

Experts have said it is possible that Western countries will not impose trade restrictions on the meat market, instead introducing restrictions for Russian banks. However, this, too, could seriously hurt the meat industry, as banks will be forced to raise interest rates on loans, which will reduce meat companies’ profitability.

Even without the problem of sanctions, profitability in the Russian meat industry is already falling. According to statistics in 2013, the largest meat producer in Russia, Miratorg, saw its net income down 13%, while the second-largest producer, Cherkizovo, reported a drop in profits of 70%. Experts fear that sanctions can only exacerbate the problems in the meat market.

Related topics: Meat

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