President of Meat Union of Russia, Musheg Mamikonian: "We and the World: the balance of the interests"
Modern Russian economy in general, and meat and meat products market in particular, can develop only under condition of active co-operation with the global market. The choice of development strategy should account for the changing global environment and vary with the global trends.
President of Meat Union of Russia, Musheg Mamikonian – concerning global and Russian features of meat market and factors influencing its development in nearest few years.
Musheg Lorisovich, how do you think, what are the trends of global meat market that influence the state and development of Russian market? What are the features of Russian market?
The main trend of the modern global market – increasing meat and meat products consumption by people of China. Thus, according to forecasts, global meat consumption by 2015 will increase by 21.3%, and two thirds of the growth belong to China.*This trend effects in increase of American meat supply poultry, first of all, to China, and curtailing of chicken import to Russia from the USA. Last year, for the first time, Russia purchased less American poultry than China – the leading consumer of this product for the present day.
Change of global market environment meaning the end of cheap import epoch, - the main factor supporting competitive ability of home producers and hedging consumers from cheap off-grade meat.
Global market has not once witnessed the situation when Argentina trying to reduce food prices at domestic market introduced restrictions for beef exports. This happened in 2004 and in 2010. We see that doing so, partners of Latin America countries transfer part of social tension to other countries whose markets depend upon Argentina meat import.
Apart from the fact that situation at the global market is determined by social and economic development of individual countries, meat trade mostly depends upon epizootic situation, and is subject to administrative risks, on of which is export banning.
On this basis we can make conclusion regarding shrinking of meat production import at Russian market with the purpose of independency and food safety of the country. The main role here must belong to the Government of Russia, adopting import substitution policy and supporting efficient poultry and hog breeding farms.
Here, we are to be guided by the strategy of Russian agro-industrial sector development, rather than the food safety doctrine accounting for the level of market saturation with home made production, which eventually would make producers enter the global market and not confine themselves to import substitution.
I am sure that the major Russian companies, claiming to be the leaders of the industry should start exploring the markets of other countries this day. First of all, they need to pay attention to Indo-China and Arab states which suffer from grain shortage and are need of cattle fodder.
Special attention of market competitors should be paid to the segment of conserved products: within the period of last 10 years the global market of conserved poultry has tripled. There is a demand for poultry preserves both in countries with low purchasing power and in developed and in the developing countries. Apart from that, domestic poultry producers and meat processors have not introduced any specialized brand of domestic poultry preserves to the market.
I would like to emphasize that in Russia should exist an alternative for sale of excess poultry if such appears. Underestimation of prospects of global sale and export is our first serious omission. The second – misconception of existing need for industrial production of large poultry fit for further butchering rather than producing certain averaged chicken weighting 1.5 kg. If 30-40% of home production will be aimed at large poultry, it would enable significant increasing its efficiency via enhancing of labor productivity, reduction of most part of unreasonable expenses and change of ratio of bone products and muscular tissue of poultry (the greater is the muscle bulk on a skeleton the greater is the production and procession efficiency).
Unfortunately, instead of this, Russian poultry processors hope for positive decision of the Government in response to their succeeding requests to set home market free from imported products. But importing curtailing may and should be achieved by not only administrative measures but also by company competitiveness enhancement due to implementation of innovative technologies, increasing of productivity, improving of consumer properties of final products.
What were the relationships between Russia, EU and CIS countries in the area of meat supply recently? What do they depend on?
Economic climate between CIS countries is determined by the level of veterinary control and epizootic situation in the country in general and in individual regions rather than economic feasibility considerations.
Difficulties in relationships with CIS countries are generally associated with the products for which Russian market is closed, and ingress of the above products to Russian market through the border of friendly nation.
No significant changes in trade pattern and volumes have taken place and are expected.
As for EU countries relationships I believe that trade of end meat products accompanied by reduction of raw stores share that is associated with decreasing quotas and high duties for purchase of import raw meat in Russia will enhance.
European companies will certainly take the opportunity to present end meat products at Russian market, to increase sales volumes, enlarge range of presented products. Especially as consolidation of retail sale will enable cooperation with major European producers, carrying out promotional activities in shops. I suppose, that such projects will significantly influence the market of end meat products in Russia in the nearest five years.
How far is Russian meat market attractive for foreign investors and will their interest grow?
At the level of financial support rendered by Russian government to perspective investment projects in the area of poultry and hog husbandry projects implementation must be interesting for both Russian and foreign producers. Favourable conditions are created for them. And the task of each individual company or investment fund, commercial bank is to assess risks and treat correctly technology issues of project implementation.
In return our government protects interests of investors through mechanism of market price maintaining, i.e. reduction of quotas and increase of duties that makes system of companies planning efficient, enable accurate assessment of projects payback periods.
How can the creation of Custom Union affect relationships in meat sales between member countries?
Formally it will be difficult to agree such foreign trade parameters as quotas and duties. I suppose that government mobility in making decisions for foreign trade control will decrease.
There will not be any changes from economic point of view. Advantages provided by the Union for Kazakh, Belorussian, Russian business are available for meat industry in either case: trade between these three countries is not restricted.
I do not see in Kazakh and Belorussian markets any potential that may be used by Russian meat producers, much less, they are nowadays open to much more important and interesting possibilities.
What are your expectations regarding development trends at domestic meat market in general?
We are in the third year of world crisis. My opinion is that consumption of red meat (beef and pork) will continue stagnating, while white one, on the contrary, will enhance, at that growth will achieve 3-5% except for the first quarter of 2010 when consumption drop is traditionally observed. The share of white meat consumption as against red one will grow, and poultry meat will occupy 45% of all meat market in the medium-term outlook, i.e. almost each second meat kilogram will be white one.
High prices for beef at international market and significantly high taxes determine high price for beef being imported in Russia. Finally beef price will be permanently higher than pork one, that will result in reduction of beef consumption in favor of poultry and pork. This trend will result in extreme improvement of situation at Russian market, since hog husbandry competitive nowadays will finally obtain new market.
It may be expected that meat market in the medium-term outlook will be organized as follows: 45 % will be taken by poultry meat, about 35% - by pork and remaining 20% - by beef.
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Автор: Victoria Zagorovskaya