MARKET OVERVIEW
In 2020, Russia produced 4.3 million tonnes of pork in slaughter weight, showing a year-on-year increase of 9%. With the expansion of capacities, the domestic market enabled to approach the self-sufficiency in pork and the per capita consumption of pork went up by 5% – to 28 kg per year.
Higher output was attributable to the expansion of the industrial sector. Thus, pork production by agricultural enterprises grew by 11% (+0.4 million tonnes) to 3.8 million tonnes. The majority of this growth was shared by four market players – Miratorg, Rusagro, AgroPromkomplektatsiya and Velikie Luki Pig-Breeding Complex, which in total ramped up their production by 0.2 million tonnes in slaughter weight. Meanwhile, the capacity figures of farm enterprises and private farm households continued the downward trend. In 2020, they produced 5% below the 2019 level – 0.5 million tonnes, making the share of the industrial sector grow by another 2 p.p. to 89%.
In 2020, six largest pork producers together produced 1.9 million tonnes of pork in live weight (1.5 million tonnes in slaughter weight), an equivalent of 36% of total domestic production. During the year, the market leaders scaled up their output by 0.3 million tonnes of pork in live weight (0.2 million tonnes in slaughter weight). With a share of 9.5% (+1.0 p.p.), Miratorg retained its status of the largest domestic pork producer – its production volume rose by 95 thousand tonnes (+22%) and amounted to 522 thousand tonnes of slaughter pigs in live weight. Rusagro, with a share of 5.6% (+0.8 p.p.), came in a close third after the Velikoluksky Pig-Breeding Complex, with a slight lag of 0.2 thousand tonnes.
In 2020, due to the higher supply of domestic pork, the average market price for live pigs fell by 3% and stood at RUB 87.9 per kg, exclusive of VAT. The month to month variation of prices during the year was caused by the seasonality of demand for meat products, the supply of live pork, and the pork export developments. The coronavirus epidemic had slight impact on domestic prices – a price hike was registered in March and was related to the outbreak of the epidemic and the panic-buying spree, but in the spring the demand had already dropped to the season-specific level.
RUB/kg, excl. of VAT
In 2020, the exports of pork (half carcass, large cut, industrial cuts and semi-finished pork products) and pig offal from Russia recorded significant year-on-year growth. Owing to the opening up of the Vietnamese market for pork – in addition to pig offal – at the end of 2019 and the growing demand for pork in Hong Kong, pork exports increased by 130%, totalling 243 thousand tonnes (+138 thousand tonnes). Specifically, supplies of pork went up by 160% (+78 thousand tonnes) and reached 126 thousand tonnes, supplies of pig offal – by 101% (+59 thousand tonnes) – up to 117 thousand tonnes.
The pork products of Russian origin are mainly purchased by Hong Kong, Vietnam, Ukraine, and Belarus (93% of the total volume). In 2020, all above economies intensified their imports of Russian pork and pig offal. The largest contributors to this growth were Vietnam (+398%, or 57 thousand tonnes) and Hong Kong (+132, or +49 thousand tonnes), which was supported and promoted by the continued decline in domestic pork production in Asia. Exports to Vietnam totalled 24 thousand tonnes (+69%, or +10 thousand tonnes) of offal and 47 thousand tonnes of pork (vs 0 thousand tonnes in 2019). Sales to Hong Kong amounted to 78 thousand tonnes (+117%, or +42 thousand tonnes) of offal and 8 thousand tonnes (up 8 times year-on-year) of pork.
In 2020, pork imports to Russia sank year-on-year by 83% (−69 thousand tonnes) to 14 thousand tonnes. All top suppliers, except for Argentina, scaled down the volume of their supplies due to the replacement of the tariff quota for pork with a flat top rate of 25% and the depreciation of the rouble against world currencies amid the enhancing appeal of the Chinese and Southeast Asian markets. In 2020, Chile, with a total supplies of 6 thousand tonnes (-75%), emerged as the largest importer of pork and pig offal to Russia. Brazil, which used to be the main supplier of imported pork and pig offal for years, reduced export volumes by 94% – to 3 thousand tonnes and was second after Chile.
In 2021, Russian pork producers will hold a continued focus on increasing their output to promote the utilisation of slaughtering capacities, earlier growing at an outstripping pace, which yet may be hindered by recurrent outbreaks of African swine fever. Declining real incomes of households will cramp the development of domestic demand for finished goods. At the same time, weakening rouble will favour the growth of export supplies, especially to Vietnam, and prop up domestic prices, thus exposing them to the changes in the exchange rate. Combined with an spike in world prices for agricultural products, the devaluation of the national currency will drive up the raw material costs, which will put a downward pressure on the profit margin of pig breeding companies in 2021.