2012-09-03 14:28:02 - Fast Market Research recommends "Russia Agribusiness Report Q4 2012" from Business Monitor International, now available
BMI View: With Russia's entry to the WTO, subsidies to the agricultural sector will be phased out, which could hit some livestock producers. However, the government will continue to play an active role in the agriculture industry. For livestock, we continue to see strong growth in the poultry sector owing to continuous government support and import restrictions. The privatisation of state-owned grain trader United Grain Company (UGC), which is expected to boost efficiency in Russia's grain sector, should not end the government's interventions in the industry. In spite of extreme weather in Russia's growing regions we believe it is unlikely that the country will implement grains export restrictions this season.
* Corn production growth to 2015/16: 143.1% to 7.5mn
tonnes. Much of this growth is due to the very low base. However, expected growth in the country's poultry and pork sectors, which use corn as feed, will also have an effect.
* Cheese consumption growth to 2015/16: 27.0% to 936,990tonnes. Stronger incomes will lead to increased consumption despite the country's falling population. Growth in cheese and butter demand will be stronger than milk demand growth as more milk is used to produce value-added dairy products.
* Poultry production growth to 2015/16: 74.7% to 4.4mn tonnes. Growth will be supported by strong domestic demand and government initiatives to ensure a domestic production surplus. We project Russian poultry production to surpass consumption from 2014 onwards.
* 2012 real GDP growth: 3.4% (down from 4.3% in 2011; predicted to average 4.0% over 2011- 2016).
* Consumer price inflation: 4.9% year-on-year (y-o-y) on average in 2012 (down from 8.5% yo- y on average in 2011).
* BMI universe agribusiness market value: 13.6% y-o-y increase to US$44.0bn in 2011/12, forecast to grow on average 4.2% annually between 2010/11 and 2015/16.
Full Report Details at
- www.fastmr.com/prod/451371_russia_agribusiness_report_q4_2012.as ..
In April 2012, the Russian Government approved the 'Strategy for Development of the Russian Food Industry until 2020', which aims to modernise good processing production facilities and increasing production capacity. For the dairy sector, the plan seeks to increase production, decrease imports and raise human consumption of dairy products through an investment of US$1.5bn. We believe this longterm plan should support production growth in the coming years. However, we see the strategy's targets (milk production should reach 38.2mn tonnes by 2020) as hard to achieve given the current production levels, especially for butter and cheese production goals.
We expect the devastating flash floods that have affected southern Russia in recent months to have little effect on the country's wheat output totals. The floods, which have killed an estimated 171 people and have damaged several roads and railways, have mainly affected the Black Earth region, in the west of Russia. The country's wheat crop was harvested beginning in early June, so a significant proportion of the crop is already collected. However, port closures and damaged transport networks could see export contracts deferred or even defaulted on.
Russia's leading meat producing and processing company, Cherkizovo, has reported upbeat first quarter results on the back of strong numbers out of its poultry division, and favourable pork prices in particular. Per capita consumption of meat, particularly poultry and beef, is low in Russia compared with developed world levels. In 2010, according to data from the Food and Agricultural Policy Research Institute, per capita consumption of beef and chicken, at 14.5kg and 19.7kg respectively, was less than half that of the US. Russian poultry production has grown significantly in the last decade, largely owing to government support and increasing domestic demand. Over the long term, we forecast demand expanding significantly, mainly owing to price competitiveness against other livestock products.
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