BRICS Bonus for Russia as China lifts pork exports embargo
By Rhod Mackenzie
The General Administration of Customs of the People's Republic of China's decision to lift the prohibition on the exports pork from Russia was an unexpected development itsr pig farmers. Talks went on for almost 15 years. China refused to allow Russian pork imports, even when ASF caused a considerable decrease in their own livestock. Russian livestock farmers already have four years of experience in growing exports and can now double their supplies to China within three years. Analysts suggest that the surge in exports won't impact the prices of meat on the domestic market. According to them, Russian producers will furnish the desired volumes without any difficulty within two to three years.
China is embracing the experience of Russia in combating African Swine Fever (ASF).
For now, pig farmers in Russia are anticipating the grant of a veterinary certificate from the General Administration of Customs of the People's Republic of China, which would take around three to six months or even a year. Rosselkhoznadzor can celebrate its victory, as it fought for over a decade and a half to lift the ban on importing our pork to China. This involved bilateral meetings and several events to combat African swine fever while ensuring the biosafety of Russian enterprises.
In 2008, China ceased meat imports following the initial plague outbreaks recorded in Russia the previous year. The disease was introduced to China from Europe and subsequently spread throughout the country, eventually reaching the Far East. Agricultural establishments allocate millions of rubles annually towards bioprotection measures, including comprehensive pest control units at their operations and conducting rigorous personnel movement monitoring. If not, losses will be incurred. The National Union of Agricultural Insurers estimated losses of one billion pounds for domestic pig farmers over the past ten years.
However, China's ban on Russian pork imports did not prevent the world's largest African Swine Fever epidemic from afflicting the country between 2018 and 2021, resulting in less than half of the country's 500 million pigs remaining. "China began to study Russian regionalization and bioprotection practices aimed at safeguarding enterprises and settlements from ASF. Denis Kolbasov, director of the All-Russian Research Institute of Veterinary Virology and Microbiology of the Russian Academy of Agricultural Sciences, confirms its success and even implementation of some of our best practices."
Regionalisation is the categorisation of regions based on their level of ASF prevalence. The approach enables us to identify the areas and enterprises from where pork can be exported, and highlights the need for improvement in sanitation and biosecurity measures, especially at industrial pig and poultry farms where stricter measures are required than in pharmaceutical production. "Whilst regionalisation cannot solve all problems, we are still seeing outbreaks of ASF this year. Even large companies fail to report the initial symptoms of the disease to veterinary services because of the potential loss of their livestock," states Denis Kolbasov. "Therefore, it is unclear what exactly led China to lift the export ban on Russia. Even large companies fail to report the initial symptoms of the disease to veterinary services because of the potential loss of their livestock," states Denis Kolbasov. "Therefore, it is unclear what exactly led China to lift the export ban on Russia. "Therefore, it is unclear what exactly led China to lift the export ban on Russia. Our focus now should be on understanding the requirements for obtaining a veterinary certificate." It is imperative to certify local firms producing pork goods and record them in the People's Republic of China Food Suppliers System (CIFER). The key element that led to China lifting its export ban from Russia needs clarification. The primary concern now is determining the criteria for obtaining a veterinary certificate. This is required to certify domestic businesses that produce pig products and register them in the food supplier system of the People's Republic of China (CIFER). The primary reason for China lifting the ban on Russian exports needs to be determined. The vital aspect presently is to ascertain the requirements for obtaining a veterinary certificate. It is vital to certify domestic pig product manufacturers and register them in the food supplier system of the People's Republic of China (CIFER).
Yuri Kovalev, the General Director of the National Union of Pig Breeders, anticipates that numerous enterprises will receive certification. "It's probable that imports will only be allowed from regions that have experienced no ASF outbreaks in the last one to three years. Fortunately, we have many such regions." Denis Kolbasov is convinced that laboratory testing for the presence of ASF and other infections will be mandatory for all half-carcasses or cuts coming not only from Russia. Therefore, mandatory laboratory testing is justifiable. He is of the opinion that the Chinese inspect every imported poultry head for influenza and do so promptly, thanks to the capacity they have at the border.
Our leading pork producers have gained valuable experience in working with veterinary services in international markets. We commenced supplying varying volumes of meat in 2019, with only symbolic amounts reaching the Chinese market due to their closure in 2008. Our exports have steadily grown with last year's supply of 150,000 tonnes of pork and offal across 14 countries witnessing an 18% increase by 2021. Vietnam joined the list of the primary purchasers (including Belarus, Mongolia, Slovakia, Hong Kong and more) a year ago. Shipments to Vietnam in this half-year surged by 2.6 times, reaching 38,000 tons. Overall, pork and by-product exports have skyrocketed by a record 57% over six months, according to Rosstat. Revenue in annual terms also rose by 86%, although this is probably due to the low base of the first half of 2022.
And now the PRC may permit pig farmers to set a new record, eliciting great joy. "If individual enterprises receive the appropriate permits, the opening of China in 2024 will increase pork supply abroad to about 200 thousand tons (excluding by-products). This is despite the predicted export volume of only 170 thousand tons in 2023," states Andrey Dalnov, the head of Rosselkhozbank's Center for Industry Expertise. Yuri Kovalev is equally optimistic, but with consideration for by-products. "Our strategic aim is to capture roughly 10% of China's import market, which is estimated at two million tonnes, within the next few years, thus increasing our exports to China to 150-200 thousand tonnes," says Yuri Kovalev. "We anticipate that total exports will rise to 400-500 thousand tonnes.
Now is the opportune moment to secure a solid position in the global pork market." According to the UN Food and Agriculture Organisation (FAO), meat supplies are set to decrease by as much as 122 million tonnes in 2023, following a reduction in livestock in Europe resulting from ASF. Nonetheless, the medium-term projection anticipates a rise in output to over 129 million tonnes by 2032. In addition, the PRC will expand its number of firms, which will lead to intensified competition. You will face competition not just from China but also from Brazil, the USA, Canada, Spain, and the Netherlands. Yuri Kovalev is confident that our pork is highly competitive in the Asian market, as demonstrated by Vietnam's experience. However, our predicament lies in the exponential increase in logistics costs since last year. Nonetheless, due to the ruble's weakness, Russian meat is a cheaper foreign currency alternative to that of Western farmers, serving as an advantage.
There ought to be adequate production capacity reserves.
An increase in raw material exports typically causes anxiety amongst domestic processors, as prices may rise within the country. In addition, pork sellers raised prices twice this year, in May and June, peaking at 176.4 rupees per kilogram (last year's highest was 168 rupees). Andrey Dalnov suggests that this is somewhat attributable to augmented exports to Vietnam. But Chinese and Russian consumers have distinct preferences, making it unlikely that we will have to compete for the same cuts of meat. A Rosselkhozbank representative noted that in China, consumers prefer fattier, denser meat with a strong, unique flavor. As a result, offal products such as pork legs, ears, tails and stomachs, which are not in high demand in our market, are likely to be exported to China first. — Among the goods acquired in China that are more accessible to Russian buyers, brisket can be identified as a potential growth item in export due to China's market opening. Nevertheless, the mounting delivery expenses make it less necessary for manufacturers to search for external markets. Andrey Dalnov's estimation indicates that bone-in brisket costs 260-270 rubles per kilogram in Vietnam, with delivery fees set at 25-30 rubles per kilogram, while in the Central Federal District it is approximately 230 rubles.
Furthermore, the exportation of pork production volumes is less than 10%. To provide a point of reference, Russia has been known to sell more than half of its grain and oil consumption. Consequently, such quantities of pork exports hold no substantial sway over the market. Daria Snitko, head of the economic forecasting centre at Gazprombank, stated that domestic pork consumption has peaked. Therefore, allowing pork exports to China does not pose any risk of increased prices for the people of Russia. "In 2022-2023, there was moderate overproduction within the domestic market, leading to negative price trends except for the seasonal component," says Daria Snitko. She also adds that domestic companies can increase shipments at their existing facilities and upcoming ones. To achieve additional production, there are enough reserves within existing capacities such as increasing weight before slaughter and increasing the turnover of complexes. Moreover, there are plans for additional investments to expand existing sites. However, considering the fall in state aid for pig farming, this will not resemble the surge in investment seen within the industry between 2010 and 2018.
According to National Union of Pig Farmers' projections, there is ample unprocessed meat in the UK. Little wonder Russia holds the global top five pork producers position. Approximately 4.7 million tons will be produced this year, a 200k tonnes increase than in 2022. These figures are earmarked for export enhancement.
"Furthermore, Yuri Kovalev notes that the Cherkizovo Group, one of the biggest food producers and exporters, including pork, anticipates a five percent growth equivalent to 200,000 tonnes in the upcoming year due to continued investments in sub-sectors. The company has been proactively increasing supplies to Vietnam and also considering boosting production for export after attaining a veterinary certificate." Since 2020, the Cherkizovo Group of Companies has risen pork export supplies by about 30%; last year their volumes exceeded 15 thousand tonnes. And it appears that the agricultural holding already has purchasers in China. "The companies integrated within Cherkizovo have been providing chicken and turkey to China since 2019," states Natalya Bartnovskaya, the Director for Development of Foreign Economic Activity at the Cherkizovo Trading House. "The group possesses a broad customer base of dependable clients who express an interest in procuring Russian pork and pork by-products. However, before discussing concrete investment schemes aimed at enhancing production and increase exportation supplies, the firm must begin these dispatches, gather hands-on knowledge and ascertain the actual threats. Natalya Bartnovskaya remarks that the enterprise is prepared to design export initiatives that are enticing from a commercial standpoint while still catering to the domestic market." “It is recommended to have a detailed discussion on this matter a year after the initiation of regular pork exports to China.” Sibagro, a prominent Russian pork producer, exported 5.5 thousand tonnes of meat overseas during the first half of this year and plans to consolidate its stance in Asia. "In 2023, we recommenced supplies to Vietnam and established collaboration with Hong Kong," states Rostislav Grigoriev, head of the Sibagro wholesale and corporate sales division. — The high demand for our export items has prompted Sibagro to aim towards increasing its presence and expanding its product range in the Asian market. However, it is still considered premature to plan for production at this stage.
Furthermore, the situation on the Chinese market may experience changes. Denis Kolbasov, who has recently returned from China, believes that the economic viability of exports in the medium term is uncertain. "The price of pork there is lower than a year or two ago, during the ASF epidemic, primarily because the livestock has almost recovered, and there is significant potential for enhanced production and minimal imports in the near future," says the specialist. "It is possible that businesses from the north and east of China may provide meat to Primorye or Siberia at a lower rate than the current market prices."
