International Egg and Poultry Review

By the USDA's Agricultural Marketing Service - This is a weekly report looking at international developments concerning the poultry industry, this week looking at Russia's recent economic expansion.
calendar icon 20 July 2005
clock icon 6 minute read
International Egg and Poultry Review - By the USDA's Agricultural Marketing Service - This is a weekly report looking at international developments concerning the poultry industry, this week looking at Russia's recent economic expansion.


Russia’s leaders are coming under increasing pressure to maintain the country’s economic expansion that has occurred over the last several years. From 2000-2004 the country averaged 6.5-7% growth. However, in 2005 the country is predicted to achieve growth of 5.5- 6%. In order to reassure domestic and foreign investors, investment friendly laws have become legislation including decreasing the statute of limitations on privatization from 10 years to 3. Increased outside investment is deemed to be necessary if Russia’s current economic growth is to be reenergized.

Some are proposing increasing domestic spending to increase domestic growth by utilizing excess oil revenues. If this happens, maintaining the government’s 10% inflation target may become unrealistic and the value of the ruble may continue to climb ultimately resulting in adverse ramifications on Russia’s industrial sector, which accounts for almost half of the country’s jobs. The goals of the government are to double the gross domestic product by 2010 and hoist the living standards of those below the poverty line – currently at least 1 in 5 Russians. A few are predicting the country will finally reach in 2007 the economic output achieved in 1990, before the economic collapse of the 90's.

The United States (US) and Russia have set up a commission which is drawing up proposals of cooperation in the energy sector. In a partial response to the continued upward trend in oil prices, cooperation between the 2 countries could result in the US importing 50 million tons of Russian crude per year without additional investment. However, some consider an impediment to Russian and US cooperation is the Jackson-Vanik amendment. The Jackson- Vanik amendment has come into play on various agricultural issues between the US and Russia, including US poultry exports to Russia. Currently the US makes decisions every year which neutralizes the effects of the amendment.

In preparation for entrance into the World Trade Organization (WTO), Russia is amending 74 laws and regulations. However, Russia has indicated a desire to keep its right to set quotas on poultry, beef and pork imports until 2009 and $9.6 billion in state support for agriculture when it joins the WTO, which is currently 3 times larger than what is currently allocated to support domestic agriculture. Negotiations concerning state support of agriculture are currently making slow progress. As an added incentive for Russia to join the WTO, approximately one third of its GDP is formed and depends on foreign markets. If Russia did join the WTO, quotas would be raised 2% which is half of the expected minimum growth in consumption expected of the products. Some expect Russia to become a WTO member in 2006.

From 2001-2004 Russia saw double digit gains in broiler production and in 2005 a 12% increase is forecast with some expecting a bigger increase. Production is expected to increase 2,500 million MT by 2010 with per capita consumption increasing from 10 kilograms (kg) to 16 kg per person during the same time frame. Nationally, the consumption of poultry slightly exceeds 2 million tons with imported poultry supplying half of it. What may assist this growth is the rapid growth of the retail food sector with about $7 billion in new retail sales of food accounts expected by 2012. The poultry quota and high prices on other meats in 2005 is also expected to continue to support high producer investment and increased production. The gains come as the agricultural sector transforms from a command economy to a more market oriented-system. The transition has resulted in increased fiscal responsibility and increased production efficiencies due to resource constraints.

Russian poultry producers consist mostly of 2 types – privately owned which are generally more efficient and “the State Unitary Enterprises” (SUEs). SUEs are a growing voice in the industry even though they are partially or wholly financed by local/regional governments. The SUEs receive preferences from local governments including lower taxes and limitations on competing products from other regions. Initially, Russia allocated the US 771,900 metric tons (MT) of poultry for 2005. On June 15, 2005 the US Trade Representative announced the signing of an agreement with Russia confirming a previous understanding allowing for specified access for US poultry, beef and pork. The agreement would allow increases in US exports over the next 4 years. In 2005 the agreement would allow 811,300 MT of poultry to be exported to Russia and increasing to 931,500 MT in 2009. Total imports of poultry from January – May, 2005 are 442,300 MT, according to Russian custom statistics, an increase of 32.3% over the same time frame last year.

Poultry imported within quota will be subject to a 25% tariff, over quota 62.5% tariff until 2009 when it drops to 50%. The agreement also includes rules on the allocation and distribution of import licenses and veterinary permits, and establishes a consultative mechanism that ensures representatives from the US and Russia meet at least twice a year to discuss market conditions, trade related matters which includes sanitary issues, and the administration of the special measures.

Currently the US exports 15-20% of its chicken production and Russia currently is the top export market for US poultry products.
Sources: USDA/Foreign Agricultural

Canada-United States

The Ninth Circuit Court of Appeals unanimously overturned over turned a judge’s injunction against the import of live Canadian cattle. Rancher groups are now left with 2 alternatives, accept the ruling or appeal it the United States Supreme Court.
Source: various news sources

To view the full report, including tables please click here

Source: USDA's Agricultural Marketing Service - 19th July 2005

© 2000 - 2024 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.