By the beginning of 2021, Russia had become one of the largest exporters of pork and co-products, and the consumption had reached its peak in 30 years. The fully realized potential of import substitution and satisfied domestic demand forces producers to look for a higher profitability in foreign markets: in 2020 export of pork and co-products increased by 86% to 192.6 thousand tons in comparison with 2019. Pork exports in 2021 will set a new record - 250 thousand tons in a favorable environment, - the RusAg analysts forecasted in a quarterly report on meat market in Russia.
The pork production in live weight reached 5.5 million tons in 2020, an increase of 8.9% over the year. The main increase was in the industrial sector with share of over 88% in 2020.
"The accelerated pig farming development has led to the completion of import substitution. Moreover, the pork segment is achieved the target (85%) and brought to 110% for meat self-sufficiency by Food Security Doctrine, which means that production exceeds domestic demand. Therefore, the main task for pig farming industry in the coming years is to maintain and increase profitability in oversupplied environment." - commented Andrey Dalnov, Head of RusAg’s Centre for Industry Expertise.
According to RusAg analysts import decrease and export growth had responded as a pork market oversupply and competition.
Import. In 2020, imports decreased 10 times to 8.3 thousand tons in kind against 91 thousand tons in 2019. Therefore, if in 2010 the share of imported pork in Russia was 33% (1,127 thousand tons), in 2020 this figure fell to almost zero (0.3%).
"The factors led to decrease of imports were the introduction of a flat 25% duty, exchange rate volatility, as well as high prices in world markets caused by African swine fever in Asia," -explains Andrey Dalnov.
Consumption. In 2020, pork consumption increased by 4% compared to 2019 and reached to 4.08 million tons. Pork consumption per person is 27 kg per year for now, this is the highest result in the history of modern Russia. Total annual meat consumption is 76.5 kg where the share of pork is 36% after the traditional leader - poultry (34 kg, 44%).
Export. Russia exported 192.6 thousand tons of pork by the end of 2020.
"There is a significant increase in export supplies by 85% in comparison with 2019. Such a sharp increase resulted by the opening of the Vietnam market at the end of 2019, which accounted for more than 30% of the export, "said Andrey Dalnov.
Hong Kong (24.5% in kind), Ukraine (20%), Belarus (11.5%) are among other importing countries of Russian pork. Exports to these countries also showed a multiple growth. One of the favorite products of Russian pork is brisket, about 26% of supplies.
In general, the share of pork in the export of Russian meat and co-products in 2020 reached 37% and amounted to USD 325.8 million.
2021: growth points
"Pork consumption will grow by about 3% in 2021 compared to 2020. Domestic consumption will not be such an effective driver of the industry as it was 5-10 years ago. The transformation of Russia from one of the largest pork importers into one of the largest exporters makes pork exports the potential growth point. We expect that by the end of 2021, pork exports from Russia will increase by 25% in comparison with 2020 and set a new record, reaching 250 thousand tons," says Andrey Dalnov.
The prospective markets in terms of logistics and demand are Southeast and East Asia, accounting about 30-40% of the world's pork supply. In addition, China accounts for about 20-25% of all world pork supplies. When China will be open for the supply of Russian pork, exports in 2021 would grow by 50% or more and exceed 300 thousand tons.
"African fever has seriously affected China's pig population, to which Beijing has responded with increased imports to reduce the lack. Livestock is being restored, a number of large-scale, multi farms are being built, however, considering reports of a new wave of African fever, which destroyed about a quarter of the livestock in the north of the country, in the coming years, increased demand for imported pork in China will remain. Therefore, the prospects for exports to China are most attractive," said Andrey Dalnov.
Analysts expect that in 2021 the profitability of the industry will increase from 15% to 18%, largely due to increase in wholesale prices at the beginning of the year.
Pork production will increase by 170 thousand tons and reach a new peak of 4.44 million tons (+ 4% compared to 2020) through the introduction of investment projects and refueling working capacities.