On May 19, Moscow hosted the conference “ANIMAL FARMING RUSSIA 2022: Animal husbandry and feed production in the new market reality”, at which Sergey Pavlyuchenko, General Director of the information and analytical portal Meatinfo.ru, spoke as a speaker with forecasts for the development of commodity markets until the end of 2022.
According to the expert, since the end of 2019, agriculture has been in turbulence due to the pandemic (consequences: global rise in prices for food, seeds, fuels and lubricants, plant protection products, mineral fertilizers, disruption of supply chains, as a result, the transition to manual state regulation key agricultural sectors).
Even before the start of the special operation in Ukraine, agricultural production was among the most affected areas due to global economic instability. The current situation in the food market is a trend for at least the last two years.
Q1 2022 brought a new challenge - a geopolitical crisis. Nevertheless, the growth of the agro-industrial complex in the first quarter amounted to 1.9%. According to Sergei Pavlyuchenko, the 2nd quarter will show a similar increase. It is too early to talk about the 3rd and 4th, the expert concluded, but in general, positive dynamics are expected. The growth in production seems to be quite objective and expected due to the rise in the price of agricultural products. And it is obvious that with the current rise in prices, agricultural production will grow.
In general, 2022 will, of course, be difficult for the Russian agro-industrial complex: you will have to live in conditions of global restrictions, bans, rising prices and costs. The state will partly support the sector, as well as the transition to domestic counterparts. However, negative consequences are inevitable, although agricultural production is not expected to fall by the end of the year. There will be no large-scale results in the growth of the agro-industrial complex, but 1-2% growth is quite likely. But it is important to understand, Sergei Pavlyuchenko stressed, that the danger of the sanctions being imposed lies in the fact that they hit farmers not immediately, but in the future. Discussing the issue of trends in the development of livestock and meat production in Russia, the head of Meatinfo.ru noted that, given the difficulties that have arisen with the supply of necessary imported technologies, in the medium term, at least a temporary cessation of productivity growth in livestock can be expected. At the same time, according to the results of this year, meat production in the Russian Federation will grow, and the main growth driver, as in recent years, will be pork, while poultry meat will remain the leader of the meat industry. However, according to Pavlyuchenko, there are nuances here that have been formed over the past couple of years and which must be taken into account. These are increased demand for meat due to the lack of outbound tourism, limited growth in production due to rising feed prices and availability, pressure on production levels due to changing trade flows, and a recent new problem - lack of working capital.
If we talk specifically about the types of products, the production of cattle meat at the end of the year, at current production rates, can reach 1-1.2%. The reason for it will be the exit of a certain number of farms from dairy farming. But the growth rate will slow down and in the coming years will be about 0.6-0.8% per year, primarily due to an increase in production volumes in agricultural enterprises and peasant farms. Despite the gradual growth of domestic production, one should not expect final import substitution for beef in the medium term: beef remains more expensive and, therefore, less in demand compared to other types of meat, so there are no large-scale plans for a sharp increase in the number of livestock in the industry.
Also, the number of cattle remains a big problem, which requires renewal, and the import of breeding animals will be seriously hampered in the near future.
The demand for pork is now, although higher than in the pre-pandemic period, but no more than in 2020-2021. According to preliminary estimates, in May, production has already added more than 4%, and this growth was the result of an increase in demand with the beginning of the barbecue season, which in the 2nd and 3rd quarter should compensate for the drop in normal demand and bring the industry to growth at the level of 4-4 by the end of the year. 7%, although in the short term the sector may be negatively affected by too strong growth in domestic supply and growth in imports.
At present, Russia is fully self-sufficient in poultry meat. According to the results of the 1st quarter, poultry production increased. In 2022, the positive dynamics will continue. About 30 investment projects in the poultry sector are at various stages of implementation, 4 of which will be put into operation this year. But at current rates, production growth will still be low and may reach 0.6-0.7% by the end of the year. The sector will be supported by the production of turkey meat. The share of turkey in the total volume of poultry meat production in Russia reached 8.0%. For the third year in a row, it is thanks to the growth in turkey farming that the capacity of the Russian poultry meat market remains stable. But a serious problem may be a ban on the import of breeding material.
Forecasting the formation of prices in the Russian market, Sergey Pavlyuchenko noted that the pressure on prices will be exerted by a record rise in prices over the past decades for grain, soybeans, energy resources, labor, feed additives, vitamins, veterinary drugs and other components of the cost of production. Many sectors of the agro-industrial complex, according to the expert, will have to change their production strategies in order to adapt to the capabilities of buyers.
The cost of meat in 2022 will increase, according to preliminary estimates of Meatinfo.ru, by 17-27%, which will naturally affect the price tags. Inflation is accelerating against the backdrop of a shortage of money from foreign partners due to failures in the payment system after the sanctions, which also “costs companies a pretty penny.” At the same time, the supply of foreign drugs against animal diseases, fertilizers, and equipment remains under question. Also, suppliers are switching, as a rule, to prepayment. And all this against the backdrop of a sharp rise in prices. In addition, Russian farmers are at risk of losing their previous income due to the loss of export markets and restrictions on international transactions. It is possible that eventually this situation will lead to an increase in mergers and acquisitions in the market, and individual companies will leave the industry.
Summing up, the head of Meatinfo.ru emphasized that it can already be assumed that the Russian economy and the agro-industrial complex, after initial adaptation and adjustment to new conditions, will have to work on a less advanced technological base, which in the medium term will affect production efficiency indicators.