Expert: outflow of investments from animal husbandry is possible when importing duty-free beef

The plans of the Russian authorities to introduce a duty-free import quota of up to 200,000 tons of beef by 2022 may lead to a serious outflow of investments from Russian beef cattle breeding. This will also put the regions where beef production is the only direction of the agricultural sector in a difficult position, depriving them of the opportunity to create new jobs. The allowable volume of the quota can be no more than 50 thousand tons and it must be introduced at a certain price level of the Russian beef market, says Roman Kostyuk, general director of the National Union of Beef Producers.

CONJUNCTURAL STRESS

“The current situation with the proposal for a preferential quota for the import of beef should be considered, first of all, as a rejection of the desire of regional investors, farmers to engage in cattle breeding, until it is clear how long-term or short-term this policy is,” Kostyuk said. - That is, if now prices are starting to rise and the government urgently introduces this kind of measure, then, based on the current situation, there will hardly be a sharp improvement in livestock in 2023-2024. So, there is a high probability of extending this measure.”

“And if this measure is extended, accordingly, requests for investments in the area where there are competitive offers from foreign suppliers, such as Uruguay or Paraguay, for example, begin to raise doubts among banks. And banks are already reluctant to finance such projects,” he said.

According to him, such a tactical decision as plans for the preferential import of beef “contradicts the strategic task of convincing the maximum number of Russian regions to attract small businesses and the peasantry so that they begin to maximize beef cattle breeding, including export-oriented and create jobs in this area, develop rural areas.”

As Kostyuk emphasized, from the point of view of an objective analysis, it is beef cattle breeding that is practically the only mass agricultural sector that can develop in the maximum number of regions and climatic zones of the Russian Federation. Everything else requires very large infrastructure costs, he noted.

“Our union is engaged in building farm clusters, attracting small and medium-sized businesses to create jobs in regions where, due to a certain nature, there is simply nothing else to do. They are not suitable for crop production, there are no minerals in the right amount, they are not so well located in terms of the logistics of traffic flows,” he said.

“But this process is extremely lengthy, since in beef cattle breeding products appear only in the third year from the start of any project. Entering beef cattle breeding is a meaningful decision for 10-15 years of investment from both the farmer and the businessman, Kostyuk explained. - And in the current situation, a paradoxical chain is emerging: on the one hand, a complex system has been built to encourage the development of rural areas through animal husbandry, a complex and expensive system of soft loans for long-term contracts has been built, on the other hand, the government immediately questions all participants in this chain the need to do this ".

According to him, beef cattle breeding is the best tool that can not only create many jobs, but also massively involve millions of hectares of unused land in circulation. “Russia needs to double the number of beef cattle, which means that it needs to involve 3 million to 5 million hectares of land in this process,” he said. “And such a complex and long-term task as the systematic development of regions, together with small business based on beef cattle breeding, is subject to serious stress in the event of opportunistic decisions from the government of the Russian Federation,” the head of the Union said.

According to Kostyuk, tens of billions of rubles have been invested in the development of beef cattle breeding in the Russian Federation in recent years. “Moreover, investments are already difficult to make, because this is a complex and long-term sector. And now the job of persuading new investors to go in and be stressed by the prospect of imports is even harder. Investors can postpone their decision for a year or two. And for an industry where output appears two to three years after the start of the project, this means a delay of 5-10 years,” Kostyuk said.

NO MORE THAN 50 THOUSAND TONS, NO MORE THAN 5%

At the same time, Kostyuk said that the Union does not fully deny the possibility of introducing a quota. “From our point of view, this is a serious issue that requires deeper reflection. We are not saying that under no circumstances should it be introduced, we are saying that this is not an easy decision, and it may be necessary to reduce the quota. For example, it should not exceed 50,000 tons,” he said.

“Or vice versa, not to import anything, to intensify work to involve the regions, business and the peasantry in the creation of farm enterprises and try in the next year or two to finance not cheap meat on the market, but, as has been discussed recently, to support the poor, give them the opportunity to buy more expensive products,” he said.

According to him, the beef in question is extremely diverse. “There is beef from dairy cows that doesn’t rise significantly in price, but there are premium cuts that are initially on high price tags,” he said, noting that processors do not use expensive beef.

At the same time, Kustyuk does not rule out that the duty-free quota mechanism may not be activated if the agreements reached at the meeting to discuss the introduction of duty-free quotas are maintained.

“The question initially stood as follows: if the opinions of the industry associations that were at the meeting are taken into account, then the first should be entered in the protocol - quotas are opened only if the 5% threshold from October prices for wholesale beef of the current year is exceeded. That is, if beef prices do not rise significantly, that is, they will not exceed 5% from October, then a quota is not needed. Moreover, our partners in the EAEU - both Kazakhstan and Belarus - are ready to try to close the problems with their supplies," he said. - And secondly, we talked about the fact that the quota should be opened quarterly in order not to throw in this meat at the same time. It turns out that, in fact, with such indicators, there is a possibility that even the adopted decision on the quota may not come into effect, since the price of beef may

BRAZIL READY FOR DUMPING

According to Kostyuk, with the weakening of the import regime, beef supplies from Brazil are most likely.

“Brazil has not stopped trying to enter our market before and now, because it has huge potential,” he said. “In addition, because of China 's refusal to buy Brazilian beef, they have released a huge amount of meat. In order to take this volume somewhere out of the country, they will be practically ready for dumping, which will complicate the position of our producers.”

According to him, China refused to buy from Brazil from 50,000 to 80,000 tons of beef every month.

Speaking about prices, Kostyuk said that "Russia and the world in this case are in approximately the same price corridors." “We have beef at about the European level. In Brazil, it is cheaper, so it is able to bring beef at a competitive price in relation to both Europe and our production,” he said.

THERE WILL BE MORE BEEF

According to Kostyuk, beef production in Russia this year may exceed last year's figure by 1.5-3%.

“This will be due, rather, to the fact that a number of regions will partially dump their dairy livestock due to drought and some other problems. And therefore, temporarily there will be more beef both at the end of this year and at the beginning of 2022,” he said.

According to him, approximately 1 million 620 thousand tons of beef were produced in 2020. “I think this year the production growth will be 1.5-3%,” said the head of the Union.

As reported, the Russian subcommittee on customs and tariff regulation supported the proposal of the Ministry of Agriculture of the Russian Federation to introduce a tariff exemption in the form of exemption from duty on frozen beef imported into the Russian Federation in the amount of no more than 200 thousand tons. The measure is expected to be in effect through 2022. A similar exemption was also approved for the import of frozen pork in the amount of not more than 100 thousand tons for the period from January 1 to June 30, 2022.

The EEC Council planned to consider this proposal on November 12. However, as Interfax was informed by a source from one of the countries participating in the union, familiar with the results of the council, the consideration was postponed until the next meeting.

As follows from the message on the EEC website, the next meeting of the EEC Council is scheduled for December 3.