The EEC Council supported the decision to zero the import duty on beef and pork

The Council of the Eurasian Economic Commission approved the duty-free import to RUSSIA of up to 200 thousand tons of frozen beef during 2022 and up to 100 thousand tons of pork during the first half of 2022. The corresponding document was published on the legal portal of the Eurasian Economic Union (EAEU). The condition for applying the exemption is the intended purpose of the products: MEAT processing within the country.  

The Ministry of Agriculture proposed to establish a tariff exemption for the import of frozen meat to support the processing industry. Earlier this decision was considered and supported by the subcommittee on customs-tariff and non-tariff regulation.

The proposed measure is aimed at balancing the markets for cattle and pork meat in Russia to stabilize prices for meat products, follows from government reference materials sent to the EEC. it also notes that beef prices in recent months are at the maximum level for five years, and in October they were 14.5% higher than a year ago. This is due both to insufficient production volumes and to the termination of reduced duties on imports from the main supplying countries (Brazil, Paraguay, Argentina). Also, the rise in prices is due to an increase in the cost of production against the backdrop of an increase in the cost of feed, veterinary drugs and other means of production. In addition, the spread of African swine fever (ASF) and avian influenza has become a negative factor that affected the prices of all types of meat. Also ASF is called the main reason for the reduction in pork production. Retail prices for it in October were 15.2% higher than last year, according to government materials. The shortfall in federal budget revenues as a result of zero duties is estimated at $100 million for beef and about $75 million for pork.

According to the Federal Customs Service, last year imports of frozen beef amounted to 199.5 thousand tons, in the first nine months of 2021, 123.5 thousand tons were imported, which is 16.3% less than in the same period of 2020. Imports of frozen pork last year were at the level of 4.2 thousand tons, by the end of October this year, 2.5 thousand tons were imported.

Federation Council Speaker Valentina Matviyenko sees no need to zero the duty on pork. She said this on Friday at a meeting of the upper house of parliament. Anatoly Artamonov, HEAD of the Federation Council committee on budget and financial markets, also noted that the zeroing of duties could lead to a drop in interest in the industry, as well as to the bankruptcy of a large number of enterprises, TASS reports.

“If our agricultural producer fully saturates the domestic market with pork, then why should we remove customs duties from imported pork? It’s not clear to me either, ”said Matvienko. According to Senator Yevgeny Savchenko, domestic pork production in Russia is at least half a million tons higher than consumption.

Zeroing the import duty on pork, according to the industry, is inappropriate, says Yury Kovalev, DIRECTOR general of the National Union of Pig Breeders. According to him, over the past five years, pork production in Russia has grown by 5-10% annually. In 2021, it was also planned to increase by 5%, but due to the complex of epizootic problems that began to arise at the end of last year, the growth will be 1%.

The apogee of the decline in production occurred in September: statistics came out, from which it followed that the drop was almost 7% compared to September 2020. This was the reason for the concern of the government and the Ministry of Agriculture, who feared that the industry would not recover during the first six months of next year, and decided to allow duty-free import of 100,000 tons of pork, explains Kovalev. 

“We have provided all the arguments that the decline in production is a temporary phenomenon due to epizootic problems, and next year we expect a record and planned increase of 8-10%. This is such a significant increase that even with the repetition of outbreaks of diseases (and no one is immune from them), the increase will be at the level of 7-8%, ”commented Kovalev. 

The latest data for October turned out to be a turning point, he continues. If production in agricultural enterprises in September compared to the same period last year showed a drop of 7%, then in October - plus 2%. The growth for nine months is 0.9%. Particularly characteristic are the data for the Central Federal District, where more than half of the total volume of pork produced is produced, and during the current year a whole range of epizootic problems associated with ASF and porcine reproductive and respiratory syndrome (PRRS) was observed. So, in September, production in the district fell by 12%, in October it increased by 3.8%. According to Kovalev, the increase is due to the commissioning of new complexes and the restoration of production at enterprises affected by ASF.

In addition, the growth in production is confirmed by the fall in prices for pork in the wholesale segment: over the past three weeks, they have fallen by 25-30% from summer highs. “We will already have an increase in production, competition will intensify and a decrease in wholesale prices is likely,” says Kovalev. An additional 100 thousand tons of pork could add another 5% to the increase in Russian production, which could bring down wholesale prices by 10-15%, and this, with a 25-30% increase in production costs, will create very serious problems for investors, given that retail prices pork prices have increased by only 13% over the past five years. 

“In 2018, we became self-sufficient in pork, and in 2020 we became net exporters. This suggests that we practically do not need imports, and in 2022 we will need it even less, because significant capacities will be put into operation that will satisfy all needs,” the head of the union concluded.