OREANDA-NEWS. August 13, 2014. Following the approval of President Putin’s order No. 560 “On Certain Special Economic Measures Aimed at Ensuring Security of the Russian Federation”, and Government’s Decree No. 778 defining the list of import restricted food products, Cherkizovo Group considers it necessary to clarify the Company’s vision of the situation.

Today, Russian poultry market amounts to approximately 4 million tonnes a year. It is supplied by domestic producers almost completely. Import quota for poultry (including turkey meat) amounts to 360 thousand tonnes a year, or less than 10% of the market needs. The chilled poultry meat most commonly presented on stores shelves is produced domestically. Thus, we should not expect any significant changes, price growth or deficit. Russian producers will fully cover all market needs.

In pork, some deficit is seen, as domestic producers cover only 70% of the market’s needs (such needs reaching approximately 3.5 million tonnes a year). Import quota amounts to 430 thousand tonnes a year. In March 2014, import of pork meat from EU was banned due to veterinary reasons. This caused a price increase of 30-40%. Thus, import ban imposed in August is not news for the market, since imports are closed for few months, which is already priced in. Cherkizovo Group considers that Russian pork producers may close the market gap within the next 2-3 years, but this will require a comprehensive state support, as the pork market is volatile.
The sausages market is also covered with the domestic production almost completely. Sausage products prices will be determined by the market conditions and raw meat prices.

Cherkizovo management expects that import restrictions will have a positive impact on the Company’s business. As these restrictions will most likely support meat prices at current levels, this will be favourable for the Group’s financial performance. In 2014, Cherkizovo Group will not increase its production output above the earlier announced levels, since livestock breeding production increase requires more time than few months. The Company will thoroughly analyse the market environment to work out the most beneficial mid-term strategy.