The BRICS countries are developing meat production so quickly that each year the demand for imports falls. Source: Photoxpress
In March, the BRICS countries will make an initial attempt to develop a coordinated policy regarding one of the European Union’s commodity markets. The task before the bloc’s member countries is to formulate arguments to convince the European governments to abolish or lower limits on pork imports.
Just before the session of the Committee on Veterinary and Phytosanitary Standards, which is scheduled for March 25–26 in Geneva, there is supposed to be a meeting of representatives of the veterinary agencies of the BRICS member countries. According to Sergey Dankvert, the head of the agricultural watchdog Rosselkhoznadzor, the meeting’s agenda will address the spread of the African swine fever epidemic in places including the EU.
Dankvert anticipates that in three to five years, the European Union will encounter a crisis in pork production, particularly in relation to eastern Europe, where small farming prevails. Because small business cannot reach a suitable biological safety level, Russians think that a pork shortage in the region is likely.
Throughout February, representatives of Rosselkhoznadzor conducted negotiations with fellow BRICS members, primarily China, India and Brazil. “I think that in the near future (two to three years), we will be able to institute reforms and convince the EU of the safety of our products from uninfected regions,” Daniil Khotko of the Institute for Agricultural Market Studies said.
As of now, existing capacities in the BRICS countries do not make it possible to replace the large share of European products, but if there is a gradual growth in demand, production volumes can undoubtedly be raised to the necessary levels. In Russia alone in 2013, pork stock increased by 7.5 percent; 28.7 percent growth is expected in 2014.
A major problem for the bloc partners might be overcoming the EU’s protectionism. Vasily Yakimkin of the FIBO Group noted that Russia and the other BRICS countries do not have such trade barriers with the EU, but the EU exercises protectionism toward and provides subsidies to its manufacturers of livestock products. For example, Russia permits the import of products by around 3,600 European meat and dairy businesses. Yet only eight Russian companies have the right to supply the same types of products to Europe. “According to the OECD [Organization for Economic Co-operation and Development], the level of support of European farmers’ income is 22–24 percent, while in Russia it is 13–15 percent. Consequently, the EU often exports food products at prices lower than the cost price, while Russian agricultural holding companies cannot compete with this, and the small farms even less so,” Yakimkin said.
Within the BRICS framework, a unified policy on veterinary medicine can be formulated, and the partners can help one another to prepare for European requirements, “given that in three to five years there will be problems with pork in eastern Europe, and for Brazil an enormous market is opening. Businesses there are very competitive, but ractopamine is used. We gave them the option to do special programs in Russia that would also be suitable for the EU [where the use of growth stimulants is also banned]. The EU will nevertheless need to open its markets. We are all working together, and I think that’s productive,” Dankvert said.
Russia cannot yet count on a substantial share of the European market even though meat production here is developing rather quickly. Even recently, discussing the export of meat from Russia was unthinkable—the country depended entirely on imports. However, beginning in the first half of the 2000s, investment in the sector took off, and this led to explosive growth in poultry production and a slightly more tempered growth in pork production. This year, Russia has already exported 50,000 tonnes of poultry and there is visible potential, but Russia hardly exports pork and beef. Only a small portion of pork products, amounting to 10,000 tonnes, was exported to China. According to Daniil Khotko of the Institute for Agricultural Market Studies, poultry import will not exceed 13 percent and pork import will not exceed 26 percent. He believes it will take Russia two years to reach its target level of food security of 85 percent of its raw materials for pork. “The Chinese market must be developed, and there must be more activity on the supremely promising African market,” he stressed.
Yet Khotko doubts that a meat union within the framework of BRICS will be long term. “The BRICS countries are developing meat production so quickly that each year the demand for imports falls. Ultimately, within the group there will be an oversupply and it will be necessary to disband this ‘coalition,’” he said.
Timur Nigmatullin, an analyst at Investcafe, asserted that the BRICS countries are perfectly capable of influencing even such a strong economy as the European Union when it comes to removing export barriers. They can create access to their internal market, which is also desirable for export-directed Eurozone companies, through a “trade” item during discussion of the elimination of customs barriers. “For this, the BRICS countries need to increase the volume of trade among themselves, develop an internal market and improve the legal framework,” he said.m
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