Feed Sector Continues to Develop But Obstacles Remain

An Expert's View about Agriculture and Animal Husbandry in Russia

Posted on: 31 Mar 2012

The Russian feed sector is continuing to develop and is experiencing steady growth as a result of strong government support of the livestock sector.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 3/14/2012 GAIN Report Number: RS1217 Russian Federation Post: Moscow Russian Feed Sector Continues to Develop But Obstacles Remain Report Categories: Grain and Feed Approved By: Levin Flake Prepared By: Marina Muran Report Highlights: The Russian feed sector is continuing to develop and is experiencing steady growth as a result of strong government support of the livestock sector and the introduction of new technologies and improved quality of feeds. Despite this, major weaknesses in the sector remain including the use of outdated facilities and technologies, insufficient domestic production facilities for acids and vitamins, nontransparent registration procedures for feed, and a lack of sufficient domestic production of certain feed grains and oilseeds. Executive Summary: The 6th International Conference ?Compound Feeds-2012? was held on February 6-7, 2012 in Moscow Russia and was organized by the Russian Ministry of Agriculture, the Russian Feed Union, the All- Russian Scientific Feed Institute, and the International Industrial Academy. The conference brought together government officials from both federal and local levels, and more than 250 participants from 36 Russian regions, including regional agricultural leaders, scientists and technologists, as well as representatives from 10 foreign countries, such as Germany, Belgium, the United States, the Netherlands, and others. The following key issues of feed production in Russia were raised at the conference: The status and current development of the compound feed sector in Russia The quality of local feeds The availability of raw materials for feed production and non-traditional types of raw materials New technologies and equipment in feed production New technical regulations and their impact on feed production in Russia General Information: The Status of Feed Production in Russia At this conference, a number of speakers presented on the current state and future prospects of feed production in Russia. Denis Cherkesov, Deputy Director of the Department of Animal Breeding of the Ministry of Agriculture, reported that government measures aimed at improving the agricultural sector in Russia have resulted in strong growth in the livestock sector in general, and consequently in compound feed production as well. He reported that the Ministry of Agriculture forecasts compound feed production in Russia to reach 18.6 million MT in 2012, a 26 percent increase from 2011. Mr. Cherkesov also reported that other positive trends in the development of the feed sector include the increase in poultry and livestock production in Russia, the introduction of foreign experience and technology, improved quality of feeds, as well as relatively stable prices for feed. Despite these positive developments, however, there remains weaknesses in the sector including very high prices for higher quality feeds, continued use of outdated technologies, poor management systems for quality and safety, as well as that much feed production continues to be concentrated in small farms and households. In addition, a lack of sufficient domestic production of soybeans and grain legumes is also detrimental to the industry. His report included data from the Ministry of Agriculture, which reported that there are 259 registered feed production facilities operating in Russia with the largest being: 45 factories (17.4%) with production capacities from 100,000 to 300,000 metric tons 41 factories (15.8%) with capacities from 50,000 to 100,000 metric tons 65 factories (25.1%) with capacities from 20,000 to 50,000 metric tons Mr. Cherkesov was followed by the President of the Russian Feed Union, Valeriy Afanasyev, who also stressed the rapid growth of the feed sector for the past 4 years, with annual growth between 7 and 10 percent. According to Rosstat, of compound feed production in Russia-59.5 percent is for poultry, 28.2 percent for swine, and 11.7 percent for livestock. As poultry production is the fastest growing sector, this has led to much stronger demand for the compound feed industry. He also stated that actual feed production is far above the estimated 18.6 million tons reported officially, and is closer to 23 to 25 million tons. The reason for this discrepancy is that most poultry and pork facilities operate their own feed mills and this production of feed is not reflected in the statistics. He mentioned that new feed production facilities are coming online and recently 40 new feed production facilities started operation with capacities ranging from 20 to 50 metric ton/hour, and which are equipped with modern equipment which produce high quality products. In his presentation, Mr. Cherkesov explained that the leading Russian regions in feed production are Belgorod oblast, with the share of 17.4 percent, followed by Leningrad oblast with 7 percent and Kasnodar kray with 4.6 percent. He expressed that he was satisfied with the significant growth of the production of premixes and protein and mineral additives in Russia. He reported that the production of premixes in 2011 was 27 percent higher than in 2010 and production of protein mineral concentrates increased by 28 percent. Despite this growth, however, Russia still remains largely dependent on imports of raw materials for production of premixes. According to the Russian Feed Union, domestic producers still import 75-80 percent of biological components to Russia. He also explained that the major obstacles for the Russian feed sector development include: A lack of government support specifically for feed producers (rather than the livestock industry as a whole). The Feed Union has appealed more than once for including feed facilities to the list of agricultural facilities that can get subsidized credits for renovation and facility modernization) Outdated equipment and outdated technologies as a result of high interest rate on credits Burdensome registration and import procedures for feed Lack of local production facilities for vitamins and amino acids Insufficient use of waste products for feed production in place of grain (for example, in 2011 the production of beet pulp in dry weight was estimated at 5.8 million tons, and if used in feed production could have replaced about 7 million tons of grain annually). Currently the regular component share in compound feeds is: 70 percent of grain, 8 percent of plant protein, 1 percent amino acids and vitamins, and 21 percent other raw materials Continued growth of energy prices and fuel prices which severely negatively impacts the cost efficiency of feed production Insufficient domestic production of certain feed grains and oilseeds Mr. Cherkesov stressed that the Government of Russia is taking initiatives in strengthening the role of feed producers and the Feed Union in the decision making processes. In October 2010, an Office of Feed was organized at the Department of Livestock Breeding in the Ministry of Agriculture. This made it possible for feed producers to get more access to discuss with and advise the government on developing legislation and regulatory documents for the domestic feed sector. The representatives of the Feed Union have also taken an active role in discussing and commenting on the Technical Regulation on Safety for Feeds and Feed Additives. Additionally, an expert group was involved in discussing drafts of Administrative Regulations of the Veterinary and Phytosanitary Surveillance service in regards to registration of feed additives with GMO components. A special commission on feeds was also formed in the Public Council at the Ministry of Agriculture. State Regulation of Animal Feed Maria Novikova, Deputy Head of the Office at the Federal Veterinary and Phytosanitary Surveillance Service (VPSS), spoke at this conference about new initiatives in State regulations of the safety of feed additives and animal feed. The new regulations cover 2 main areas: 1. Feed registration and imports into the territory of the Customs Union 2. State control in the territory of the Customs Union Some of the key aspects of the new regulations include: A new administrative regulation will allow companies from regions to apply for import permission directly to VPSS. (Note: Previously the importers had to go through regional VPSS offices, which was a more drawn out process) Products of chemical and microbiological synthesis will not need to be accompanied by a veterinary certificate Feed and feed additives will be allowed to move freely on the territory of the Customs Union (Note: Russia recognizes feed and feed additive registration in Kazakhstan and Belarus) A separate administrative regulation specifically on feed additives is currently being discussed Mrs. Novikova called on the Feed Union and domestic producers to be ever more involved in submitting comments and suggestions on the new draft of the Technical Regulation on Safety of Feeds and Feed Additives as the law is now open to public comment. WTO Accession Dr. Sergey Kiselyov, Dean of the AgroEconomics faculty at the Moscow State University, reported at this conference on the expectations of the feed sector of Russia?s impending WTO accession. He is confident that Russia will gain much out of WTO accession and accession cannot be viewed as a ?disaster?. He emphasized that the $4.4 billion that Russia will be allowed for domestic support to agriculture by 2018 will be sufficient for agricultural development in the country. Dr. Kiselev pointed out the following advantages for Russia after accession to the WTO: Russia will have access to legal mechanisms for trade conflict resolution, specifically for export- oriented industries Russia will have a possibility of ensuring its rights in the case of changes in trade regimes by third countries (for example EU grain quota and EU expansion) Russia will be able to influence changes in trade regulations Specifically for the feed industry, benefits include that soybean and soybean meal tariffs will be bound at zero and corn at 5 percent, and the tariff on vitamins A, C, E will fall from 5 to 3 percent; and for Vitamin B and D will be at 5 percent (Note: this is related to production of premixes and protein and mineral additives) However, Dr. Kiselev also referred to the following disadvantages of Russia?s accession to the WTO: Restrictions in the level of custom tariff protection Restrictions in the use of custom tariff mechanisms as protective measures (tariff-rate quotas) Restrictions in the level of internal financial support (such as for agriculture) Restrictions in the use of export mechanisms (export subsidies, export credits, state insurance) Restriction on the use of protective measures, such as import licensing, fees and charges on import other than tariffs) Likely restrictions affecting wholesale trade under the framework of services Specifically for the feed industry, there is a major concern over the tariff for live swine falling from 40 to 5 percent at accession, and that the quota for pork will be done away with by 2020 In concluding his speech, Dr. Kiseliev stated that further development in Russia?s agriculture does not necessarily depend on Russia?s accession to the WTO, but on sound domestic economic policy.
Posted: 31 March 2012

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