Russia Changes Global Market for Livestock Products
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In moving from a centrally planned to a market economy, Russia experienced a dramatic drop in the consumption of high-value livestock products, such as meat, milk, and eggs. Per capita meat consumption, for example, fell from 165 pounds in 1990 to 90 pounds in 2000. The main reason for the decline was the elimination of massive government subsidies for livestock products that had helped boost production and consumption during the former Soviet era. Without these subsidies, producers could not sustain output levels, consumer prices rose, and demand fell. In addition, demand has shifted to goods and services of which consumers were starved during Soviet times, but that are now becoming more plentiful: fruits, vegetables, and packaged convenience foods, as well as consumer durables—such as automobiles, refrigerators, and televisions—and services ranging from legal and financial services to car repair and health clubs.
These changes could have important implications for global trade in meat, animal feeds, and high-value products. Incomes began to grow in Russia in 2000, following the 1998 financial crisis, and gross domestic product and consumer income are currently rising at about 5-6 percent per year. The income growth has generated a rebound in meat and other livestock consumption. But because the large subsidies of the former Soviet era encouraged overconsumption of livestock products relative to the economy’s real wealth, per capita consumption is unlikely to return soon to the levels of that period. Nonetheless, the rise in livestock consumption provides export opportunities for U.S. producers.
Despite the drop in overall meat consumption, during the 1990s, Russia became a major meat importer, especially of poultry. In 2001, Russia imported 1.1 million tons of U.S. poultry, accounting for 45 percent of U.S. poultry exports. In spring 2003, however, Russia imposed a quota on its poultry imports, as well as restrictions on its beef and pork imports. The poultry quota allows 1.05 million tons of imports a year, compared with Russia’s total 2002 poultry imports of about 1.5 million tons. Russia’s apparent motive behind these measures is to protect its poultry and other meat producers from import competition, given that, in recent years, Russia has been importing about a third of all domestically consumed beef and pork, and over half of its poultry. It remains an open question, however, as to whether Russian poultry producers will respond sufficiently to this added stimulus to satisfy the growing demand among Russian consumers for poultry meat.
This article is drawn from...
Changes in Agricultural Markets in Transition Economies , by William Liefert and Johan Swinnen, USDA, Economic Research Service, March 2002
Russia briefing room (archived), USDA/ERS, October 2007