Russia eyes sausage trade with China and Japan

31-Jul-2016 - Last updated on 01-Aug-2016 at 11:41 GMT

Russian sausage exports could help processors who have endured years of falling profits

Related tags Meat processors Pork Meat Russia China Beef Lamb

Russia is looking to export sausages and processed meat products to Japan, South Korea and China, according to the Meat Processors Association of the Far East.

The president of the organization, Pavel Kitaev, said the feasibility of such supplies will be supported by the development of the meat industry in this part of Russia, as well as devaluation of the country’s ruble. However, there are still some certification complications.

“Negotiations are under way with Korean, Chinese and Japanese companies on cooperation, but everything stops due to the absence of an intergovernmental agreement on the admission of Russian companies on these markets," said Kitaev.

“China is a priority for us, because there is the huge interest to our products in this country,” he said, adding that work on opening up the Chinese market to Russian meat has been going on for several years.

“There is already an agreement on the supply of products, but there are problems with accreditation of certain Russian companies in China. Work on this issue has been taking place during the past two and a half years. Ironically, China is afraid of the dumping of Russian [sausages production], because at the moment the cost of meat in Russia is cheaper than in China. This is one of the most likely reasons that hinder the adoption of a decision [on export of Russian sausages to China],” he added.

Falling profitability

Export supplies may support the business of meat processors, because in the past two years they have suffered falling profitability and have struggled to improve the situation.

According to Sergey Melnichenko, head of Serishevcsky Meat Processing Plant, one of the largest manufacturers of sausages in the Far East, the rise in prices of raw materials combined with falling purchase prices in the domestic market, means profitability of business is significantly lower than before the beginning of the current economic crisis in Russia.

According to Melnichenko, the cost of raw meat for sausage manufacturers in Russia has jumped nearly 50% in the past two years, resulting in a drop in production volumes of 20%. While previously most companies applied to import raw materials, due to veterinary restrictions and the food embargo, most meat processors have had to shift to domestic meat.

Rebuilding the production process

“We have had to partially rebuild the production process, purchasing new equipment, because domestic meat producers usually offer raw meat in half carcasses,” said Kirill Avdeev, director of marketing of the Ratimir Company, meat processor from Primorsky Krai province.

Struggling to reduce costs, many sausage producers in the Far East have invested in their own farms. This is one of the most effective tools in making businesses more stable, according to analysts.

“The creation of vertically-integrated structures with various segments of business, starting from the growing of crops and ending with the retail sale of meat products under the company’s own brand, is thought to be the strategy with the best profitability for sausage manufacturers in current market situation,” said Russian agricultural analyst Eugene Gerden.