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AGRICULTURE:
DAIRY VICTORY AND MEAT COLLAPSE
Alies Sierzanovic
Summary
The Belarusian food industry showed a solid performance in 2013, especially in the dairy sector, because of the favorable external environment. In the meat industry, negative trends were observed starting at the very beginning of the year, resulting in a ban on Belarus’ export of pork to Russia that lasted almost a month. The financial condition of Belarusian food-making companies was varied: while dairy companies performed quite impressively, meat producers appeared to have been affected the most.
The year 2013 was not particularly favorable for Belarus’ agribusiness. Yields fell year-on-year for almost all crops. An outburst of African swine fever caused a major reduction in the pig population, and milk yields also fell for various reasons. The financial problems in agriculture aggravated, and the state had to continue its support for farms.
Trends:
• Further export orientation to the Russian market;
• Aggravation of financial problems in agribusiness;
• Reduction in Russia’s pressure on the Belarusian food industry;
• Further drop in the output of the main types of unprocessed food.
Performance
The year 2013 turned out to be one of the least successful years in terms of farm output in the past decade. Belstat reported no all-time high output for any crops. On the contrary, the country’s potato output was lowest in the last 14 years1.
Belarus harvested 7.6 million tons of grain and legumes in 2013, down by 17.6% year-on-year. Flax fiber harvest amounted to 45,000 tons, down by 13.5%, sugar beet harvest totaled 4.3 million tons, down by 9%, and colza harvest reached 676,000 tons, down by 14.5%. Potato harvest went down by 14.5% to 5.9 million tons. \fegetable harvest increased by 2.8% year-on-
Gross harvest of the key crops see: http://belstat.gov.by/homep/ru/ indicators/agriculture.php.
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year in 2013 to 1.6 million tons — that was the only increase in output recorded in 2013.
The drop in last year’s harvest was caused by unfavorable weather conditions, which affected yields. Only colza and vegetables showed an increase in yield, by 0.01 ton per hectare and 0.1 ton per hectare, respectively. Decreases in yields were reported for all other crops.
The drop in the harvest of the main crops has not compromised Belarus’ food safety so far. However, the shortage of high-quality potatoes brought about a major challenge for the local starch producers. The reduction in grain production might call for an increase in import in 2014, because grain consumption is partially covered from the previous year’s reserves, which in 2014 will be lower than in 2013.
Animal farming, which is the pivot of the Belarusian food industry, was affected by some negative developments in 2013. An increase in stock was reported only in poultry farming, by 7.8% on the 2012 level to 45.7 million head of poultry—this achievement should be attributed to the gradual upgrade of poultry meat-packing facilities (including at the Smaliavicy broiler factory, which was acquired by Mahilioh-based businessman Jahhien Baskin).
At the same time, cattle stock dropped by 1.1% year-on-year to 4.321 million head; while the number of cows edged up by 0.3% to 1.525 million head. Pig stock fell to 3.3 million head, a new record low since 2003. The drop by 22.3% year-on-year was mostly due to an outbreak of African swine fever, which was first detected in Hrodna Region (late June) and then in Viciebsk Region (July). According to unofficial reports, there were other outbreaks of African swine fever in Belarus, but there were no official confirmations.
The ASF trouble resulted in limitations of pork and swine product exports from Hrodna and Viciebsk Regions, whereas from late August2 to the middle of October, export was banned from the entire territory of Belarus. Anyway, the ban on Be-
Rosselkhoznadzor imposes restrictions on import of pig products from Belarus until the ASF virus has been eradicated, see: http://doingbusiness. by/rosselhoznadzor-vvel-ogranicheniya-na-postavku-produkcii-svinovodstva-iz-belarusi-do-momenta-iskoreneniya-virusa-achs.
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larus’ pork and swine products seems to have been politically motivated as well (the main reason being the dispute between Uralkali and Belaruskali) and was later lifted.
Pig stock continued falling at the start of 2014, which may result in a deficit in supply to Belarusian meat-packing plants as early as the middle of the year.
Raw milk output also dropped in 2013. According to Belstat, milk output reached 6.651 million tons, down by 1.7% from 2012. The shortage of raw milk affected the supply pattern to dairy factories, which could have increased their exports due to favorable prices in external markets, but were unable to do so. Some dairy factories were standing idle.
Export goes to Russia
The food-processing industry traditionally depended on both the situation in agribusiness and external markets in 2013. The increase in food prices in the Russian market caused by a systemic crisis facilitated export deliveries of Belarusian dairy products to Russia. According to the National Dairy Producers Union, in 2013, dairy output in Russia accounted for only 10% of the actual volumes of raw milk delivered for processing3. The Russian market therefore was in need of dairy products. Belstat reported overall export of uncondensed milk and cream at 292,000 tons worth a total of USD 237.6 million in 2013. In volume terms, export decreased by 3%, whereas in value terms, it went up by 17.4%. Russia accounted for 96.7% of Belarus’ uncondensed milk and cream export in value terms.
The export of condensed and powdered milk and cream increased more than any other dairy export — by 13% to 238,200 tons in volume terms and by 50.4% to USD 859.3 million in value terms. Russia accounted for 90.7% of the total export of condensed and powdered milk and cream from Belarus.
The foreign supplies of churn-milk, yoghurt and kefir increased by 46.1% year-on-year in 2013 to 72,800 tons in volume terms and by 65.1% to USD 103 million in value terms. Russia
Government holds a session to address dairy sector: http://www. souzmoloko.ru/news/news_2247.html.
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imported 86.8% of Belarus’ foreign deliveries of chum-milk, yoghurt and kefir.
The export ofbutter dropped by 19% year-on-year to 69,300 tons in volume terms. In value terms, butter export increased by 18.4% to USD 373.9 million. Russia imported 92.5% of Belarus’ butter export in value terms.
The export of cheese and curd cheese amounted to 141,000 tons in 2013, down by 2.3% from the 2012 level; however, in the U.S. dollar terms, foreign supplies of cheese and curd cheese went up by 5.6% to USD 650.8 million. Russia consumed 96.7% of Belarus’ cheese and curd cheese exports in value terms.
Russia was thus the main consumer of Belarusian-made dairy products, mostly because Russia’s domestic dairy prices were markedly higher than world prices. Belarusian suppliers benefitted from that price gap in 2013; however, it seems the focus on a single buyer could be risky if the Russian sanitary authorities should place a ban on the import of Belarusian products. Such an attempt was made in August 2013, when the Federal Service for \feterinary and Phytosanitary Surveillance (Rosselkhoznadzor) discovered pathogenic organisms in the products of several Belarusian producers4. At the same time, there is no need for Russia to limit supplies of Belarusian food, and it will hardly be taking action against Belarusian deliveries.
The export of meat products from Belarus was affected by various unfavorable trends in 2013. At the start of the year, prices for all types of meat products dropped, and poultry meat prices remained critically low throughout the year, which made export supplies unprofitable, while domestic prices remained quite high. Pork prices were low at the beginning of 2013; however, as new outbursts of African Swine Fever occurred in Russia, prices began growing. They peaked in early autumn, when Belarusian products were banned from the Russian market. Belarusian meat producers never managed to substantially increase their export during the final months of the year even though the ban had been lifted.
Savushkinprodukt. we believe Rosselkhoznadzor found coliform bacterium in adulterated curd cheese. http.//doingbusiness.by/savushkin-produkt-polagaem-chto-kishechnaya-palochka-obnaruzhena-rosselhoznadzorom-v-falsificirovannom-tvoroge.
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Pork export fell by 29.4% year-on-year in volume terms in 2013 to 42,600 tons, and in value terms, the drop was by 40.3% to USD 130.4 million. Russia’s share in Belarus’ export reached 97.7%
The average beef prices were lower in 2013 than in 2012; however, the problems with pork sales in foreign markets called for an increase in beef supplies.
In 2013, the export of fresh or chilled beef reached 99,000 tons in volume terms, up by 32.5% year-on-year; however, in value terms, beef supplies increased by only 14.5% to USD 432.9 million. Of the total volume of export, Russia accounted for 99.8%.
The export offrozen beefwent up by 63.4% in 2013 to 52,600 tons worth a total of USD 196.2 million, up by 33.6% year-on-year. Russia accounted for 83.4% of supplies. The lower share of Russian buyers in the export of frozen beef is due to the longer transportation distance.
Sausage export amounted to 69,700 tons, down by 1.1% from the 2012 level. In value terms, Belarusian export supplies went down by 2.7% to USD 261.8 million. Russia imported 97.5% of Belarus’ sausage export.
The export of ready-to-eat or canned meat products reached 25,700 tons, which represents a decrease by 16% from 2012, worth USD 130.1 million, down by 12.9%. Russia’s share in Belarus’ export of ready-to-eat meat amounted to 98%.
The reduction in the export volume of ready-to-eat meat products was due to the fact that a temporary ban had been placed on these products alongside pork. Furthermore, meat prices remained low, which discouraged consumers from buying sausage and canned products.
Sugar is another important export commodity, which showed a significant increase in the volume of supplies to Russia. In volume terms, deliveries to Russia amounted to 373,600 tons, which was almost twice as much as the originally agreed quota for 2013 and 53.3% above the 2012 level. However, Russia did not complain about the excessive deliveries. Nevertheless, the already substantial sugar supplies to Russia have become a challenge to further sugar deliveries to that country.
Russia accounted for 73% of Belarus’ sugar export in 2013, up from 54% in 2012. The rapid increase in deliveries to Russia
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and the growing share of that country in Belarus’ export may result in a situation similar to that observed in 2006—2007, when the neighbor complained about the origin of Belarusian sugar. It will be hard for Belarus to prove the origin of its sugar delivered to Russia.
Financial situation in Belarus’ agribusiness
The financial state of Belarusian agriculture was quite alarming at the end of 2013. According to Belstat, as of 1 January 2014, there were 101 loss-making organizations, which is 5.1 times more than as of the same date in 2013. The share of loss-makers stood at 6.8% in early 2014, up from 1.3% at the start of 2013. Loss-makers reported a total net loss of BYR 1.2 trillion as of 1 January 2014, up 9.7 times in 2013.
The total number of loss-making agricultural organizations including those that enjoyed state support reached 921 in 2013, up by 90% from 2012. The share of loss-makers in the total number of agricultural organizations amounted to 61.8%, up from 32.7% in 2012. Their net loss totaled BYR 3.8 trillion, up by 290% year-on-year in 2013.
Accounts payable of agricultural organizations increased by 52.9% year-on-year in 2013 to BYR 39.6 trillion. Overdue payables increased by 76.3% to BYR 7.7 trillion. The increase in overdue payables in agriculture resulted in a situation when suppliers of fertilizers and crop protecting agents suspended their deliveries in early 2014 waiting for the government to provide farms with additional resources.
The Ministry of Agriculture and Food insists that foodprocessing companies should pay farms in advance for them to be able to pay wages. Nevertheless, the number of agricultural organizations with wage arrears increased in 2013 and keeps growing in 2014, while the practice of down payments affects the financial situation at food-processing companies, as they are forced to take loans (which are provided at excessively high rates) to boost their floating capital.
The financial situation at dairy companies was quite favorable in 2013, according to their balance sheets, whereas in the meat sector, very few companies from the west of the country
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reported net profits. In 2014, the financial situation in agribusiness and the food industry will develop building on the trends that were observed at the start of the year.
Conclusions
The year 2013 proved to be very favorable for the dairy industry, which managed to make the most of the high prices in the Russian market. On the other hand, the meat sector suffered first from low prices and then from African swine fever, which resulted in a halt in pork export in the second half of the year.
The financial situation in agribusiness rapidly deteriorated. The poor weather conditions and ongoing systemic crisis in agriculture resulted in a lower output of almost all farm products.
In 2014, the situation may further aggravate in animal breeding, due to both African swine fever and poorly managed cattle-breeding techniques. The poor situation in agriculture will produce a direct negative impact on the food sector, which will ultimately affect the financials of processing enterprises.
Export opportunities will entirely depend on the Russian market. Dairy supplies will likely result in net profits, while the prospects of meat deliveries to Russia in 2014 remain unclear.
