Cherkizovo: the situation in the meat industry is improving

The first quarter of the year was very difficult for meat producers in Russia. Grain prices reached a historic high, while pork prices fell throughout the quarter, Cherkizovo reports. However, the situation has started to improve.

In the 1^st quarter, large pork producers were forced to sell meat and processed meat products below cost. “Although the pork division has been hit hard by falling prices, part of the margin has shifted to the meat processing division,” Cherkizovo reports.

“We expect the situation to improve considerably in future. As we anticipated, pork prices started to increase with the start of the summer season.

Due to a market shortage caused by a decrease in imports and the exit of inefficient producers, live-weight pork prices increased by more than 10% at the beginning of May. At the same time, grain prices started falling in expectation of a good harvest,” the company emphasizes.

Cherkizovo welcomes the government’s decision to increase support for the agricultural sector. Direct government subsidies this year will be 9 rubles per kg of pork and 3.5 rubles per kg of poultry meat. “These subsidies will be allocated based on production levels in the 4^th quarter of 2012. Thus, Cherkizovo Group could receive subsidies of nearly 600 million rubles,” said Sergei Mikhailov, Chief Executive Officer of Cherkizovo Group.

Cherkizovo Group is Russia’s largest meat manufacturer. The Group is one of three largest companies serving the poultry, pork and processed meat market and is the country’s largest feed manufacturer.

The company has 7 full cycle poultry production facilities with total capacity of 400 thousand tonnes live weight per year, 14 modern pork production facilities with total capacity of 180 thousand tonnes live weight, 6 meat processing plants with total capacity of 190 thousand tonnes per year, 6 feed mills with total capacity of nearly 1.4 million tonnes per year, grain storage facilities with total storage capacity of more than 500 thousand tonnes, and a land bank of more than 100 thousand hectares. In 2012, Cherkizovo produced more than half a million tonnes of neat and processed meat products.