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In 2003, the Russian government decided to rebuild the meat industry and began imposing tariff quotas.
Sergey Yushin was concerned that the government was making a mistake, not having a grasp on the investment that would be needed domestically to fill the gap that this would create in meat supply. He was instrumental in the establishment of the National Meat Association, which was founded by four importers with the aim of driving domestic production toward self-sufficiency.
The association was a medium for dialogue with government ministries on any issues that presented themselves in the meat industry.
CL: What was idea behind tariffs initially in 2003, given that the Russian sector wasn’t in a position to take up the slack?
SY: It’s a basic thing; to develop our meat industry and protect our own farmers. It didn’t completely stop imports. If the market needed, products were imported. It gave local producers financial incentive to start investing in increasing production. Between 1990 and the beginning of this century, our cattle population has fallen from 58 million to 23 million. Heavily subsidised food, like what was being produced in your EU, was wiping out our farmers. We could not compete. I was part of the problem too – I was importing the stuff.
Yes, at the beginning (initial years) of the tariffs there were lots of imports, it took time. But people were also getting richer at the time so they could afford to start paying more for their food.
In 2006, the government adopted the National Priority Project (NPP) to develop agriculture. Our farmers got a new support instrument to go with the tariff quotas – cheaper loans. At the time it was very expensive to get a loan. Instead of 14% interest rate, loans were given at 6% to 7%. Noticing how quick meat demand was increasing, the banks became more willing to give out loans to farmers too. It led to better knowledge, better facilities and better management on farms too. We brought in a lot of foreign expertise to help build up and manage our farms.
Listen to “The Russian beef industry” on Spreaker.
CL: How has beef and beef consumption developed in Russia in the last 15 years?
SY: If you go back 10 to 15 years in Russia, beef consumption was high but production was almost solely from cull dairy cows. Beef was a very cheap meat back then – cheaper than sausage. It was included in soups and broths, or boiled. There was no steak culture. It would be cooked for two or three hours to soften it.
At the end of the last decade, we had to convince the government to restructure production if we wanted to secure the future of the beef industry.
We had to specialise more of the cattle herd. At the time most of the dedicated beef herd was in back yard operations.
Things like 0% interest loans were brought in in 2008 under the State Programme for Agricultural Development – a follow on from the NPP.
Today, specialised beef breeds account for more than 15% of the total herd. We have imported lots of Angus genetics from America and Australia.
But it wasn’t just animals, we also had to import farmers because we didn’t know how to deal with these animals.
A lot of American cowboy families came to run 5,000 head farms in areas like the Bryansk region.
Why does our government need to make life easier for other countries? Do you think that anyone abroad makes life easy for Russia?
CL: What percentage of Russia’s beef is produced on specialised beef units, like Miratorg?
SY: Russia produced 1.2 million tonnes of beef last year and this year it is forecast that these types of operations will cumulatively produce around 100,000 tonnes. There is an interesting dynamic within this though. These farms have only really become established in recent years.
If we take the Russian market and their 100,000 tonnes, 10,000 tonnes of this will be high-end cuts. In the better times, when the country was richer, the USA and Australia used to export around 3,000 tonnes of these premium cuts to Russia and fulfil our demand. At present, demand is still exceeding supply even with this 10,000 domestic tonnes. It draws the conclusion that more and more Russians are eating premium beef.
CL: Are there export opportunities for Russia now with the development of these units?
SY: We want to look abroad now. We don’t use any hormones or additives and can use this as a marketing tool, just like the EU. We already have access to Japan and the UAE.
CL: What about the small holding farms? There is no traceability here, no medical records taken and often their animals are slaughtered in the same units as the new beef units.
SY: At present, only product from the new beef units is moving abroad. These have been designed and are being run with international export standards in mind. I feel that change is afoot on the smaller farms though. As of 1 January next year, veterinary surveillance along the whole supply chain is being introduced. At present, the documents used to move animals can be forged, altered, even bought. It will have to change. This will hit the market hard but it is a necessity.
CL: Russia is not self-sufficient in beef production, where is the deficit being filled – given that many countries are banned from sending beef into Russia?
SY: New Zealand was, but some of their processors were caught using trenbalone acetate. Their volumes were small though, maybe 500 tonnes. Belorussia are sending in quite a lot, but I think at least 35% of beef coming from here is coming from Ukraine – it’s a grey channel. Some offals are coming in from the EU, as offal is not included on the embargo list. Australia is small – 2,500 tonnes. American beef is banned because of growth hormones, not the embargo. South America is a significant source, Brazil being the most significant and by far the biggest exporter.
CL: Is that not a contradiction? The United States would have much better standards than Brazil, particularly from a traceability point of view. There are many 100% traceable, hormone-free producers in the US. Are your government just suiting themselves? They can’t afford to ban Brazil because their beef is cheap. There is undoubtedly some hormone use in Brazil too.
SY: There have been incidences in the past where steroids were found in Brazilian operations too. They lost the right to supply temporarily, some are still closed. The processors had to go and talk to their farmers and sort it out.
CL: The embargo goalposts are changing a lot – the rules seem to be rewritten the whole time. For example, offals not being on the embargo.
SY: Why does our government need to make life easier for other countries?
Do you think that anyone abroad makes life easy for Russia?
Offals are not on the embargo because a decision had to be made quickly, in hours, and without proper analysis at the time. For me, if you want to be consistent, everything should be on the embargo.
In my opinion, this will happen eventually. Our agriculture minister hinted in an interview the other day that some of the meat products not currently on the embargo will be banned by the end of the year.
CL: What sort of parts of the animal would be consumed here that western Europeans wouldn’t be familiar with?
SY: Tongues are a delicacy here for example. But, it differs depending on where you are in Russia. In rural Russia, the influence of Soviet times is still there – people are very inventive as they were brought up eating every part of the animal. Be it shoulder, knuckle or whatever, they eat everything.
It’s about profit. Did the meat industry in Europe stop after horsemeat? No.
CL: There are 8 million dairy cows in Russia, is there any dairy-beef system?
SY: No not really. Some people tried it, but rearing calves is not financially viable here. Miratorg is experimenting with veal production on a small scale, but that’s it.
CL: So, bull calves are slaughtered soon after birth?
SY: Yes, many of the farmers are reluctant to, but it happens.
CL: Are these big industrial size farms financially viable yet? Is government money keeping it afloat? There are plenty of rumours about animal mortality and poor performance at some Miratorg farms in recent years.
SY: Miratorg spent seven years getting their facilities and pastures ready from 2007 and had their first meat on the shelves in 2014. I expect them to make their first profits in three to five years. Current prices are good though, so it might be sooner. They are expanding rapidly and there is big investment going in at present.
Ciaran Lenehan with Sergey Yushin.
CL: It’s very hard to get finance as a typical farmer in Russia. It’s well known that the personnel behind Miratorg have close links to the government. Are they being looked after with easy access to cheap funds?
SY: That’s not true. I know from inside. It is never easy, they are just a normal company. I meet the president and prime minister more often than they do. They have the same issues as any other investors. They have been working with banks since 1995 and have never failed to meet their payments. Banks are eager to work with companies like this. During the recession, Miratorg kept paying.
CL: How big does a family farm have to be in Russia?
SY: Here, around 200 hectares.
CL: The words corruption and Russia go hand-in-hand for many. You’re now getting into international beef trading. Beef production is an easily corruptible process, take horsemeat in Europe and Operation Weak Flesh in Brazil for example. Are you worried that corruption might become an issue for Russian beef and act as a shackle?
SY: It’s not a matter of corruption for me. It’s a matter of people’s negligence for the law. Some individuals don’t give a damn about the law. And the authorities often have to close their eyes because of social influence and possible unrest. Russian people can get wild very quickly. It’s very difficult to persuade people sometimes that it is in their interest to pay more attention to the law if they were used to a different way for decades.
People need meat. Importers don’t think too much about these things – it’s about profit. Did the meat industry in Europe stop after horsemeat? No.
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