(For other news from the Reuters Russia Investment Summit, click on http://www.reuters.com/summit/RussiaInvestment09?PID=500)
By Aleksandras Budrys and Robin Paxton
MOSCOW, Sept 16 (Reuters) - Russia will rely on imports for no more than 10 percent of its poultry and pork within three to four years as growing domestic output squeezes other suppliers from the market, the head of meat producer Cherkizovo said.
Russia has invested billions of dollars in recent years to increase domestic production of poultry and pork and reduce its reliance on imports, potentially pushing the U.S. poultry sector out of a market that consumed a quarter of its exports in 2008.
Sergei Mikhailov, the chief executive of leading Russian meat producer Cherkizovo, told the Reuters Russia Investment Summit on Wednesday that broiler meat production in Russia had risen by between 15 and 16 percent annually in the last five years.
First Deputy Prime Minister Viktor Zubkov said in April that Russia aimed to reach self-sufficiency in poultry meat and pork by 2011, with exports a possibility by 2012.. "This goal is quite attainable, give or take a year," Mikhailov said. "I don't think we'll be able to do without imports altogether, but their share will shrink to about 10 percent, which is normal for keeping competition on the market." Russia produced 64 percent of the poultry meat it consumed last year, Agriculture Ministry data showed, meaning imports took a 36 percent market share. Self-sufficiency would help Russia to avoid the crises that importers have faced when food prices rose.
"In times of crisis, the task becomes more urgent," said Mikhailov. "To some extent it's a measure of security for the country. We can, for example, cut off gas to Europe, and they could cut off supplies of meat and we will go hungry."
ROOM FOR GROWTH
Russia last year produced about 6 million tonnes of meat in total and consumed almost 9 million tonnes, or 3.1 percent of the world's entire meat consumption, data from industry lobby the National Meat Association showed.
The country produced 2.2 million tonnes of poultry meat and imported 1.2 million tonnes last year, the association said. Pork output was 2.0 million tonnes and imports, mainly from Latin America and the European Union, totalled 770,000 tonnes.
Mikhailov said demand for meat in Russia had fallen between 10 percent and 15 percent during the financial crisis, but that imports had been more affected than domestic production.
"In Russia, there's a preference for Russian products."
Mikhailov said Russian pork production had begun to rise significantly over the last two years. He said government help had played an important role in this process by backing projects that normally only start paying back in five to eight years.
Cherkizovo has asked the state to guarantee 20 billion roubles ($646 million) of the 46 billion roubles needed to build a meat complex in the Lipetsk region, south of Moscow.
"We have a preliminary agreement for this project with the Russian Agricultural Bank and assume that they will finance this project," Mikhailov said, adding that Cherkizovo's core earnings in 2009 would likely exceed those of last year.
London-listed Cherkizovo currently is implementing two more projects -- in the Russian regions of Bryansk and Penza -- that will allow the company to raise poultry meat production by 50 percent to 300,000 tonnes a year, Mikhailov said.
"We expect to finish the investment projects that we started and we are eyeing new investment projects," he said.
Russia has room to step up meat consumption, Mikhailov said. He said that annual per capita consumption is only 65 kg compared with 120 kg in the United States and 80 kg in the European Union.
"Even a citizen of the Soviet Union consumed about 78 kg," he said.
But Russia is unlikely to cut beef imports for the foreseeable future. "We have an understanding that Russia will not become competitive in beef," Mikhailov said.
"Beef production has a longer investment cycle. If for poultry breeding, it is three to four years and for pig breeding, four to six years. For cattle breeding it is eight to 10 years." ($1=30.98 Rouble) (For summit blog: http://summitnotebook.reuters.com/) (Additional reporting by Maria Kiselyova and Maria Plis; editing by Karen Foster)