The effect of coronavirus on the meat market of Russia

The NKR rating agency has prepared a review “The meat market in Russia in a pandemic”, which considers two scenarios for the development of this industry for the coming year, RBC writes.

The first scenario (basic) provides for the extension of most quarantine measures until the end of the first half of the year. In this case, the decline in Russia's GDP by the end of this year will be 5-6%, population incomes will decrease by 7-8%. With this development of events, the demand for meat can begin to recover in July-August this year. Consumption will remain at the level of 2019 – 77 kg per person per year for all types of meat, but consumers will choose cheaper products.

The second (crisis) scenario assumes that quarantine measures in most regions will continue in the second half of the year, and the second wave of a pandemic may begin in the fourth quarter, which will last until the beginning of 2021. In this case, Russia's GDP in 2020 may decline by 7-8%, and household incomes will fall by 10-12% and begin to recover only in the first half of 2021.

According to analysts, in a crisis scenario, domestic meat consumption will decline, but export potential will continue. Meat price will rise due to higher feed prices, in which the share of imported ingredients is high, while the possibilities to increase retail meat prices will be limited, since this product is included in the list of socially important essential goods. As a result, the revenue of the largest domestic meat producers will not grow, and the margin of the top ten companies will be negative.

SOURCE: Sfera FM