Cherkizovo suggests establishing a meat intervention fund in Russia, similar to the grain intervention fund

February 6, 2013

“One of the most effective mechanisms to stabilize the Russian meat market could be a special intervention fund, in which pork and poultry meat will be purchased by the State,” said Sergei Mikhailov, the CEO of Cherkizovo Group, one of the largest Russian producers of meat and meat products. 

At present, Russia has a grain intervention fund for the regulation of the grain market; in  periods of low grain prices, the state buys grain, and in the case of a sharp growth in grain prices, sells it on to the market. 

"One option could be the creation of an intervention fund for meat. The USA and Europe have done something similar." Sergei Mikhailov said on Wednesday, during a meeting with the Ministry of Agriculture about the conditions and prospects of the development of pig breedingin Russia. 

According to Sergei, in the shorter term (around 1-3 months), this mechanism would allow the State to enter the market and remove excess poultry and pork, stabilising the market and removing the price volatility. "I think this could be a very effective and cost-efficient mechanism," Mikhailov said. 

“At the moment there is high volatility in the pork and poultry market for various reasons, which is unacceptable for manufacturers,” he said. “And even if the current situation stabilises, we cannot discount the possibility of this happening again. Some months, volatility may increase due to seasonal factors, or consumer trends, or the effect of new investments in production, and the market will still have to adjust,” he said. 

Later, during the media briefing, when talking about the effectiveness of an intervention mechanism, Mikhailov gave the example of the United States. When Russia temporarily refused to import American chicken legs, which came as a surprise to U.S. poultry producers, U.S. officials bought up part of the released volume through a special fund – i.e. they removed the surplus, which was then released in to the market when it had stabilized. 

"Two or three refrigerators would be needed to store the 50,000 tonnes of meat that would have to be removed to eliminate the volatility in the market," said Cherkizovo’s CEO, in reference to the Russian market. Pork can be stored in the fund for 6-12 months and poultry for up to 6 months. 

Another potential control measure is to support exports, which is a strategy used in Europe. The surplus in the market is bought by the fund and then, using an export subsidy, these products are sold to a third country that is outside the EU.