2017 of the russian federation d · 2017 russian terms of delivery are comparable to actively...

February 28, 2017

Dubai

Ministry of Agriculture

of the Russian Federation

Supported byGu

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Export potential of the Russian agricultural products

State Secretary –

Deputy Minister Of Agriculture of

the Russian Federation

Sergey Levin

2© 2017 JSC “KPMG”, a company incorporated under the Laws of the Russian Federation, a member firm of the KPMG network of independent member firms affiliated

with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Ministry of Agriculture


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Russia is the largest country in the world, rich in natural resources, actively developing its industrial potential

in land area

Sources: World Bank, KPMG analysis

1st worldwide

in population9th worldwide

in farmland area5th worldwide

climate conditionsUnique

in border length1st worldwide

in GDP by purchasing parity6th worldwide 16,376,870 sq.km which is more than one-eighth

of the global surface area

144 million people, which is equivalent to

approximately 2% of the total world population

The farmland area in Russia is 218 million ha \

539 mln acres (over 4.4% of global farmland

area)

Russia has a large variety of climatic zones, from

arctic to subtropical, including moderately

continental and monsoon, which creates

inimitable conditions for crop production and

livestock breeding

GDP equaled USD 3.6 trillion in 2015 (3.1% of

the world`s GDP)

Russia has borders with 18 countries and is

bounded by 12 seas, creating unique logistic and

trading opportunities




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Russia in the global balance of resources

20%

80%

14%

10%

7%

69%

NA

TU

RA

L R

ES

OU

RC

ES

Sources: UN Comtrade, World Bank, USGS, FAO, Federal State Statistics Service, Ministry of Agriculture, KPMG analysis

Russia accumulates vast natural and human resources potential for food production and excellence in agricultural

field

Russia controls 10% of all renewable

sources of fresh water in the world

Russia ranks 2nd in the export of potash and nitrogen fertilizers

Arable land

in Russia

of the world`s area

Other countries

USA

China

Russia

10%130million hectares

0.4

2.7

3.0

0.9

5.4

World

Russia

20%

1.1

1.3

2.7

4.9

0.7

Exports of potash, 2015, USD billion Export of nitrogen fertilizers, 2015, USD billion

HU

MA

N R

ES

OU

RC

ES

In Russia there are more than 300 higher

and secondary educational institutions in the

agricultural sector

Total

population

of Russia

Employed

72,3

144million people

7%

million people

Percentage of workforce of the country involved in the agricultural business

= 321 million acres




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Russian agricultural sector is growing at higher growth ratesthan anticipated

Growth rates, %

Sources: Bloomberg consensus, Federal State Statistics Service, Ministry of Agriculture

GDP structure, %

-0.2

-2.8

0.7

1.3

5.8

3.5

2.6

4.8

2013 2015

GDP growth rate

2016E

Agriculture sector

growth rate

2014

3.0% 3.2% 3.4%3.8% 4.0%

Other

industries 96.0%

100%

+1%

Agriculture

sector

2016

97.0% 96.8%

2012

96.6%

2013

96.2%

2014 2015

The Russian agricultural sector is a priority sector of present-day state policy




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Total commodity & food production(а) , 2017 forecast

million tons

Notes: (a) European Union is considered as 1 country for the purpose of ranking

Sources: USDA forecast, KPMG analysis

Total commodity & food exports, 2017 forecast

million tons

Russia is a leading producer and exporter of agricultural commodities and food

in wheat exports№1

№4 in barley exports

in exports of sunflower seed oil№2

USA 27.9

Russia 28.5

2.0

5.1

Russia

Ukraine

3.9

7.0

Russia

Australia

№2

4.8

7.8

Russia

EU

№2

4.1

5.8

Russia

Ukraine

№2

Russia 17.5

EU 59.8

№6

30.2

India 160.0

№4

Russia 72.5

EU 144.9

№6

3.8Russia

USA 18.7

Russia

in oat production

in sunflower oil

production

in barley production in cow's milk production

in wheat production

in broiler production

№х

Russia`s position in the world:

production

№х exports

leading country




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Major states-suppliers to the Middle East, Persian Gulf and North Africa

Total exports of agricultural commodities and food

to the Middle East and North Africa(а), 2015(б)

USD billion

Italy

USA

Spain

5.2

8.8

Argentina

India

Netherlands

Brazil

Canada

7.4

Ukraine

New Zealand

7.1

Germany

Australia

5.4

4.4

3.7

3.4

3.1

2.4

2.2

2.2

2.1

2.0

Russia

China

4.7

France

Notes (а) Excluding commodity turnover in the Middle East and North African countries (b) Excluding countries for which data are not available for 2015

Western Sahara, Iran, Iraq, Libya, Mauritania, Lebanon, Palestine, Syria

Sources: UN Comtrade, KPMG analysis

Target markets

Russia is

the 5th largest exporter

to the region’s markets

Key suppliers of agricultural commodities and food to

the region’s countries

Top-5 suppliers

Top-15 suppliers

Target markets (foreign trade data for

2015 is available)

Target markets (foreign trade data for

2015 is unavailable)




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The trade relationships between Russia and the Middle East, Persian Gulf, North African countries are stable

+29%

2020F

22.0

2016

17.0

2015

16.2

11.0

5.2

Total exports of agricultural commodities and food

from Russia

USD billion

Trade turnover with the Middle East, the Persian

Gulf and North African Countries, 2015

USD billion

Sources: Federal Customs Service of Russia, KPMG analysis

Total exports to the Middle

East, the Persian Gulf and

North African countries

Lebanon 0.6

Iran

0.50.5

Algeria 0.11.2

Egypt

0.1

1.0

Turkey 4.111.7

Kuwait

Morocco

0.3

0.43.3

0.21.0

0.10.3

Saudi Arabia 0.20.8

UAE

ImportsExports

Russian Federation is a reliable trade partner for the Middle East, Persian Gulf and North African countries: total

trade turnover with these countries exceeds USD 28 billion

ТОP-3Persian Gulf

ТОP-3Middle East

ТОP-3North Africa




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1st priority

3rd priority

2nd priority

4th priority

Product attractiveness index for the Middle East, Persian Gulf and North Africa

Ag commodity and food attractiveness index for the Middle East, Persian Gulf and North Africa

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

18

20

22

24

26

100 1,000 10,000

Chocolate

Sweet beveragesSauce

Sunflower-seed oil

Wheat

Soya bean oil

Chilled fish

Dough

Chilled beef Condensed and

powdered milk

Apples

Infant food

Fresh potato

Leguminous veggies

Waffles

Yeasts

Barley

Onions

Maize

Spirits

Soya beans

Turnip

Sugar

Dairy butter

Frozen beef

Honey Rape seed

Lamb

Nuts (coconut, brazil, cashew)

Palm oil

Walnuts

Rice

Poultry meat

Imports in Middle East and North African countries in USD million

Coffee and tea

Cookies

Cheese and curd

Frozen fish

Notes: (a) Based on the methodology used to calculate the Herfindahl-Hirschman market concentration index

Sources: UN Comtrade, World Bank, KPMG analysis

The size of a bubble is inversely proportional to the segment concentration

index(а) – the larger the circle, the lower the concentration

Ave

rag

e a

nn

ua

l g

row

th r

ate

of

imp

ort

s fo

r 2

01

0-2

01

5.,

%




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The traditions of Halal production in Russia

Russian Halal food producers comply to requirements of Muslims while exporting to the countries of the Persian

Gulf and Africa

* according to the chairman of the Eurasian Halal Union

— UAE

— Kuwait

— Oman

— Egypt

— Jordan

— Tanzania

— North Africa

23 million Muslims

live in Russia today*

85 million Muslims

on the entire post-Soviet

space

The destinations of current supply of Halal products

from Russia *:

Sources: Interview with the Eurasian Halal Union in Russian




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Price drivers for ag commodities and food from Russia

Rouble devaluation Low production costs

Electricity

USD per kilowatt

/ hour

Petrol

USD per liter

Average salary

USD per month

Corn(b)

USD per ton

30

25

0

85

80

75

70

65

60

55

50

45

40

35

х2

2017201520132011

1 2

Note: (a) based on a survey of market players (b) to assess the cost of the fodder base

Source: globalpetrolprices.com, Numbeo, OVO Energy research (2011), the data of commodity exchanges, Central Bank of Russia, KPMG analysis

Exch

an

ge

ra

te R

UB

/ U

SD

0.7

0.7

1.2

1.1

1.0

1.5

Ø 1.02 Ø 0,16

0.19

0.29

0.08

0.17

0.12

0.11

Ø 1,551

1,826

2,872

507

593

2,895

611

148

160

Ø 177,2

183

207

188

Average

level

н/д

The competitiveness of Russian ag commodities and food is driven by rouble devaluation and lower production costs




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Russian terms of delivery are comparable to actively exporting countries (based on the UAE case)

USD 2.2 for 1 kg(c)

USD 2,000(a) for dry container

USD 3,400 for a refrigerator

30 days

USD 2.0 for 1 kg(c)

USD 1,480 for dry container

USD 2,800 for a refrigerator(b)

22 days

USD 3.2 for 1 kg(c)



24 days

USD 1.0 for 1 kg(c)

USD 400 per dry container

USD 680 for a refrigerator

3 days

USD 3.4 for 1 kg(c)



21 day

Note: (a) All prices are given as at the end of January 2017 (b) Based on the example of current supplies

of the Russian agricultural producers (c) Delivery on a pallet

Source: searates.com, interviews with experts, KPMG analysis




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Food products of Russia: case study (1/4)

“PROSTO MOLOKO” considers pursuing its priority

markets: UAE, Egypt, Sudan, Lebanon, Tunisia,

Algeria, Morocco, etc.

Dairy products (based on the example of the manufacturer's product)

“PROSTO MOLOKO” delivers high quality products that is highly appreciated

by the international experts on the following tradeshows:

Source: the company data

Unique selling points

Export plans Awards

№4

№2

№1

№3

Raw materials for production are purveyed from ecologically clean districts of Tatarstan and

undergo stringent microbiological tests.

40% of consumers have opted for the products of this brand soon after the first batch of

dairy products appeared on the Tatarstan market.

The company is one of the biggest Russian milk processers with seven dairy plants.

State-of-the-art equipment makes it possible to extend the shelf life of the 100% natural

product up to:

— 24 months for deep frozen butter;

— 9 months for milk in Tetra Brik Aseptic package.




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Damate turkey exports started in spring 2016. It successfully

sells the product to the Netherlands, Italy, Serbia,

Switzerland, Ireland, Hong Kong, Vietnam, Africa and

the Caribbean. In addition, it has started deliveries to the

EurAsEC and the CIS

Turkey (based on the example of the manufacturer's product)

Winner of the contest WorldFood Moscow in 2014, a regular winner of the exhibition

ProdExpo, winner of "Best Trademark“ award and others.



Export examples

Quality

It is produced on a full cycle factory on

the most state-of-the-art equipment in

Europe under the constant supervision

Useful

High standards for the quality of fodder

and the conditions for poultry (fodder

and farm)

Delicious

A unique air-cooling system without

water utilization makes it possible to to

keep the meat juicy and soft

FreshModern packaging lines together with unique packaging solutions make it possible to keep the product fresh up to 10 days

AffordableFederal distribution, partners with all key national retailers

Awards

№2

№1

№3

№4

№5





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Export shipments:

Azerbaijan, Gabon, Republic of Guinea, the Republic of

Guinea-Bissau, the Republic of Equatorial Guinea, Ghana,

Georgia, Congo, Côte d'Ivoire, Morocco, Liberia, the United

Arab Emirates, Togo

Marbled beef Black Angus (based on the example of the manufacturer's product)

Miratorg – is the only company outside North

America certified by standards

Certified Angus Beef



Export examples Awards

Full production cycle. Quality is

ensured by product control from “farm to

fork”

The largest cattle herd of Black Angus

breed: more then 450K animals, including

160K animals of maternal herd – unique

genetic pool

200 days of grains battening

30% of produced premium beef complies to the highest marble grade Prime 5. Wide-ranging product-mix: from premium steaks to meat subproducts

№2

№1

№3

№4




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Since 2005 AQUA-WHITE has focused on implementation

of wide-ranging export projects. The volume of exported

products has increased by 64% compared to 2015.

Nowadays AQUA WHITE is exporting its products to 15

countries.

Gold and silver medal winner, diploma winner of the international

contest "Best Product 2017" PRODEXPO-2017.

The gold and silver medals, diplomas of the international

professional competition "Best Product of the Year” of the Russian

Research Institute of Brewing, soft drinks and wine industry



Export examples

Direct mineral pipeline from the

well to the plantEuropean Certification LATSERT

and permission to distribute to the

EU

Natural ingredients

Wide range of products

Top 3 Russian manufacturers of water

Beverages (based on the example of the manufacturer's product)

Awards

№2

№1

№3

№4

№5


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Ministry of Agriculture


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2017 of the russian federation d · 2017 russian terms of delivery are comparable to actively...

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