In October 2018, Russian Prime Minister Dmitry Medvedev announced new governmental targets for the country’s agriculture sector, which included a goal of achieving USD 8 billion (EUR 7 billion) in revenue from annual seafood exports by 2024.
The goal is a doubling of Russia’s current annual export figure – in 2018, the country exported USD 4 billion (EUR 3.5 billion) worth of seafood. And it won’t come from catching twice as much fish. Ilya Shestakov, head of the Russian Federal Agency for Fisheries, has said the national catch is projected to rise only 500,000 metric tons (MT) through 2030, thus adding the maximum of 10 percent to the five million MT estimated to be harvested in 2018.
In order to achieve its ambitious goal, the industry must rapidly shift from supplying primarily raw materials to selling high value-added products, Medvedev said in his announcement. Shestakov promised favorable investment quotas and support of promotional trade programs in foreign markets as avenues to help the country’s fisheries sector achieve the objective.
“The task to double export revenue is a serious and ambitious one. We understand we cannot increase the catch twofold, which means other ways need to be found. We must enhance the value of the seafood export,” Shestakov said in a speech at the Golden Autumn, the biggest agriculture exhibition in Russia.
Russia isn’t starting from scratch on this project, but it’s close. According to Ilya Bereznyuk, managing partner of Agro and Food Communications, an agriculture industry consultancy, Russia exported two million MT, or almost 50 percent, of its total seafood output in 2017, but 86 percent of that total was frozen unprocessed fish.
“[That’s] primarily pollock sent to China,” he told SeafoodSource. “Though a share of frozen fillet has also increased: 55,300 MT was exported in the first half of 2018 against 36,000 MT in the first half of 2017.”
Federal Agency for Fisheries export pricing data show Russian products have lower per-ton value abroad, reflecting the fact they are largely unprocessed. The average price of one metric ton of exported Russian fish goes for USD 2,000 (EUR 1,750). However, the United States – a country with a similarly-structured seafood industry – gets an average of USD 3,900 (EUR 3,420) per metric ton of exported seafood.
“Much still has to be done here,” Shestakov said, referring to efforts to increase the value and reputation of Russian seafood abroad.
He called for the industry to move toward selling fillets and other types of value-added products instead of raw fish. One metric ton of pollock processed into fillet or stuffing brings USD 1,400 (EUR 1,230), he said, while selling an unprocessed metric ton yields only USD 1,200 (EUR 1,054). End products – fish sticks, for example – move up the value chain even further, to USD 3,500 (EUR 3,076) per MT.
New lanes to growth
In addition to making more of its pollock catch more valuable, Shestakov has called for an expansion of Russia’s seafood sector into new species. There is untapped potential in prospective species which now remain underfished, he said. After a 25-year time period, saury, iwashi, and mackerel returned to Russian coasts in 2018. Pelagic season this year has brought three times more iwashi than in 2017 (50,000 MT); 23 percent more mackerel (20,000 MT), and 12 percent more saury (5,000 MT). Other promising species include Antarctic krill and mesopelagic species.
Shestakov said aquaculture in Russia also presents a promising ancillary toward reaching Russia’s USD 8 billion annual goal by 2024. While the sector produces only four percent of the country’s total seafood output – 200,000 MT of five million MT – its output is set to increase to 700,000 MT a year through 2030. More important, the national aquaculture segment is capable of producing high-value seafood, he said.
The more efficient use of existing products can help retain more value for the sector, Shestakov said. Waste products can be turned into fish-flour or fish oil, which can be used for producing fish feed and then sold in Asian markets for aquaculture.
Shestakov said the government was working to eliminate bureaucratic barriers that are hindering the seafood sector’s growth. For example, most of Russia’s caviar production is still forced to stay home, as it cannot be exported to Europe due to European quality control. requirements. In 2017, Russia produced nearly 32 MT of caviar, but just seven MT of that was exported, primarily to the United States, Singapore, and Canada.
“We [want] the segments where Russia used to be well-known in foreign markets – first of all, sturgeon and black caviar – [to grow again],” Ilya Shestakov commented.
Alexander Novikov, chairman of the Union of Sturgeon Breeders, complained that Federal Service for Veterinary and Phytosanitary Surveillance (FSVPS), Russian agriculture supervisory authorities, have been unable for years to meet the demands of their European counterparts to make caviar exports possible. The sticking point is methods used in laboratories accredited by FSVPS for quality control of caviar. These methods must be corrected in accordance with European standards, but this work will take some time to be accomplished, he said.
Another part of Russia’s plan to grow the value of its seafood industry lies in finding new markets. Maxim Kozlov, chairman of the Sakhalin Fisheries Association, said in his speech at the Golden Autumn that companies from his region discovered a lucrative Chinese market for live flounder and now are looking for investments to build vessels to meet the demand from Asian consumers.
“It can increase the value of export considerably,” he said.
That effort is being paired with a two-year-old public-private partnership that has the goal of renewing the country’s fleets and processing plants. Under the program, 33 vessels are under construction, including those equipped with fillet production lines, and 22 plants are being built across the country, with the biggest share being under construction in the Russian Far East. Most of these ships and processing facilities are scheduled to enter operation between 2021 and 2023 – in time to help Russia meet its goal.
Sergey Sennikov, the deputy CEO of Norebo, the largest fishing company in Russia, told SeafoodSource that the fishery’s fleet renovation program envisages new vessels equipped with state-of-art processing facilities.
“This equipment will make it possible for us to produce fillet, fishmeal, cod-liver oil and canned cod-liver, as well as enhance the efficiency and utilization of resources,” he said.
As part of the program, Norebo is upgrading its plant in Murmansk, which currently produces value-added products under the Borealis brand name for the Russian retail sector and for foreign markets in Europe and North America. It is also planning to build additional facilities to manufacture clipfish (salted and dried or semidried cod and haddock), which is popular in Europe and South America. And the company is planning to up its marketing efforts its wholesale brands Ocean Spirit and Glacialis.
Government is here to help and ... control
When it comes to both stimulating exports and marketing them, however, the Russian Federal Agency for Fisheries wants to play first fiddle. The Russian Fish, a recently-formed nonprofit, is in the midst of formulating a campaign to help national fisheries, farmers, and traders market their products abroad.
Shestakov, whose agency has been behind the initiative, has expressed optimism that Russian brands are already gaining traction globally.
“Russian fish is well-known and recognizable in foreign markets, which means we can promote brands there,” he said. Shestakov added that Russian producers should pay special attention to the pre-sale process to better meet foreign clients’ demands.
Shestakov said he hopes to collaborate with private Russian companies in the marketing effort, but there’s a catch: Its helping hand comes with stricter demands for financial transparency. Currently, a sizeable portion of the country’s imports and exports receive illegal breaks on customs duties. In an effort to curtail those breaks, the government has proposed shifting to an auctions system for export sales, starting with pollock and crab.
While some fishing companies are bristling at the idea, the government will not be deterred in its push for greater transparency, Stestakov warned in his Golden Autumn speech.
