Shrimp and prawn production booming in Russia
Shrimps and prawns have not been produced in Russia on an industrial scale since the Soviet era. While investors used to consider this too risky a business, new companies are now determined to re-acquaint Russian consumers with this long-forgotten taste.
Russian consumers have traditionally made no distinction between shrimps and prawns, with the same word, krevetka, borrowed from the French crevette, used for both, reports Vladislav Vorotnikov. Shrimps are small krevetka and the prawns are big krevetka, or sometimes they are also called king krevetka. The same definitions are used by the Russian government agencies and custom services.
Prior to 2014 shrimp and prawn consumption in Russia was estimated at 50,000-55,000 tonnes per year, or only 384 grams per capita. Both types of krevetka were considered a premium product, but still affordable to the middle class.
According to Alexander Fomin, President of the Association of Fishing Industry Production and Trading Enterprises, prior to 2014 most shrimps and prawns in Russia were imported from Canada. It is believed that at that point the demand for these products reached the record heights in the country.
Following the annexation of Crimea in 2014, the first international sanctions were introduced. In August that year President Vladimir Putin responded with the so-called food embargo, which with a few exceptions, barred imported of all food products from the US, the European Union, Australia, Japan and Canada.
The domestic market immediately lost almost all krevetka supplies. Import had begun from Thailand and India, but the consumption slumped by more than half to only 25,000-30,000 tonnes in 2015 and 2016, or less than 200 grams per capita, according to Alexander Fomin.
In addition, in 2014 retail prices for shrimps in Russia started at Rub280 ($9) per kg. In 2018 this figure reached Rub769 ($12). While in hard currency terms the price difference is not that much, in rubles the price had jumped almost threefold and for the middle classes krevetka became a luxury item.
Shrimp and prawn consumption in Russia totalled 37,900 tonnes in 2017, 45% up on the previous year. In monetary terms this made around $243.5 million, estimated Levon Kharatyan, senior analyst at the Fishery Strategy Consulting agency. The biggest supplier is Greenland, followed with China, India and Thailand.
It was believed that the domestic market was recovering last year as Russia’s economy had been through the worst. But in 2018 new US sanctions undermined the ruble and new restrictions may follow in connection, and a ban on dollar transactions for Russian banks could result in an unprecedented shortage as Russia pays in dollars for imported shrimp and prawns.
Within the food embargo Russian government had banned import of shrimp and prawn broodstock from all countries subjected to restrictions. In 2016 the federal authorities realised this had been a short-sighted measure, and removed the broodstock from the list.
“The removal of import restrictions paved the way for the Russian shrimp and prawn industry to emerge. Russia has not produced broodstock and feed, and those things in the European part of the country now can be imported only from the European Union,” commented Anton Ivanov, member of the Russian Union of Industrialists and Entrepreneurs.
“At the current wholesale prices the payback of the average project is within five years. These are especially attractive terms for investment, especially as long as the federal government allocates state support to mariculture,” he added.
Against this background, in December 2017 Russkaya Krevetka opened what was described as “the biggest shrimp farm in the country” in Kaluga Oblast. With an investment cost of Rub100 million ($1.5 million), the farm is designed to produce 20 tonnes of Pacific white shrimp.
“This is only the beginning. Production is set to increase to 200 tonnes per year. One of our next steps is to shift from growing to breeding shrimps. So far all broodstock in Russia is imported from abroad,” Robert Stubblebine, general director of Russkaya Krevetka said during the opening ceremony at the farm.
The project will develop in stages and the regional government has already expressed readiness to provide full-scale support to the upcoming expansion.
“Our task is to help them. We would certainly provide extra land plots for them to expand production,” commented Anatoly Artamonov, the governor of Kaluga Oblast.
Several months later North Krevetka, revealed its own plans to invest Rub150 million ($2.5 million) to start producing shrimps in Leningrad Oblast. The design production capacity of the project is 20 tonnes per year, although it is set to increase during the coming years, said Kirill Kirillov, one of North Krevetka’s owners.
The company aims to release its first marketable products in 2019, and expand production to 200 tonnes per year by 2022. This would require additional investment of Rub200 million ($3.1 million). Initially the company will grow Vannamei shrimp, but in future some freshwater shrimps will be added to the range.
“We expect to get support from the Leningrad Oblast’s government. Companies engaged in the aquaculture business get subsidies on feed, and soft loans [from state-owned banks], plus reimbursement of the price of equipment,” Kirill Kirillov explained.
However, the price for the first local shrimps on the Russian market will be different as compared to the price of imported products. North Krevetka plans to sell at Rub1800/kg ($25), mainly in the HoReCa segment.
More In the pipeline
Other Russian companies are also consider investments in krevetka production. Tkachev’s Agricultural Complex, a major manufacturer of agricultural products in central Russia, launched in 12017 an experimental facility for shrimp production, where the company planned to test the technology.
As soon as it has solid results, some decision about large-scale investments could be made, although the lack of local feed and broodstock need to be overcome. Similar experimental production was launched in Astrakhan Oblast a few years ago by a local businessman Victor Kryuchkov. His small facility he is growing crayfish and prawns and at the moment he is seeking partners to start production at the industrial scale.
“We are offering profitability close to 100%. This is really high, as for comparison outside Russia the average profitability in this business does not exceed 20%,” he said. “Despite that, it is not easy to find investors to such kind of project.”
The main problem is that production of shrimp and prawns is a brand new business that most investors know nothing about.
Another shrimp farm may be launched in the Tatarstan Republic within the aquaculture cluster supported by the regional authorities, Vasily Sokolov of the Federal Fisheries Agency was quoted as saying, and he added that the regional government has agreed to provide land under the project.
Over the past years Russia has been struggling for the self-sufficiency of its domestic food market. There are no exceptions under this policy, so there is a belief that support for new projects in seafood production will only grow in the coming years. In Russia aquaculture now considered as a part of agricultural industry, which was promised record-breaking state aid of Rub3.42 trillion ($51 billion) from 2019 to 2025. New projects for krevetka production can also be expected to be in line for a piece of this pie.
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