February 18, 2004

 

 

Russian Broiler Production Marks Increase For Sixth Straight Year

 

Russian broiler production is forecast to continue to grow at a brisk pace in 2004 (11 percent), marking the sixth straight year of increased production.  However, high feed costs due to the poor Russian grain harvest of 2003 will reduce production growth and temporarily subdue the high level of industry investment.  Poultry imports are forecast to reach only 1.05 MMT in 2004 due to the poultry quota. 

 

The 2004 poultry import quota should be somewhat more flexible for exporters due to the elimination of a requirement that 25 percent of imports in 2003 be mechanically deboned meat.  With demand expected to remain strong, the poultry quota and, to a lesser extent, the feed shortage are expected to maintain strong upward pressure on prices.

 

Production

 

Russian production of broiler meat is forecast at 620,000 MT in 2004, an 11 percent increase over production in 2003, but three percent less than the previous forecast.  The broiler production estimate was decreased slightly due to tight feed supplies throughout Russia. 

 

Though feed supplies are short and feed grain prices are high, modern poultry facilities continue to increase production.  These efficient producers also continue to buy low efficiency poultry farms, which remain plentiful in many parts of Russia, and add new management techniques, new equipment, and new production technologies.  Increasing poultry prices have helped the efficient producers remain profitable, despite grain prices, and permitted further expansion. 

 

An additional factor for investment remains the strong earnings for companies in the natural resource export sector, several of which own and support poultry and livestock subsidiaries.  However, poultry industry profits are lower than in recent years, subsequently reducing the rate of upgrading poultry production in the old plants.

 

The Russian poultry flock increased by two percent in 2002 over 2001 and decreased by 0.2 percent in 2003, compared with 2002.  This is the result of bankruptcy or production slow-downs among inefficient producers.  Nevertheless, more overall efficient production is causing increased average daily weight gain and faster finishing times.

 

Feed Supply

 

Increasing poultry production demands increased feed supplies.  The low 2003 grain harvest, increased grain export volumes, and increased feed consumption by poultry and livestock producers created feed shortages in the Russian Federation at the end of 2003 and will continue through the first half of 2004.  Thus, prices have skyrocketed.  The price of one metric ton of feed wheat has reached about $160, barley $130, and corn $175.  Significant feed stock reduction in 2003 in comparison with 2002. 

 

However, despite the very high prices, the feed price effect has been mitigated to some degree by the very high profitability (per kilo of meat) of leading producers, increasing efficiency of feed utilization, and use of non-traditional feeds (or feed not accounted for by national statistics) by small farmers. 

 

Nonetheless, producers are experiencing difficulties in obtaining the volume and quality of grain (mostly wheat) necessary in some regions due to the poor inter-regional transportation of grains.  Artificial administrative or other barriers to free transit of grain inside Russia have forced many producers to shift from the traditional predominately wheat ration to other components, including imported soy and other feed ingredients.

 

Consumption

 

Poultry consumption in 2004 is forecast to decrease by three percent over 2003 because local production will not be able to fill the gap between supply and demand caused by the poultry quota.  Prices will continue to rise on all types of poultry products.  As prices continue to increase, consumption will be held to a lower level.

 

Trade

 

Russian poultry imports are expected to be 1.05 MMT in 2004, the same as the previous forecast because the quota volume remains unchanged. 

 

Total Russian poultry imports in 2003 were about 100,000 MT lower than 2002.  Overall poultry trade saw two peaks in 2003, the first (February - April) before the poultry import quota was enforced and second (November-December) when poultry traders where trying to import the remainder of their quota before the 2003 licenses expired.  High import volumes in the pre-quota period softened the negative impact of the protective measures on poultry imports and buoyed poultry availability and supply throughout the remainder of 2003. 

 

Turkey imports in 2003 were higher than expected because the country allocation allowed certain importers to seek to maximize the value of their quota license by importing higher priced turkey parts.  

 

The trade in 2004 has got off to a slow start due to delays in import quota allocation.  The Ministry of Economic Development and Trade announced the eligible importers on January 26, 2004, after publishing and then revising two earlier versions.  Assuming a minimum processing time for license applications of five working days, the first shipments of U.S. poultry would not arrive prior to March 1st.  While this is a frustrating delay, many traders were subdued because they still held large stocks as a result of the rush of product prior to the expiration of the 2003 licenses in late 2003.

  

Poultry prices

 

Prices for domestic poultry frozen carcasses and boneless breasts decreased in November, as did prices for the popular imported chicken leg quarters and all other imported poultry.  November was the only month to exhibit an across-the-board price decrease in 2003. 

 

This decline in prices is attributed to the large amount of poultry that was entering Russia or had been booked for shipment during the last two months of the year, prior to the expiration of the 2003 quota licenses.  Clearly, this shows how influential imported poultry remains in Russia.  It is important because it fills a significant portion of demand, but it also plays a price setting role as domestic producers maintain a relative ratio between their prices and imported poultry prices.

 

Stocks

 

Large volumes of poultry shipments in December 2003 created temporary large stocks of poultry meat at the end of the year.  The trade estimates that stocks will be exhausted by the end of February and return to normal levels when imports resume.  There is concern that 2004 ending stocks might be much lower if the poultry quota is not used evenly throughout the year.

 

 

Source: USDA