October 25, 2007

  

Russia's poultry production seen rising   

 

 

Domestic poultry production in Russia is expected to continue to increase, but demand for biofuels is contributing to rising feed costs, thus reducing incomes and investment, according to a US Department of Agriculture attache report posted Wednesday on the Foreign Agricultural Services Web site.

 

The Russian government continues to search for a middle ground between protecting domestic poultry producers and protecting consumers from rising food prices. The average price for domestic frozen chicken products increased 7.4 percent from March to August 2007 but import prices remained relatively flat. The Russian government is expected to change soon the procedures for allocating meat and poultry import quotas. Additionally, the Russian veterinary service plans to expand the list of countries whose meat and poultry imports will be subject to electronic verification.

 

The USDA report stresses that rising grain prices are revealing inefficiencies in domestic poultry production and some Russian producers are resorting to invalid comparisons between domestic and US imported chicken in an effort to sway Russian consumers away from imported poultry. The average price for domestic frozen chicken products increased 7.4 percent from March to August 2007 while prices for imports remained relatively flat.

 

Turkey products are a relatively new product on the Russian market and investors are committing resources to increase production capacity. Producers are positioning Turkey as a healthier, more affordable alternative to red meat. Consumption is expected to fall, however, as increases in customs duties curtails imports. Domestic production may compensate some for the loss of imports.

 

The country's broiler production increased 15 percent in 2007 and is projected to grow another 11 percent in 2008, but the profitability of poultry production is declining due to increasing feed prices. High grain prices are reducing farmers' incomes which limit investment. In response, the Russian Poultry Union proposes that the government establish a feed intervention fund, or limit retail trade profits, which reached 50 percent during the summer as low-income consumers switched to less expensive imported poultry products, according to the Union. Another measure offered by the union is to increase the import duty on poultry products from 25 percent to 80 percent to slow imports and compensate domestic producers.

 

New Russian Prime Minister Victor Zubkov believes Russia should balance domestic meat output and meat imports, since domestic producers should remain the first priority. Nevertheless, since prices are increasing rapidly for food products, there is considerable pressure on the Russian Government not to take measures restricting meat imports. Meat and poultry prices were the largest contributors to the overall growth of the cost of a consumer basket of goods from January through September, 2007, compared with the same period in 2006.

 

Significant growth of the biofuel market globally is contributing to rising costs of grain and oilseed products, according to some experts, and the current market conditions for grains could continue through 2008. Grain prices increased rapidly in Russia through the middle of July before stabilizing at high levels as harvest progress reports were released. Higher prices attract exports and domestic sales, and the current environment may stimulate investments in grain production in 2008.

 

Prepared animal feed production from January -July 2007 was 6 percent higher than the same period in 2006. The growth of poultry and swine industries encourages imports of soymeal, and from July-August 2007 Russia imported 165,000 tonnes of soymeal, which is 50 percent more than in the same period of 2006.

 

In February 2007 outbreaks of avian influenza (AI) were discovered in the Moscow and Kaluga oblasts. The outbreak was considered eradicated by the end of February, according to a VPSS report, with Russian officials citing illegal poultry imports as the source of the outbreak.

 

Poultry meat consumption will continue to grow, and is projected to rise by 5 to 6 percent compared to the more rapid growth in domestic production of 11 percent.

 

Consumption of turkey meat is declining in Russia, but growth in domestic turkey production is expected to compensate some for the sharp decrease in turkey imports caused by stricter measures in assuring declaration of full customs values.

 

On the other hand, Russian broiler imports from 2007 through 2008 will be flat due to regulatory changes in April 2006 that increased the minimum price permitted for customs declarations. Previously, low prices allowed importers to underreport the value of products which created significant increases in world meat prices and specialized offshore middle companies take advantage of the difference between the prices declared at customs and the real prices.

 

Russia imported 8 percent less poultry in the first six months of 2007 compared to the same period in 2006, but the value was 9 percent higher due to the increase in the minimum declared price for customs duties. Poultry imports into Russia decreased from 582,727 tonnes to 534,566 tonnes, when comparing the coverage periods, while the value of imports increased from US$384.4 million to US$418.7 million, according to the Russian Customs Service.