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December 15, 2015
 
Will prospects for Russia's poultry industry remain bright? (Poultry Industry Update, Jan-Nov 2015)
 
By VLADISLAV VOROTNIKOV
 
An eFeedLink Exclusive
 
 
From January to November 2015, Russia had produced 3.546 million tonnes of poultry which is 11.3% more than the same period in 2014. At the same time, it is clear that the pace of the development of the Russian poultry farming sector is slowing down, as the country is getting closer to the rate of self-sufficiency in poultry meat, while import prospects remains weak.
 
Over the last five years Russia had increased the volume of poultry production nearly by half, in large part thanks to active state help. The rate of government support to poultry farmers climbed from US$350 per tonne in 2000, rising to the peak of US$1,251 in 2013, according to data from the Russian Academy of Agricultural Science.
 
However, it has now slumped to US$847, and will continue to decline, as the state neither has the interest, nor the money to continue its support of poultry farming. The current growth forecasts were provided by the projects launched in the period of 2012-2014, when the market conjuncture was different.
 
To make matters worse, the food embargo imposed by Russian authorities in August 2014 resulted in the abandonment of most draft projects for broiler meat and egg production, as investors chose to put their money into import replacement initiatives in pig and cattle breeding.
 
The only exception was in the segment of the production of exotic meat, including turkey, duck and quail, where investments remain strong.
 

Poultry production in Russia from 2013-2015 (tonnes)

Month

2013

2014

2015

January

292,063

304,336

342,976

February

278,608

295,618

335,019

March

298,192

318,425

369,683

April

301,791

337,239

365,402

May

294,987

327,616

359,083

June

276,173

306,967

340,366

July

293,795

316,318

350,135

August

281,769

316,412

347,639

September

289,114

325,619

357,200

October

304,823

338,530

379,225

November

296,723

336,464

 

December

332,032

361,474

 

Total

3,540,069

3,885,018

3,546,728

 
 
Export opportunities?
 
Most Russian experts believe that the inflow of investments into the poultry industry may return only if the country explores its export potential. For instance, poultry exports from Russia had been growing in recent years, from 20,000 tonnes in 2011 to 57,000 tonnes in 2014.
 
At the beginning of the year, Anatoli Kutsenko, the head of the economy and state support department of the Russian Agricultural Ministry, suggested that in 2015, Russia will export up to 100,000 tonnes of poultry. Representatives of the Agricultural Ministry also stated that in 2016 this figure will nearly double.
 
The Russian Institute of Agricultural Market Studies believes that Russia has very good potential for developing its poultry exports. However, when analyzing the structure of exports in 2015, it also observed that Russia faced tough competition from other Western companies in the most important markets of Hong Kong and Vietnam.
 
It is believed that the Trans-Pacific Agreement leading to the lifting of import duties on a large number of meat producers outside of Russia, including poultry producers, should have minimal impact on Russian exporters, particularly in the short term.
 
In 2014, countries now under the Trans-Pacific Agreement accounted for 85% of the overall structure of the Russian poultry export market.
  
 
Finding an avenue for further growth
 
For 2014, poultry consumption in Russia reached 31.4 kg per capita, nearly double of the 15.6 kg per capita for 2001. It was also a year-on-year rise of 4.2%, or 1.3 kg, from 2013. Russian poultry consumption will probably exceed 32 kg per capita in 2015 as a result of the decreasing purchasing power of the Russian market, as locals opt for cheaper meat options.
 
But alongside the rise of consumption there is also a price issue to be tackled. Currently the average cost of one kilogram of chicken on Russian grocery shelves is RUB116 (US$1.65). Compared to the cost of RUB90 (US$2.70) per kilogram in November 2014, this is an increase in rubles but a sharp decrease in dollars. Devaluation has significantly cut the profitability of selling Russian poultry in the domestic market.
 
The current development programme of the Russian Agricultural Ministry calls for the country to increase poultry production to five million tonnes by 2020. Given the current market situation, the plan will require a 20% rise in domestic consumption or an equivalent twenty-fold increase of annual exports to one million tonnes compared to last year's level. In general, experts believe that this plan is unrealistic.
 
It is suggested that in the coming years Russia will face the changing structure of the poultry industry, as industrial producers continue to push the private sector of small farmers via veterinary bodies and a number of other initiatives.
 
Today, 20% of all poultry in the country is still produced by small households. But under the pressure of rising competition, changes in the rules of retail trade, and for other reasons, they are seeing their market share shrinking steadily over recent years.
 
The departure of these small producers will be one of the important factors that will help industrial producers maintain their level of profitability, but probably not enough to see them commit to new projects as there appears to be no further avenues for growth for Russian poultry farming in the foreseeable future.
 
  
 


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