March 10, 2014

 

Russia's chicken imports to drop on falling rouble

 

 

Prompted by the devaluation in the rouble this year as well as by a double blow from the shift from emerging market currencies and from the Ukraine crisis, Russia's chicken imports may decline this year.

 

This year, Russia will import 530,000 tonnes of chicken, a volume stable on-year, but half the annual levels seen in the last decade, when Russia was the top importer, USDA staff in Moscow said.

 

The country's reliance on imports has been stemmed by a drive to build-up domestic production, which has quadrupled output in a decade to more than three million tonnes last year.

 

However, the level of imports, already at amongst their lowest in 20 years, could fall further if a weaker rouble, which hit a record low against the dollar this week, hurts the competitiveness of foreign supplies.

 

The USDA said that if the Russian rouble further weakens over the course of 2014, it could yield increased market opportunities for domestically produced poultry at the expense of imports.

 

The comments as investors are continuing to assess the impact of the fallout from Russia's deployment of troops to Crimea, in southern Ukraine, a move which has prompted international outcry.

 

Ukraine has been growing provider of poultry exports to Russia, of 39,284 tonnes last year, up from just 5,171 tonnes in 2011. The US remains the main origin, at some 263,000 tonnes in 2013.

 

In agriculture, Black Sea farm operator Trigon Agri and Russia-based dairy group Ekosem-Agrar have downplayed the impact of the crisis, saying that weaker currencies – the Ukraine hryvnia has fallen too - could bring benefits.

 

But the crisis is seen as, if not directly hampering Ukraine's grain export logistics, at least dissuading importers from fresh purchases, a factor which has helped a rally in prices of corn and wheat on Western markets.

 

Chicago's best traded May corn contract on Friday touched US$5.02 ½ a bushel, returning above US$5 a bushel for the first time since August, on a nearest-but-one contract basis.

 

"The conflict between Russia and Ukraine over the Crimean peninsula is continuing to boost the price," Commerzbank said. "The problems in Ukraine are likely to increase demand for US corn."

 

Russia is also a major buyer of pork, second-ranked behind Japan, as well as of beef, of which it is the biggest importer, bringing in more than 1.0 million tonnes a year.

 

With pork and, in particular, beef industries more difficult to develop than poultry, in part thanks to the animals' longer life cycles, Russia has had less success in growing domestic output of these meats, although in pork it is now the fourth biggest producer, expected to overtake Vietnam this year.

 

Russia's poultry production has reached such level that is beginning to register as an exporter, with shipments expected to rise by one-third this year to 40,000 tonnes, the USDA bureau said.

 

"Russia's broiler exports are expected to grow in 2014 as poultry producers increasing look to foreign markets to spur continued production increases. Most likely these markets will initially be composed of the other former Soviet Union states, but recently small export volumes have begun to move to Asian and African markets.