March 10, 2015

Trade sanctions on Western poultry exports to Russia may have raise profitability for the Russian poultry industry via increased chicken prices, but not enough to save producers from bankruptcies and consolidations.

In 2014, Moscow's tight lid on broiler imports brought about a near 25% rise in prices for broiler carcasses. If maintained this year, broiler meat imports could slump 29% to a 22-year low of 320,000 tonnes.

However, Russian gains are challenged by falling industry profitability in the fourth quarter of 2014 due to the declining rouble, according to a USDA staff. The consequences of currency depreciation involve higher costs for "imported hatching eggs and day-old chicks, production equipment, veterinary drugs and vaccines". It also provokes rising Russian grain exports in the same period, leading to costlier feed prices.

Due to Russia's troubled economy, major industry investments are not expected in the short term, said the USDA staff.

Adding to woes of the country's poultry sector, weaker businesses are likely to go bankrupt due to limited operating funds and bank lending. Consolidations within the sector are also expected to continue in 2015.

In the meantime, Russian broiler meat production could increase by 150,000 tonnes to 3.4 million tonnes this year. Local consumption may keep at about 3.7 million tonnes as chicken prices remained low compared to other meats.