Problems have been exacerbated by the Russian government’s recent intervention in Ukraine, which has resulted in the country’s currency falling by about 12%, as well as a rise in feed costs. Russian producers are importing some compound feed ingredients from abroad and paying in dollars, while selling poultry on the domestic market for rubles.
"Because of the low purchase price for domestic poultry, producers have been suffering losses for about three months now," claimed Mikhail Yakushev, CEO of Belgrankorm Group, the fifth-largest poultry producer in Russia, speaking at a meeting of industry participants in Belgorod. "We were not prepared for such low prices," he added.
He noted that, in the first quarter of last year, the price for poultry amounted to about RUB71 per kilogram (kg) (US$2.36 based on last year’s currency rate) but that it had now dropped to RUB69 per kg (US$1.94). He also revealed that poultry producers had not received the state support promised to them, probably due to the tough economic situation in the country.
"Despite the fact that our company has significantly increased its sales network, with much reduced sales to wholesalers and resellers, state support is very important for us," he added.
Lowest profitability
The Russian poultry industry’s profit margin is currently around 3.5%, said Vladimir Fisinin, head of the Russian Union of Poultry Producers (RUPP). This is one of the lowest levels of the past 15 years. According to RUPP’s recent research, poultry producers’ problems have coincided with a rise in the price of grain and feed, which has jumped over the past year.
"The first reason for the low profitability is the high price of feed and grain, which came about due to a severe drought of 2011-2012. Also, the industry has a lot of debt that amounts to about RUB5bn (US$150m) in total. This has led to a sharp deterioration in the financial condition of poultry farms in general," added Fisinin.
At the same time, RUPP noted that, over the past few years, Russia’s poultry industry has been developing rapidly and achieving good results, so that it now needs some "breathing space".
"Russia’s poultry industry is a dynamic, knowledge-based agro-industrial sector, which provides 37% of animal protein in the diets of Russian citizens, via the consumption of poultry and eggs," said Fisinin, adding that the volume of poultry production in the country had risen around sixfold.
"In 1997 we were ranked 12th in the world in terms of gross production of poultry meat, and last year we took fourth position, just ahead of the USA, China and Brazil," he said.