Experts have claimed that over more than 10 years the industry has enjoyed steady growth at an average pace of 13% per year. Growth also took place in the first half of 2016, by 6.1% in the first quarter and 3.7% in the second quarter year on year, according to the company’s report.
However, Andrey Sizov, SovEcon director, said an absence of growth in recent months could be explained by a decreasing demand for chicken in Russia, a continued fall in the purchasing power of the population and rapid growth in the industry’s production performance over the past few years.
Galina Bobyleva, general director of the Russian Union of Poultry Producers (Rosptitsesoyuz), said the sector was also under pressure from falling market prices and rising production costs. For instance, according to estimates from Russia’s largest meat producer, agricultural holding Cherkizovo, since the beginning of the year prices for poultry in Russia declined 3% to RUB92.26/kg ($1.42/kg), contributing to a fall in the profitability of poultry businesses to their lowest-ever rates.
Rising feed costs
Since the beginning of 2016, the profitability of the poultry sector has dropped 4.3% year on year to 14.3%, which is more than two times lower than profitability in the pork industry, where it amounts to 29.8%, said a report from Cherkizovo. This was due not only to falling market prices, but also the rising costs of compound feed ingredients, hatching eggs and veterinary drugs, the company added.
Bobyleva suggested that the absence of growth in the third quarter of 2016 could be an indication that Russia’s poultry market has reached complete saturation.
According to Sergey Yushin, general director of Russia’s National Meat Association, in the fourth quarter of 2016, the market could see this negative trend continue, as production performance may start to decline. He explained that Russian poultry producers may face a shortage in soybean meal, which is an important ingredient in compound feed.
Russia’s largest importer of soybean meal, the Sodrugestvo Group of Companies, has faced problems with imports of the product, due to government restrictions on imports of food and feed products containing genetically modified organisms, said Yushin.
In addition, under current market conditions, prices for poultry in Russia are some of the lowest in the world, Yushin added. For instance, a chicken fillet now costs two times lower than in Europe, while the price for a broiler carcase is nearly two times below the level of the US, he said.
Meanwhile, market participants have suggested that production performance is uneven in different segments of the poultry industry, as the production of turkey and duck meat is continuing to develop. Taking this into account, production of chicken meat in the third quarter of 2016 reduced slightly, although there are no firm statistics on this as yet.