Russian poultry production declines

By Vladislav Vorotnikov

- Last updated on GMT

Russian poultry production declines

Related tags Poultry Livestock

Russian poultry production shrank by 5.1% to 1.5 million tonnes (t) in the first five months of the year (January to May 2019), with frozen poultry production down by as much as 24% year-on-year.

Production began falling after consistent growth over the past ten years. The production shrank in North-West federal district, in Urals and Far East, but most noticeable decrease was seen on the Russia’s south, according to the Russian State Statistical Service Rosstat.  

Overall sales on the Russian market fell by 4% compared to the same period of the previous year, Sveltana Fyodorova, general director of the Russian consulting agency Express Obzor estimated. The domestic poultry market is “saturated with broiler meat”​, and the average business profitability is reducing because of the strong competition and the rising production costs, Fyodorova said.

The negative production dynamics on some extent undermined the growth of the Russian poultry exports, which was the slowest in the past four years, Fyodorova added.

Russian poultry market is depressed primarily by the declining purchasing power of the population, Albert Davleyev, president of the Russian consulting agency Agrifood Strategy told Global Meat News. Demand for all types of meat has been stable for over a year as the country’s GDP is stagnating at 1.2-1.5% and the disposable incomes are shrinking, he estimated.

“Structural changes in broiler production are common for all meat categories. Fresh packaged meat is more and more substituting frozen meat as major retail chains continue vertical and horizontal expansion, reaching the most remote areas and districts of the country and opening stores in smaller residential communities. Besides, poultry meat is experiencing increasing competition from packaged fresh chilled pork in retail chains,”​ he said.

Russia’s biggest meat producer Cherkizovo has recently reported that the present situation on the domestic poultry market prompted the company to withdraw from some capacity expansion projects.

“Investments in new poultry projects don’t make sense as their ROI period is getting close to 10 years and overall sector profitability is declining to average 5-7%. For this reason major broiler companies refuse from expansion and even freeze the started construction of new facilities, like Cherkizovo in Lipetsk. They prefer to take over the most profitable assets and let others go down in severe competition. Therefore the industry is set to undergo further consolidation instead of building new production facilities,”​ Davleyev said.

Sergey Lahtyukhov, chairman of the Russia’s National Union of Poultry Producers told Global Meat News that the two troubled poultry producers – Eurodon and Belaya Ptitsa – are the ones that contributed mostly to the negative production dynamics in the beginning of the year.

“The production is falling primarily in turkey segment, while in broiler segment there is a zero growth. Despite the problems we do not see the oversupply on the Russian poultry market yet. Despite the statements about self-sufficiency we are still far behind the leading countries in terms of poultry consumption per capita,”​ Lahtyukhov said.

In future, the Russian poultry industry could also get some support from rising poultry exports, as there are plans to supply large quantities of poultry meat to China, GCC countries and others, Lahtyukhov added.

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