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USDA GAIN: Poultry and Products


17 February 2012

USDA GAIN: Russian Federation Poultry & Products Semi-annual - Feb 2012USDA GAIN: Russian Federation Poultry & Products Semi-annual - Feb 2012

Russia’s broiler production is projected slightly lower than the previous estimate for 2012 but still 5% higher than 2011.

USDA GAIN: Poultry and Products

Report Highlights:

Broiler imports are increased substantially, based in large part to the revised 2012 TRQ and expectations that Russia will continue unfettered imports from Belarus. Belarusian poultry exports to Russia in 2011 also far exceeded their bilateral agreement and resulted in a strong upward revision to that estimate. Exports remain forecast flat despite extravagant calls for substantial sales from Russian political leaders. Poultry consumption is set to rally, as TRQ quantity reductions are no more, thanks to WTO Accession, yet Russia remains poised to continue domestic support programs to continue increasing production.

Summary

FAS/Moscow’s production outlook for 2012 remains positive but less so than six months ago. Production remains supported by domestic support and high, albeit stable producer prices. Earlier production prospects have been limited as a result of supply pressures that have been brought about by WTO market access commitments and Russia’s openness to import unlimited quantities of Belarus poultry. The Ministry of Agriculture agrees the outlook for poultry production growth rate in 2012 will also slow from 2011. The 2011 production estimate has been adjusted slightly upwards to reflect preliminary year-end data and another strong second half for Russian poultry production.

FAS/Moscow reversed the direction of the 2012 import forecast based on improved market access for poultry, which is now more favorable than in 2011. In total, the 2012 poultry TRQ will increase to 364,000 MT, as compared to 350,000 in 2011. This is also an upward revision from a July 2011 resolution, which would have otherwise set the 2012 TRQ at 330,000 MT. Furthermore, Russia’s demonstrated openness to keep its market open to imports from Belarus beyond agreed upon levels instills confidence that Russia will not enforce strict quotas with its Union State partner going forward. The estimate of 2011 imports reflects preliminary year-end data and Belarus trade reports. [Note: The Russian Federation and Belarus formed the Union State in 1996, and starting in 2011, began using it as a vehicle to manage bilateral poultry trade.]

Broiler meat exports remain virtually nonexistent despite continued statements from senior cabinet officials that Russia will offer 200,000-250,000 MT for export in 2012. Such figures appear solely reliant on chicken paws as such aspirations are disconnected from the economic reality of Russia’s price competitiveness as well as Russia’s ability at present to meet the sanitary, veterinary, and technical requirements of foreign markets.

FAS/Moscow forecasts broiler consumption will continue to fair well in 2012 as increased supply vis-à-vis increased domestic production and better access to imports keeps poultry retail prices growing less rapidly than the rest of the consumer basket.

Production

FAS/Moscow’s outlook for 2012 remains positive but less so than six months ago. Production remains supported by domestic support and high, albeit stable producer prices. Earlier production prospects have been limited as a result of supply pressures that have been brought about by WTO market access commitments and Russia’s openness to import unlimited quantities of Belarus poultry. The Ministry of Agriculture agrees the outlook for poultry production growth rate in 2012 will also slow from 2011.

Stable prices and reduced production costs led profitability of the broiler industry in 2011 to increase to 24%, according to Ministry of Agriculture statistics. Looking forward to the remainder of 2012, as of January 1, the feed supply was 35% higher than a year ago.

The Ministry of Agriculture reported its commission selected 74 investment projects for the poultry industry, valued at RUR48.8 billion ($1.57 billion) in 2011 for implementation between 2012 and 2014. In particular, it is known the Lipetsk, Tambov, and Belgorod regions presented investment projects valued at RUR15.3 billion, RUR5.8 billion, and RUR1.8 billion, respectively. According to the Russian Union of Poultry Producers (RUPP), in 2012, the Central and Volga region will grow faster compared to other regions as a result from these investment projects.

From 2006 to 2011, Russia has invested more than RUR200 billion into construction and renovation of poultry facilities, adding 1.8 MMT (live weight) of poultry production. The top recipient regions during this period have been Belgorod (24%), Chelyabinsk (6%), Rostov (5%), and Leningrad (5%).

RUPP considers WTO accession the major factor influencing the poultry industry in the future, and its campaign of import substitution has since been broadened to also consider price competitiveness. According to RUPP, in order to be efficient and competitive on the world poultry market, Russia should do the following during a four year transition period:

  • adjust measures of poultry industry support in order to protect investments;
  • subsidize loans for upgrading broiler facilities;
  • support deep processing of broilers;
  • build cold storages;
  • develop logistics;
  • develop breeding and genetic centers.

FAS/Moscow’s 2011 production estimate has been adjusted slightly upwards to reflect preliminary year-end data and another strong second half for Russian poultry production.

Preliminary 2011 Flock Results

According to Russia’s State Statistical Service (Rosstat), the total poultry flock totaled 471 million head at all types of poultry producing establishments at the beginning of 2012, 4.8% higher than the previous year. Agricultural establishments held 369 million head, 6.3% higher than the previous year.

FAS/Moscow considers 82% of the flock as broilers.

Preliminary 2011 Production Results

Rosstat reported poultry production of all types increased 11.5% in 2011 to 4.3 MMT (live weight). FAS/Moscow considers a conversion factor from live weight to ready-to-cook of 73%.

Graph 1. Russia: Monthly Poultry Production at Agricultural Enterprises, MT (live weight)

Production remained concentrated in the Central Federal District of Russia, which grew at 10% and accounted for 37% of total production. The fastest growing Districts in 2011 were the Northwest Federal District, North Caucus Federal District, and Southern Federal District, which grew at 19%. However, combined these three districts still only accounted for 28% of total production. All but 19 of the 78 producing regions increased production. The regions that added the most poultry production in 2011 were Belgorod (76.6 TMT), Kransnodar (41.8 TMT), Leningrad (38.2 TMT), Rostov (29.8 TMT), and Chelyabinsk (22.8 TMT).

Roughly 90% of poultry production growth in 2011 was provided by 14 poultry companies. The largest gains were provided by Cherkizovo, but in large part, these were additions through acquisitions.

Trade

Imports

FAS/Moscow reversed the direction of the 2012 import forecast based on improved market access for poultry, which is now more favorable than in 2011. In total, the 2012 poultry TRQ will increase to 364,000 MT, as compared to 350,000 in 2011. This is also an upward revision from a July 2011 resolution, which would have otherwise set the 2012 TRQ at 330,000 MT. Furthermore, Russia’s demonstrated openness to keep its market open to imports from Belarus beyond agreed upon levels instills confidence that Russia will not enforce strict quotas with its Union State partner going forward. [Note: The Russian Federation and Belarus formed the Union State in 1996, and starting in 2011, began using it as a vehicle to manage bilateral poultry trade.]

After competing without country-specific quotas in 2011, 2012 presents new TRQs divisions among poultry products. Through October 2011, the United States and Brazil represented 86% and 12% of the trade that makes up the newly established 250,000 MT broiler bone-in meat TRQ in 2012. At the same time, the European Union, Brazil, and the United States represented 44%, 35%, and 16% of the trade that makes up the newly established broiler boneless meat TRQ, which is 250,000 MT in 2012. However, in 2012 and after WTO Accession, 80% of this TRQ will be reserved for the European Union. In total, it is currently set at 70,000 MT, and it will increase to 100,000 MT upon WTO Accession.

FAS/Moscow substantially increased its estimate of 2011 imports based on preliminary year-end data and Belarus trade reports.

While Federal Customs Service data through October report poultry imports totaled only 315,000 MT (down 9% from 2010), preliminary year-end data reports 2011 imports totaled 418,800 MT (down 36% from 2010). Through October, the Federal Customs Service indicates broiler meat represented 92% of this trade. All these figures exclude Belarusian trade and are limited to raw poultry (HS-0207).

Imports into the Special Economic Zones of Kaliningrad and Magadan, where TRQ is not necessary for further processing, were relatively flat through October, down 1.2% from the previous period.

According to Russia’s Institute for Agricultural Market Studies, Belarus poultry exports to the world totaled 74,000 MT in 2011, and 60,000 MT was destined for Russia. Other industry sources have indicated this figure may have been higher than 65,000 MT. At the end of 2010, Belarus and Russia agreed that Belarus would export 10,000 MT of poultry to Russia – but due to state-set prices in Belarus, high Russian prices, and no control to enforce the agreement, Belarus exporters were able to take advantage of the lucrative Russian market.

Another duty-free, quota-free supplier, Ukraine, emerged as a Russian poultry supplier in 2011, exporting over 5,000 MT of broiler meat through October. The exports are notable as they were the only sizeable quantities of whole birds since Russia excluded them from the TRQ, hitting Brazilian exports the hardest.

Through October, Russian imports of prepared broiler meat was on pace to nearly double in 2011 to 18-19,000 MT (excluding Belarus), 77% of which came from European Union.

Exports

Broiler meat exports remain virtually nonexistent despite continued statements from senior cabinet officials that Russia will offer 200,000-250,000 MT for export in 2012. Such figures appear solely reliant on chicken paws as such aspirations are disconnected from the economic reality of Russia’s price competitiveness as well as Russia’s ability at present to meet the sanitary, veterinary, and technical requirements of foreign markets.

Consumption

FAS/Moscow forecasts broiler consumption will continue to fair well in 2012 as increased supply vis-à-vis increased domestic production and better access to imports keeps poultry retail prices growing less rapidly than the rest of the consumer basket.

The Ministry of Agriculture plans to increase total poultry consumption to 30 kg per capita in the near future. One credible vehicle for achieving further increases besides relatively lower consumer prices includes state-sponsored food nutrition programs.

According to the Ministry of Economic Development, average 2011 prices for food products increased 10% in Russia. Beef (excluding boneless) prices increased 21.7% (6.6% in 2010). Pork (excluding boneless) prices increased 7.9% (2.6% in 2010). Meanwhile, poultry meat prices were flat – 0.1% growth. At the same time, real salaries increased 3.5%, compared to 5.2% in 2010. Annual inflation fell to a record (since 1991) to 6.1%. The previous low was 8.8% in both 2009 and 2010. All these factors led to increased consumer purchases of poultry products.

Processor and retail prices began a seasonal climb again at the end of 2011; however, only the processors price for domestic chicken leg quarters had clearly surpassed the previous record highs experienced in 2010.

Graph 2. Russia: Processer and Retail Prices for Poultry


February 2012

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