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USDA GAIN: Poultry and Products


11 March 2013

USDA GAIN: Russia Poultry and Products Semi-annual 2013USDA GAIN: Russia Poultry and Products Semi-annual 2013

The Russian broiler production forecast for 2013 is 4.2% higher than in 2012 (a 120,000 MT increase) to 2.95 MMT total. This expected growth, however, is slower than recent annual increases in large part because of anticipated difficulties in acquiring affordable feed grains this year. Soaring prices for feed grains are expected to have a direct impact on the Russian industry’s production costs, not only slowing the pace of growth, but also hurting profitability. Imports are expected to remain strong in 2013, with Belarusian poultry accounting for a growing percentage of imported product.

USDA GAIN: Poultry and Products

Executive Summary:

FAS/Moscow’s broiler production forecast for 2013 is 2.95 MMT, or 4.2% higher than in 2012 (a 120,000 MT increase). This forecasted growth, however, is slower than recent annual increases (i.e., approximately 250,000-300,000 MT per annum) in large part because of anticipated difficulties in acquiring affordable feed grains this year. In fact, soaring prices for feed grains (as a result of a severe draw-down in feed stocks due to a smaller crop in 2012 and strong early season exports) are expected to have a direct impact on the Russian poultry industry’s production costs, not only slowing the pace of the industry’s growth, but also decreasing industry profitability. This may lead to less efficient poultry facilities having to file for bankruptcy in 2013, increased production costs, lower farm gate prices, and an inability to repay heavy loans producers are facing as a result of modernization efforts.

Despite concerns related to production in 2013, according to preliminary Russian government data, Russia produced 3.55 MMT of poultry meat (in slaughter weight) in 2012. FAS/Moscow estimates broiler production to have accounted for 2.83 MMT of this figure, a 10 percent increase over 2011 production levels. Imports also remained strong, with the United States accounting for the lion’s share of product, followed by Belarus, which has seen a significant increase in the volume of poultry it has exported to Russia over the last few years.

Graph 1. Historical Russian Broiler Meat Production Compared to Imports (1,000 MTs)

Source: PSD Online, Foreign Agricultural Service

Simultaneous growth of domestic broiler production and imports has boosted Russian poultry consumption, as well as intra-Customs Union trade, and stocks in the second half of 2012. As a result, FAS Moscow increased consumption by 3.6% and Russian poultry exports by 20% for 2012. FAS/Moscow’s revised consumption and export forecasts for 2013 have also been increased – by 4.5% and 27.3%, respectively.

Table 1. Russia: Broiler Production, Supply & Demand, 1,000 MT (Ready-to-cook)

NOTE: Not Official USDA Data

Production:

FAS/Moscow’s broiler production forecast for 2013 is 2.95 MMT, or 4.2% higher than in 2012 (a 120,000 MT increase). This forecasted growth, however, is lower than recent annual increases (i.e., approximately 250,000-300,000 MT per annum) in large part because of anticipated difficulties in acquiring affordable feed grains this year.

Russian domestic feed prices nearly doubled during the second half of 2012 and continue to grow (see, e.g., GAIN Report RS1304). Soaring prices for feed grains (as a result of a severe draw-down in stocks due to a smaller crop in 2012 and strong early season exports) will have a direct impact on the poultry indutry’s production costs, slowing the pace of the industry’s growth, and decreasing industry profitability. This may lead to less efficient poultry facilities having to file for bankruptcy in 2013 due to high feed prices, increased production costs, lower farm gate prices and heavy loans they are already carrying as a result of modernization efforts. The Russian Union of Poultry Producers (RUPP) is very concerned about feed supplies and has requested that the government release from 500 MT to 1,000 MT of feed grain per day, from State reserves, for use by large poultry producers/processors. The Russian Ministry of Agriculture has held discussions with Russian grain and livestock production associations and has recently agreed to:

  • collect information on the availability of grain as of January 1, 2013;
  • consider setting the import duty for wheat, meslin, rye, barley, oats, and corn at zero; and,
  • analyze whether or not there is a need for additional state support for agricultural producers involved in the production of livestock products.

The Ministry intends to announce its policy decisions in the spring of 2013.

Production Costs and Profitability

Production costs in 2012 (RUR 56/kilogram {US $1.84/kg}) were higher than they were in 2011 (RUR 53/kilogram {US $1.75/kg}), while farm gate prices remained constant. Not surprisingly, the level of profitability reportedly varies significantly across Russia’s poultry industry. Producer margins reportedly range from 4 % to 30% depending on the degree of investment in new production technologies and modern equipment. According to RUPP, however, the average industry-wide profitability levels in Russia decreased from 17% in 2005, to 11% in 2011, to 4% in 2012, which has had a negative impact on the investment attractiveness of the industry.

Processor and retail prices fell during the first half of 2012 and only began to climb in August when the poor Russian grain crop became evident and feed prices began their upward climb. Retail and processer prices for poultry products, excluding the processers’ price for domestic quarters, have already surpassed previous high levels as of December 2012, and this trend is expected to continue in 2013.

Graph 2. Russia: Historical Processer and Retail Prices for Poultry

Source: The Russian Ministry of Agriculture

Preliminary 2012 Flock Results

According to the Russian government’s statistics service (Rosstat), the total domestic poultry flock totaled 494.5 million head in 2012, or 4.5% higher than the previous year. Of this, agricultural establishments held 394.5 million head, 6.2% higher than the previous year. Flock inventories on private, registered farms are also increasing, albeit on a smaller scale, as a result of ongoing development of private small and medium-sized enterprises. FAS/Moscow estimates 82% of the Russian flock to be broilers raised in integrated commercial broiler operations.

Preliminary 2012 Production Results

Despite concerns related to production in 2013, according to preliminary Russian government data, Russia produced 3.55 MMT of poultry meat (slaughter weight) in 2012, up from 3.204 MMT in 2011. FAS/Moscow estimates broiler production to have accounted for 2.83 MMT of this figure, a 10 percent increase over 2011 production levels.

Graph 3. Avg. Russian Monthly Poultry Production at Agricultural Establishments (Live weight), 1,000 MT

Source: http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/publications/catalog/doc_1140086922125

Production volumes were higher than previous forecasts in 2012, because some poultry producers purchased large volumes of feed grains in the summer of 2012, when prices were still relatively low. These feedstocks helped support lower production costs through December 2012, and incentivized retailers to bolster broiler meat stocks for sale in 2013. Moreover, many large Russian broiler producers (e.g., OAO Cherkizovo group, Elinar Broiler, ZAO Prioskoliye, GAP Resurs, Lisko Broiler and others) marketed a greater range of poultry products to consumers. This diversity of product offerings helped stimulate consumer demand in 2012, and this demand is expected to continue into 2013 so long as prices remain moderate.

The largest Russian poultry producing enterprises in 2012 were concentrated in the following regions: Central Federal District (FD) – 36 percent, Volga FD – 17 percent, and Southern FD – 12 percent. Approximately 70 percent of all broiler meat was produced by the 20 largest companies and organizations. In fact, six of these companies (i.e., ZAO Prioskoliye, OAO Cherkizovo group, GAP Resurs, Severnaya, OAO Belgrankorm, and OOO Prodo-Trade) produced more than 50 percent of Russia’s domestic broiler meat.

Consumption:

Russian broiler consumption remained relatively strong in 2012 as increased supply, vis-à-vis increased domestic production and imports, kept poultry retail prices growing at a slower pace than the remainder of the consumer basket (i.e., red meats). The Russian poultry industry is increasingly making use of the whole bird for a variety of products, including producing more semi-ready and ready-to-eat food products. Increased pork and beef prices have also contributed towards growing demand for poultry in the retail sector, as well for chicken sausage and hotdog production. Notably, 2012 Russian poultry meat production and imports also went towards bolstering stocks for anticipated consumption in the summer of 2013, both in Russia and in CIS countries, when burgeoning feed costs are expected to put greater financial pressure on domestic producers.

FAS/Moscow has increased its 2012 consumption estimate by 3.6%, as well as its estimate for Russian poultry exports by 20%. Forecasts for 2013 consumption and exports have also been raised – by 4.5% and 27.3%, respectively, for the same reason. However, consumption growth in the second half of 2013 is expected to be slower than it was in 2012 because of anticipated price increases.

Trade:

FAS/Moscow forecasts Russian poultry meat imports at 580,000 MT in 2013, an 11.5% increase over previous levels. This increase is a result of higher demand for poultry in the retail sector, when compared to other meats (i.e., pork and beef), due to its favorable price. The Russian Federal Customs Service (FCS) reported that Russia imported $28.3 million of poultry from non-CIS countries in January 2013, a 257% increase over what was imported in January 2012. While reflecting only one month of imports, this increase is attributable to retailers seeking more low-cost meats (i.e., poultry vs. red meat).

FAS/Moscow’s 2012 poultry import estimate was also increased by 8.7%, due to an increase in imports, mostly from Belarus. In fact, Belarus and the Ukraine’s share of total Russian poultry imports continue to grow, increasing from approximately 17% in 2011 to 23% in 2012.

Graph 4. 2009-2012 Russian Imports of Broiler Meat (Quantity)

Source: Global Trade Atlas

According to Global Trade Atlas data, the United States supplied 47% of Russia’s imports of broiler meat in 2012 (Belarus supplied 18%, Brazil supplied 11%, France supplied 6%, Ukraine supplied 5 percent, and several other producers supplied the remainder). More than 90 % of Russia’s imported poultry were frozen chicken cuts and offal, 2.9% prepared or preserved chicken meat or offal, and 2.3% frozen whole chickens.

FAS/Moscow forecasts Russian broiler exports to Kazakhstan, a Customs Union member, to grow to 70,000 MT in 2013. According to the FCS, Russian poultry exports to Kazakhstan in the first 11 months of 2012 were valued at $44 million (i.e., 22,400 MT), up from $37 million during the same period in the previous year. However, FCS also notes that trade data are underreported.

Excluding broiler exports to Kazakhstan, Russia’s poultry exports were predominantly comprised of chicken paws to Asian markets.

Graph 5. 2012 Russian Poultry Exports to non-CIS Countries (MTs)

Source: Global Trade Atlas

The State Program for Development of Agriculture for 2013-2020 sets a goal to increase poultry meat exports to 400,000 MT by 2020, from approximately 40,000 MT in 2012. The target regions for exports are Northern Africa and the Middle East.

In December 2012, the EU announced that the Russian veterinary service has been granted the authority to approve exports to the EU. Despite enthusiasm within the Russian industry, in February 2013, the Russian veterinary service’s offices for the city of Moscow and the Moscow and Tula regions, together with representatives of the State Veterinary Service of the Russian Federation, surveyed 45 companies engaged in the processing and storage of products of animal origin, for their compliance with the requirements of the Customs Union (23 companies) and third countries (22 companies). According to the survey, it was found that 20 companies (45%) did not meet animal health rules and regulations, and that more work needed to be done to better position the industry for international competitiveness.

March 2013

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