Report Highlights

Domestic poultry production is expected to increase 12.9 percent in 2008 and 12.9 percent 2009, compared to a 15 percent growth rate in 2007. The Russian poultry industry continues to lobby for more government support such as new price controls on animal feed, more subsidized credits, and new trade restrictions on imported poultry. The average price for domestic frozen chicken leg quarters (CLQ) increased 10 percent from June 2007 to June 2008 while prices for imported CLQ increased only 3 percent. Turkey production is forecast to increase 12.5 percent in 2009 as investors continue to commit resources to increase production capacity. Russia's Chief Medical Officer signed a resolution that prohibits the use of chlorinated anti-microbial washes in poultry production to take effect January 1, 2009.

Executive Summary

Domestic poultry production is expected to increase 12.9 percent in 2008 and 12.9 percent 2009, compared to a 15 percent growth rate in 2007. Demand for bio-fuels and high world grain prices are contributing to higher feed costs and hurting profits and investment. The marketing year 2008 grain yield is forecast at 93.2 million metric tons (mt), substantially higher than in previous years which should help provide some relief to record-high feed costs. Market analysts have stated that the Russian poultry industry is much more efficient today compared to any other time in recent history due mostly to competition with foreign producers. However, rising grain prices have revealed significant inefficiencies in domestic poultry production. The Russian government continues to search for a middle ground between protecting domestic poultry producers and protecting consumers from rising food prices.

The Russian Union of Poultry Producers (RUPP), the Russian Poultry Union and other such organizations continue lobbying for more government support such as new price controls on animal feed, subsidized credits, and trade restriction on imported poultry. The average price for domestic frozen chicken leg quarters (CLQ) increased 10 percent from June 2007 to June 2008 while prices for imported CLQ increased only 3 percent.

Turkey production is forecast to increase 12.5 percent in 2009 as investors continue to commit resources to increase production capacity. Producers are marketing turkey a healthier, more affordable alternative to red meat. Growing domestic production and rising levels of domestic and foreign investment in this area are expected to compensate for lower imports associated with the rise in customs duties.

Russia's Chief Medical Officer Gennadiy Onishchenko signed a resolution that prohibits the use of chlorinated anti-microbial washes in poultry production to take effect January 1, 2009. The new chlorine maximum residue level will be 100 times more stringent than the current level set in Russian regulations for poultry production. In effect, the resolution will prohibit the common industry practice of using chlorine in antimicrobial washes to kill surface foodborne pathogens such as Salmonella and E. coli.

Similar to last year, the Russian government has introduced a three-year historic basis (2005-07) for calculate the poultry quota in 2009 which excludes 2008.

Production

Broiler production increased 12.9 percent in 2008 and is projected to grow another 12.9 percent in 2009 even though the profitability of poultry production is declining due to increasing input prices. In response, the Russian Poultry Union requested that the Ministry of Economic Development quadruple the current import duty on poultry imports. During the first 6 months of 2008, the number of chickens at Russian poultry farms (excluding household birds) reached 280 million, up 7 percent compared to the same period in 2007.

Relatively strong economic growth has been restored in Russia after abrupt declines in poultry production at the beginning of nineties. Poultry production is the only agro-industrial sub-industry that has managed to triple output over the last ten years and break the record levels of 1992. Weight gain a day increased up to 50 grams a day (21.9 grams a day before 1992), due to introduction of new crosses of imported and domestic origin, modern management, feeding technologies, and diet. Average carcass weight reached about 1.9 kilo in 2007 (carcass weight was 1.4 kilo before 1992), and better conversion rate - 1.9 kilo of feed per kilo of meat (3.44 kilo before 1992). Concentration of poultry production in Russia is growing – the 30 largest poultry facilities produce about 60 percent total poultry meat. This has led to the introduction of new equipment and new technologies which help reduce production costs. Domestic producers admit that significant improvements in the domestic poultry industry were reached thanks, in part, to stiff competition from foreign producers.

At the same time, however, market analysts agree that there is still room for improvement in the industry. Companies that produce 40 percent of total dome stic poultry meat are far behind in terms of modern technologies, equipment, genetics efficient management systems. The disparity between poultry prices and input costs for production are preventing speedy improvements at most of these facilities.

According to Russian Union of Poultry Producers (RUPP) representatives, per capita consumption of poultry meat will reach 15 kilograms (kg) by 2010 (11 kg in 2008). As a result, they stated that the domestic poultry industry will have to increase production by improving management, utilizing better genetic stock, upgrade older poultry facilities with new technologies, and integrate western management practices if they are to compete with foreign producers for the growing consumption trend. According to RUPP, this goal can be achieved through the creation of vertically integrated structures and relatively closed circle "production-processing trade" on their bases. The united financial and technological system should include hatching and processing facilities, poultry farms, grain production, feed meals, and producers of biologically active components as well as veterinary substances as structural divisions. Such vertically integrated complexes already exist in many regions and have substantial support from federal and regional governments.

Feed Stocks

The Ministry of Agriculture forecast grain production in 2008 to reach 95 million mt, significantly higher than previous forecasts. The increase is due to good weather conditions in July and August, reported harvest progress, and excellent yields of winter grains - especially winter wheat - in European Russia. Prices of feed quality wheat and barley continue to fall rapidly.

Significant growth of the bio-fuel market globally is a major cause of rising grain and oilseed costs, according to market analysts, and the current market conditions for grains are expected to continue through 2009. Grain prices increased rapidly in Russia through in July before stabilizing at high levels as harvest progress reports were released. Higher prices attract exports and domestic sales, and the current environment will stimulate investments in grain production in 2009.

Feed stocks in early 2008 were slightly lower than the previous year and are expected to drop even further in 2009. Lower feed stocks and higher prices are creating problems for poultry operations and hinder achievement of growth rates seen in previous years.

Russia is developing protocols to register feed produced from genetically enhanced organisms (GEMs). A Russian government resolution transferred the testing and registration of feeds involving GEMs to the Ministry of Agriculture’s Veterinary and Phtyosanitary Surveillance Service (VPSS). VPSS has developed the draft administrative procedure for registration and has already received applications based on the procedures described in the draft.

Epizootic Situation

Poultry loss in 2007 reached 50 million head or 5.5 percent of the total poultry herd. In order to improve the epizootic situation of the domestic poultry herd, the Federal Veterinary and Phytosanitary Surveillance Service (VPSS) holds an annual “International Veterinary Congress for Poultry”. The fourth such congress took place in Moscow in April 2008. Nearly 800 veterinary specialists from different regions in Russia as well as from several foreign countries participated in the event. The specialists at the conference agreed that significant growth of poultry production demands new approaches in order to provide appropriate poultry health care at farms . This means close cooperation between farm management and veterinary services. It was reported at the congress that the most widely spread infections in Russia are E. colibacteria, Gumboro disease, bronchitis and Newcastle disease. Many poultry farms in Russia are not able to provide adequate veterinary care to poultry herds and can’t comply with federal veterinary and sanitary rules that require farm operators to immunize poultry against these infections.

Consumption

Consumption of poultry meat will continue to grow and is projected to rise by 6.3 percent in 2009 compared to the more rapid 12.9-percent growth in domestic production.

Turkey meat consumption is increasing in Russia as growth in domestic consumption is compensating for a decrease in imports caused by stricter government measures in assuring declaration of full customs values.

The poultry supply is expected to increase by 6.2 percent in 2009 due to sustained growth in domestic poultry production and large import volumes. Poultry consumption is also expected to grow as disposable incomes are increasing leading to higher demand. Russia’s gross domestic product grew by 8.1 percent in 2007, exceeding the government’s forecast and registering the fastest growth rate since 2000.

Trade

Poultry imports into Russia reached 1.287 million MT in 2007 with a value of $1.151 billion. The poultry TRQ for 2008 is set at 1.211 million MT of which the United States receives 901,400 MT. From January-June 2008, the U.S. share of total broiler imports was 73 percent; Brazil 12 percent; and Germany 6 percent. U.S. exports of poultry to Russia increased 29 percent from January to June 2008 compared to same period a year earlier while the value of U.S. poultry exports jumped 46 percent.

The current livestock environment in Russia makes imported broiler meat an attractive source of animal protein for consumers. Cattle production has not yet begun to significantly recover in Russia and pork production growth is still below Ministry of Agriculture expectations. Rising feed prices are slowing investments in the domestic broiler industry as well.

Further Reading

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Other Reports in this Series

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September 2008