18 March 2024

6 minute read

By: Eugene Gerden

Europe

The Russian poultry sector is experiencing tough times as sanctions and the ever-growing isolation of Russia in the international arena has put serious pressure on the industry.

Prior to February 24, 2022, poultry was one of the fastest growing segments of the Russian agricultural sector with annual growth rates of 10% to 11%, however the beginning of the Russian-Ukrainian war put an end to any existing hope for further growth of the industry, at least for now.

The current crisis is confirmed by official statistics of the Russian Ministry of Agriculture, according to which, the number of poultry farms in Russia has declined from 5,650 as of February 2022 to only 4,900 in 2024 (a 13.2% drop), and this downward trend is expected to continue.

One of the major reasons for this farm decline is serious interruptions with the supplies of feed, raw materials and various industry technologies to the Russian poultry sector, many of which were traditionally supplied from abroad.

According to an official spokesman of the Russian Ministry of Agriculture Dmitry Patrushev, prior to 2022, most of the high-quality feed, embryos, vaccines and equipment for raising poultry were supplied to Russia from abroad, primarily from the EU states, however the imposition of sanctions led to the suspension of most of such supplies. Despite the current implementation of state policy aimed at substituting imports, Russia does not have the needed competencies and experience to establish the production of most of such products at least in the short-term. The same situation is observed in case of industry’s equipment and machinery, as well as spare parts – most of which were supplied to Russian poultry farms from the West in the past.

This has already sparked some concerns from producers, however most of them believe that the current situation remains under control, while various options to deal with the current problems are considered.

Natalya Stolyarova, head of the “Turkey” department of Damate Group of Companies, one of Russia’s poultry producers, comments: “The group is solving the issues of supplying spare parts for its production using currently available methods. There are currently no risks for the company's work.”

Labor shortages

The situation is also complicated by the deepest shortage of personnel in the sector, which exceeds post-War II figures of 1945-1946, as a significant part of the industry’s workers were mobilized to the Russian army.

Currently the most complex situation is observed in some major Russian poultry-producing regions among which are the Tatarstan, Bashkortostan, Dagestan and Krasnodar, which have suffered the most.

Roman Smirnov, general director of the Roskar poultry farm, another leading Russian poultry producer, has confirmed this.

Smirnov comments: “Due to the weakening of the ruble, there was a shortage of foreign workers. To resolve this issue, the company indexes salaries, attracts employees from other localities and provides them with housing and insurance.”

The current crisis has already led to a serious shortage of poultry and poultry products in some major Russian retail chains, with the peaks being observed at the beginning of the current year. While in recent weeks the situation has generally stabilized, analysts expect new waves of poultry product shortage in the Russian market in the coming weeks.

In the meantime, representatives of some leading Russian poultry producers believe that the current fears are exaggerated, while the production currently remains on almost the same level as in the past.

That has been confirmed by an official spokesman of Tkachev Agrocomplex, one of Russia’s largest poultry producers, according to which “the company has been producing poultry meat at the level of 105,000–106,000 tons for more than five years and plans to maintain this production volume in the future.”

Prices for poultry meat & eggs

On a separate note, according to data of some Russian state statistics services, such as Rosstat, prices for poultry in Russia are rapidly growing and will continue to grow in the coming months.

In general, prices for poultry meat and eggs in Russia have been rising at double-digit rates in recent months. As of November-December 2023, according to Rosstat, chilled and frozen chicken increased in price by 29.26%, chicken eggs - by 40.29%. The government explains this by increasing demand and certain “mistakes” made by its officials.

The Russian Ministry of Agriculture has recently said that they are studying the possibility of zeroing out import duties on eggs from “friendly” countries for the entire 2024 and are working on switching producers and retail chains to long-term contracts and increasing production. At the end of last year, the Russian agricultural regulator Rosselkhoznadzor lifted restrictions on the supplies of eggs and poultry products from Azerbaijan and Turkey, and it is planned that the same restrictions will be lifted in regard of other potential importers to Russia.

Shortage of breeding stock

Finally, there are serious problems with breeding poultry stock in Russia, which have always been imported to the country from abroad. Russia has been historically experiencing a shortage of such breeding stock, however due to the current crisis in the industry and the rise of prices, its imports to Russia have become extremely expensive.

According to data of Rosstat, poultry stock at Russian farms since June 2023 has been steadily declining along with monthly meat and egg output.

As of November 2023, the overall poultry stock in Russia estimated at 462.7 million units, which is 3.2% lower on a year-on-year basis.

As for monthly meat output, in November 2023, it was about 540,000 tonnes (-3% lower, compared to November 2022), while in the case of eggs it’s at 3.15 million units (-1%).

Experts of the Russian Poultry Union and independent analysts in the poultry business believe that serious interruptions with the imports of hatching eggs from March to December 2022 and the overall drop of their imports by 60% over two years (to about 300 million units in 2023) became the main reason for the current crisis in the Russian poultry sector.

“For comparison, in 2020, Russia imported 700 million hatching eggs, while in 2021 – 600 million,” according to Sergei Lakhtyukhov, general director of the Russian National Union of Poultry Farmers.

Poultry vaccine options may increase

Other experts also explain the current crisis by restrictions on the turnover of foreign vaccines to Russia, which led to a serious drop in output of some Russian poultry producers and their productivity. Finally, last year the situation with the spread of avian influenza in Russia significantly worsened, and there were several outbreaks of Newcastle disease.

As for vaccines, from September 1, 2023, the supplies of veterinary drugs to the Russian Federation are permitted only from those foreign enterprises that have been tested for compliance with the requirements of good manufacturing practice (GMP). According to Russian Kommersant business paper, some vaccines from the American MSD Animal Health and Elanco have not yet passed such certification. In the meantime, representatives of the Russian Association of Veterinary Pharmaceutical Manufacturers (which includes such companies as MSD, Boehringer Ingelheim, Zoetis, etc.) said there is a possibility that this issue could be resolved, while the supplies of 14 types of vaccines are expected to be carried out to Russia soon.

Russian government trying to stabilize poultry industry 

The Russian government, from its side, also prepares a package of measures aimed at stabilizing the situation in the industry. Among them are providing soft loans for domestic poultry farmers, signing of long-term state contracts for procurements of poultry for various state needs and state reserves, as well as the provision of subsidies for modernization of Russian poultry farms.

To prevent unfair increases in prices for eggs and poultry meat, the Ministry of Agriculture also proposes limiting the trade margin on these products to 20%.

In the meantime, due to current volatility in the market and the ever-tightening competition, some leading Russian poultry factories have already announced their plans to expand in some promising niches of the market.