Growth path for the Russian poultry industry

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Growth path for the Russian poultry industry 23.12.2019 13:00

Russia has long struggled to increase self-sufficiency to meet its national poultry consumption demand. Now that problem has been tackled, what’s next?

“Yes, we have managed to become self-sufficient in poultrymeat, even though we are only 12th in the world in terms of poultrymeat consumption per capita. Today, Russians consume 33 kilograms per capita per year. This figure will undoubtedly continue to grow. The leaders on that list are countries with a consumption of more than 40 kg per capita. Consumption still has a long way to go. Besides this, the growing level of exports offers a direction for the industry’s future development. The consolidation of the industry is an inevitable process. We are fifth in the world in terms of poultry production with 4.98 million tonnes of poultrymeat in carcass weight produced in 2018, while the countries ahead of us on that list have a far higher consolidation rate. We are moving in the same direction. In Russia, the top ten companies produce around 50% of all the country’s poultrymeat.”


Russian poultry producers are able to compete with the world’s leading poultry producers, maybe not always in terms of production costs, but certainly on quality. Photo: Vladislav Vorotnikov

Historically, the Russian government has spent a lot of money to support the domestic poultry industry. Are any changes expected in that area?

“State support ended completely from the beginning of this year. Nonetheless, we see signs of sustainable growth in exports and we expect to see a gradual increase in the consumption of poultrymeat and processed products. There will be only small changes in the structure of animal protein consumption in Russia over the next few. Poultry accounts for 47% of all meat consumption. We expect our industry to be able to replace around 2% of pork over the course of five to seven years. Indeed, State aid helped our industry a lot over the past few years, but it is important to note that we used that aid to build up domestic production from scratch. Now we are able to compete with the world’s leading poultry producers, maybe not always in terms of production costs, but certainly on quality.”

How was the industry affected by the 2014 food embargo?

The introduction of the food embargo halved the volume of poultry imported into Russia. As a consequence Russian producers had to step up production dramatically. The industry has seen a 20% increase in its production performance since 2014. The drop in the exchange rate of the Russian rouble [which occurred at the same time], caused a hike in production costs for poultry meat. Imported hatching eggs feed additives, drugs and equipment had to be paid for in relatively expensive foreign currencies. On the other hand, that devaluation made products of Russian origin more attractive to markets abroad. As a result, Russia exported 183,000 tonnes of poultrymeat in 2018, growth by a factor three relative to 2014. The main export destinations are China, Saudi Arabia, Kazakhstan, and Ukraine.”

What changes would you expect if the food embargo were to be suddenly removed?

There is a set quota for poultrymeat imports into Russia of 364,000 tonnes [in 2019]. All imports within this volume are subject to a 25% import duty. All quantities in excess of that figure are subject to an 80% import levy. Poultry imports into Russia from countries outside the Eurasian Economic Union (EEU) in 2018 amounted to 78,000 tonnes. An increase in imports under the quota is therefore limited to 286,000 tonnes. I think it unlikely that there would be any further increase in imports in excess of the quota because they would be simply too expensive due to the levies. This means that the potential increase in imported poultrymeat if the food embargo were to be lifted may be estimated at 6% of Russia’s domestic poultry production. On top of which we need to take that into account that the downward rally of the Russian rouble has made our market less attractive for European and US poultry exporters. Given that and the rapid development of our exports, I would not expect there to be any major turbulence on the market should the food embargo be removed.”

It is widely believed that the feed conversion ratio in the Russian poultry industry is lower than in Western countries? Is that true?

“I would not agree. We use the same technologies and the same genetics as European and American companies do. Our leading poultry producers can compete with foreign producers anytime. We are highly competitive in the world market and showing sustainable growth. We are able to compete with the leaders in this area.”


Sergey Lakhtyukhov, director general of the Russian Union of Poultry Producers. Photo: Vladislav Vorotnikov

What is the situation with feed additives and premixes? Is there any import replacement on the way?

“When it comes to premixes, we have managed to adopt the world’s best practices and mastered advanced technologies. We are completely self-sufficient in terms of premixes on the domestic market. We have the biggest European premixes plant [operated by the Russian company Megamix]. Moreover, the production facilities have still to reach their full design production capacity. We are still in the early stages in the area of feed additives. So most feed additives in Russia, around 70%, are still imported. There are some lysine plants and a few other production facilities that were set up as joint ventures with international companies. But we still have a long road ahead of us towards replacing imports in this area.”

Russian veterinary legislation is criticized for allowing uncontrolled use of feed antibiotics, including in the poultry industry? What do you think about that?

“Unfortunately, this only shows that even in our age of digital technologies the pace at which up-to-date information is distributed is still rather slow. Russia and its legislation lag about ten years behind international standards. For example, Russia adopted a strategy to prevent antibiotic resistance in 2017. The preventive use of antibiotics was prohibited, while there was some significant revision of the legislation in the area of veterinary drug use. Russian agricultural companies are introducing their own programs to control the use of feed antibiotics. So I can safely say that in this area we are among the best. And while other companies declare a reduction in feed antibiotic usage (while at the same time increasing the share of active substances), we are gradually moving towards the reasonable use of antibiotics in agriculture.”

Russia has seen a noticeable increase in halal poultry production, and the country recently introduced its first organic food standards? What are the prospects for these developments?

“The prospects are really bright. Estimates show that 5% to 10% of customers in Russia prefer poultry produced to halal standards. In addition, there is the export potential of halal poultry for the countries of the Muslim world. We also see that this kind of production has already made its way onto the wider market from being a traditionally religious niche. Along with a growing number of customers who do not consider themselves to be Muslim but who are opting for these products. They are perceived as premium quality products. The producers have to meet the consumers’ requirements. Although halal standards are not compulsory [in Russia], poultry producers put a lot of money into meeting them. Demand from abroad also gives them the impetus to comply with halal standards. Countries with a Muslim population are the main poultry consuming regions of the world.

Russia still depends on imports for hatching eggs, feed additives, and medicines. While unfavorable exchange rates for the Russian rouble drive up production costs. Photo: Vladislav Vorotnikov

The Russian Agricultural Ministry predicts poultry exports could grow to 1.2 million tonnes by 2024, almost as much as for the entire EU 27? What is your forecast?

One of the objectives of our Union is to join the list of the world’s top ten biggest poultrymeat exporters. This is a short-term goal. Now we are 11th. By 2025, we want to be close to the top five. We have started building on our export strategy just recently. This year we plan to export 200,000 tonnes of poultrymeat and we aim for more. Our strategic markets are China, the countries of South-East Asia, the Middle East and North Africa. As I already noted, we will not always be able to compete in terms of production costs, but these relatively higher costs are offset by the high quality of our products. In Russia, it is prohibited to grow GMO soy and feed GMO feedstuffs. There is also strict control of the vaccines and drugs used in the domestic veterinary market. In general, our veterinary inspection is somewhat stricter than in other countries. These and other factors make Russian products significantly better placed compared to our closest competitors. This makes us attractive in terms of quality and safety.”