Russian Poultry Industry: Export-Oriented Solutions

In the last six years, the total poultry production volume on a carcass weight basis in the Russian Federation grew by 31.5%: from 3.84 mln t in 2013 to 5.05 mln t in 2019. By 2018, the poultry production met the country’s domestic needs and began a gradual entry into the export markets. 2019 saw an export growth trend — Russia exported poultry in the amount of 234 mln US dollars in 10 months. Dmitriy Aveltsov, director of “Agroanalytics Center” of Russian Ministry of Agriculture told us how things are going in the sector and what results were achieved by Russian poultry producers.

Production volume

According to preliminary estimates, in 2019, the production of cattle and poultry on a carcass weight basis was 10.80 mln t, which was by 26.9% higher than in 2013 (8.51 mln t). By 2024, the predicted growth under the regionalization project is by 9% compared to the last year’s level — up to 11.89 mln t. Since 2013, poultry production on a carcass weight basis increased by 31.5%, reaching 5.38 mln t (Fig. 1) by 2024. This year, the poultry production share in Russia was about 4% of total world production. The excessive supply of poultry and pork in the Russian market led to the decrease in chicken meat prices. The production of deep processing products also decreased (sausages, Vienna sausages), that’s why manufacturers reduced the volume of purchases of raw meat for their production.

Agricultural producers’ weighted average price of poultry (without VAT) in the Russian Federation as of November 21st was 105.9 ths rubles/t, consumer price was 143.6 rubles/kg.

Amongst Russian regions, the leaders of poultry production were Belgorod region, Stavropol Krai and Chelyabinsk region (Fig. 3). As of 2018, the largest Russian producer in the turkey meat market was “Damate” Group with the market share of 34%.

“Tambovskaya Indeyka” (a joint project of “Cherkizovo” Group and Spanish Grupo Fuertes) strengthened its positions with the market share of 14%. “Krasnobor” reached 9%, while “Ruskom-Agro” complex reached 4% (Fig. 4).

The average per capita consumption of poultry in Russia is growing: it was 33.93 kg per year in 2019, while in 2013, it was 29.98 kg per year (growth by 13.2%) (Fig. 2). According to preliminary estimates, the optimal turkey meat consumption volume per capita in the Russian Federation is 4–4.5 kg. The production volume needed to meet those needs is 600–650 ths t on a carcass weight basis. According to preliminary estimates, in 2019, it was only 300 ths t. Due to the low supply and high demand, the average producer price of turkey meat in the first half of 2019 was by 22% higher than in the same period of 2018.

World market situation
According to the Organization for Economic Cooperation and Development (OECD), by 2025, the demand for the animal protein sources in the world will grow, while the demand for poultry might increase by 2.4% per year. The most notable growth of the demand for meat will be observed in the regions with high population growth, such as Asia, Middle East and Africa.
The epizootic situation in China made a very serious impact on the world poultry market. Since August 2018, from 25% to 50% of the total pig stock were slaughtered or died. The Philippines (-16%) and Vietnam (-6%) also suffered ASF outbreaks. South Korea also reported 14 cases of ASF, however, the outbreaks were localized, and no impact on the production is currently expected. According to forecasts, in 2020, the world pork production will decrease by 10% to 95 mln t compared to 2019, while the export will reach 10.4 mln t, which is by 10% higher than in 2019.

This will stimulate the growth of world poultry production up to record high volumes. In 2020, the production is expected to reach the level of 103.5 mln t, which is by 4% higher than in 2019. The world poultry export is expected to grow by 5% (to 12.5 mln t) in 2020 due to the increase of demand in China, which will lead to the increase of the import to this country by 20% in 2020. Brazil and USA will provide the highest increase of supply to China.

In November 2018, Russia and China signed an agreement on opening the Chinese market for Russian poultry products. In 2019, China took the first place in Russian poultry export after purchasing poultry in the amount of 85.6 mln US dollars only in 10 months. China accounts for 39.2% of the total volume of Russian poultry export. Currently, 31 Russian companies are certified to supply poultry to China. The other market actively developed by Russian poultry producers is Saudi Arabia. In 10 months of 2019, the poultry export to this country saw a six fold increase compared to the same period of the previous year — to 26.3 mln US dollars. In only 10 months of 2019, Russia exported poultry in the amount of 234 mln US dollars.

The development of high export potential of animal products is mainly due to the systematic work on the lifting of phytosanitary and veterinary bans. In October-December 2018 the following countries were opened for export: China — poultry and by-products, milk and dairy products; Turkey — beef and by-products; Laos — beef, pork, meat products (beef, pork, poultry), small cattle meat and by-products, poultry and by-products, honey and honey products, fish and seafood (including ready meals).

In 2019, the following countries were opened for export: Brazil — beef and by-products; Venezuela — poultry and by-products, beef and by-products, pork and by-products; Hong Kong — poultry and by-products, beef and by-products, pork and by-products; Iran — frozen meat by-products of small cattle, live animals — small cattle for slaughter, frozen lamb; Republic of Korea — coney; Cuba — pork and by-products; UAE — hatchery eggs of domestic fowl, day-old chicks; Oman — beef and by-products, poultry and by-products, small cattle meat and by-products, fish and seafood (including ready meals), domestic fowl eggs and egg products, hatchery eggs of domestic fowl; Serbia — food collagen, food gelatin; Singapore — pork and poultry ready meals, poultry and by-products; Thailand — fish and fish products; Turkey — milk and dairy products; Tunisia — milk and dairy products, domestic fowl eggs and egg products; Philippines — poultry and by-products, fish and fish products.

Since June 2019, under the supervision of the Department of the Federal Veterinary and Phytosanitary Monitoring Service of Voronezh and Lipetsk regions, Russia exported to China 783 t of frozen poultry from the territory of Voronezh region and 162 t from Lipetsk region. On September 7th, 2019, the Department of the Federal Veterinary and Phytosanitary Monitoring Service of Chelyabinsk region for the first time this year carried out a government veterinary control of the export of 23 t of poultry by-products to China. Apart from frozen chicken and turkey meat, Russia exports to China popular deli products like chicken legs, heads, liver and hearts.

Chicken legs are a traditional meal and delicacy in China. China is the largest buyer of chicken legs in the world. For a long time, USA was the leader of chicken leg export to China, however, due to the trade war, the export from the US was closed. Then Southeast Asian nations, Indonesia, Australia and Brazil entered the chicken leg export market. Today, Brazil is the leader in poultry supply to China. The Russian Federation has more modest capabilities in that area. China has been working with Brazilian suppliers for a long time, and the list of export certified Brazilian companies is much longer. This market is still new for the Russian Federation, with its new challenges and opportunities. Russian producers plan to expand the delivery range, providing not only legs but also whole carcasses and parts of carcasses.

Epizootic situation in the Russian Federation
In Russia, there is a system of preventive and antiepizootic measures designed to prevent the focus of animal diseases, their prompt elimination, if there are any outbreaks, and prevention of further transmission of infectious agents. These measures include surveillance studies, preventive vaccination programs and immunity stress control. In 2019, there were 224 sites of infection. Four of them were from 2018, 197 sites were cleaned and 27 remained in quarantine. In order to stabilize the epizootic situation and recover its reputation as a reliable supplier, Russia needs a strict control of the animal stock not only by the producers but by the veterinary authorities as well.

According to our forecasts, in 2020, the poultry production in Russia will continue to grow due to the potential export increase. 2019 saw an increase in export sales in monetary terms due to the rise of the export prices (Fig. 1, 2), however, in 2020, a growth in quantitative terms is expected. Generally speaking, the existing world market trends open a window of opportunities for the Russian poultry producers. Russia can and has to use it to explore new markets and attract new loyal customers. Therefore, there is much work to be done for increasing the recognizability of Russian poultry products and trust in their quality.

One of the major obstacles hindering the development of Russian poultry export are animal disease outbreaks in different regions of the Russian Federation. The address of production of meat products often plays the role of a pass ticket to the world market. The products of Belgorod producers are a bright example of this, as they without too much difficulty pass all kinds of control when supplying foreign markets.