MOSCOW: Russia is producing more poultry than ever, and scrambling to expand exports as the increased supply sinks domestic prices.
Output, mainly of chicken meat, grew 6.3 percent last quarter from a year before, the Agriculture Ministry says. It follows a record 4.49 million metric tons in carcass weight in 2015, according to the Institute of Agricultural Market Studies. That’s hurting prices and producers like Cherkizovo Group PJSC.
“Poultry in Russia is probably the cheapest in the world,” Sergei Mikhailov, director general at the company, said in Moscow. “The market is stressed.”
Cherkizovo, Russia’s second-largest poultry producer according to Moscow consultant BEFL, suffered a first-quarter loss as oversupply cut average prices 8 percent from a year earlier to 88.62 rubles a kilogram (62 cents a pound). Rising costs for local feed are also curbing margins, the company said. “It was perhaps the hardest period in the company’s history,” Mikhailov said.
Cherkizovo plans to increase exports to boost profit, bringing sales abroad to 20 percent of total revenue in the next two years. Shipments to the United Arab Emirates and Egypt are due to begin in coming months and the company is exploring opportunities in China, the Middle East and Africa, it said.
Meat producer Agribusiness Holding Miratorg started selling poultry to European Union members Italy and the Netherlands last month, according to company spokesman Dmitriy Sergeev. It began exports outside the Soviet Union in 2015 with deliveries to Angola and the U.A.E. Russian exports of chicken meat and by-products may increase 46 percent to 95,000 tons this year, according to the agricultural institute, known as Ikar.
At the same time, broiler-meat imports will fall about 50 percent from 260,000 tons, the U.S. Department of Agriculture estimates. A share of local demand continues to be met by imports even as domestic production grows, partly as cross-border transport can be shorter than internal routes.
Still, Russia has turned itself into the sixth-largest producer, up from 21st in 2001, when it imported more than any other country, according to USDA data.
Russian poultry output is still growing as companies recoup investments in capacity in the past three years, said Daniil Khotko, an analyst at Ikar. Demand for local chicken rose in 2014 as a slump in the ruble raised import costs and the government banned supplies from several countries including the U.S.
Russia will “strongly support exporters” of meat, Agriculture Minister Alexander Tkachev said on May 25. “We need to take care of exports.”
