Russian Poultry Production Forecast to Increase 8% in 2009.
The US Government report said this growth is linked directly to the availability of credit subsidies as well as the government policies on restricting imports.
Broiler output is forecast to increase by 8% this year, following on from a 15.5% rise in 2008. This projection comes despite the fact that the current financial crisis has stopped the construction of "dozens of new poultry facilities and froze renovations of several existing poultry facilities", said the report.
Industry bodies such as the Russian Poultry Union are pressing the government to reduce the total tariff rate quota for poultry in the next 12 months, as well as substantially increasing the out-of-quota rate for imported poultry meat.
Poultry meat production is projected to increase by 140,000 MT in 2009 and is targeted to reach 2.3 MMT by 2012.
Consumption of poultry meat is expected to remain flat in 2009 - due, in most part, rising retail prices for both domestic and imported poultry. Government measures aimed at lowering import volumes of poultry in 2009 will also be a factor.
This comes in stark contrast to predictions from one domestic industry body that per capita consumption of poultry in Russia will increase by around 30% over the next two years. The USDA report quotes a representative from the Russian Union of Poultry Producers (RUPP) estimating that consumption is predicted to reach 15 kg per person in 2010, compared to 11 kg in 2008.
Although domestic poultry production is forecast to rise 8 percent in 2009, the poultry supply is expected to fall marginally in 2009 on "a significant drop in import volumes".
Prices of winter grain -- particularly feed quality barley and wheat - are continuing to fall rapidly after 2008 grain production reached the much higher than forecast level of 108 MMT. On the whole, however, grain prices are said to have stabilized a high levels after prices soared during 2008 on the back of the growth of the global biofuel market.
"Higher prices attract exports and domestic sales, and the current environment will stimulate investments in grain production in 2009," said US analysts.
Since Autumn 2008, poultry producers have become eligible to receive feed subsidies from the state. Some 10 billion roubles will be available to producers to compensate for feed expenses until the end of Spring 2009. Poultry producers will receive five roubles per one kg of live weight, according to the legislation. Swine producers will also receive financial help for feed costs, said the USDA experts.
In 2009, Russia will also develop protocols for the use of genetically modified grains to produce feed. A draft procedure is already said to be in place and applications have been received by the Ministry of Agriculture's Veterinary and Phytosanitary Surveillance Service (VPSS).
The government imposed a five percent duty on soybean meal in January 2009, which was scheduled to take effect this month and run until the end of the year. Soybean meal is an important feed ingredient in the domestic poultry industry.
However, in the short-term this is not expected to pose a threat to the poultry industry as domestic soybean meal output has increased thanks to a new plant in Kaliningrad and that supplies of cheaper homegrown alternatives, such as sunflower seeds and feed grains, have also risen. This has meant that imports of soybeans fell in 2008 to 710,000 MT.
The report concluded: "Thus, a temporary five percent import duty on soybean meal is not expected to have a major affect on domestic poultry production in 2009 but may do so in the long run.
"The devaluation of Russian rouble coupled with the five percent duty will make imported soybean meal less competitive in price than domestic feeds - and protein feeds supply by the end of 2009 may shrink."
In 2008, poultry imports fell from 1.287 MMT a year previously to 1.218 MMT. But the value of imports rose from US$1.052 billion in 2007 to US$ 1.339 billion 12 month later.
For 2009, the Russian Government has lowered overall TRQ volume for poultry from 1.252 MMT to 952,000 MT. The US share of this quota has also been cut from 931,500 MT to 750,000 MT -- a fall of almost 20%.
The US report also noted that duties were sharply increased on out-of-quota poultry imports to 95% but not less than 0.8 Euros per kg. This compares to the previous rate of 40 percent but not less than 0.32 Euros per kg.
It added: "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."
Consolidation in the Russian poultry industry is increasing -- with the 30 largest facilities responsible for more than 60% of output. Rising investment in processing equipment and infrastructure has improved efficiency.
But US analysts say further improvements are still possible as "companies that produce approximately 40% of total domestic poultry meat are far behind in terms of modern technologies, equipment, genetics efficient management systems".
One reason for this is the disparity between poultry prices and production overhead costs, said the report.
The RUPP said the domestic industry would seek to meet this extra demand by increasingly adopting Western-style practices - including vertically integrated production methods.