Agro Perspectiva

Russian Federation. Steady demand for chicken meat and ample feed supplies are expected to lift production to 4.725 MMT in 2021

23.09.2020 14:55 "Agro Perspectiva" (Kyiv) — Following are selected highlights from a report issued by a U. S. Department of Agriculture attache in The Moscow (Russian Federation), steady demand for chicken meat and ample feed supplies are expected to lift production to 4.725 MMT (RTC) in 2021. Exports in 2021 are projected at 220,000 MT (RTC) with shipments to traditional and recently opened markets expected to grow at a slower rate than the 22 percent growth in 2020 driven by entry into the Chinese market. A weaker ruble will spur export initiatives but harm margins from domestic sales. In this environment, leading poultry companies are expected to increase their market shares at the expense of smaller players.

Executive summary

Steady demand for chicken meat, availability of feed from an ample grain crop in Russia and growing imports of soybean meal support production growth to 4.725 MÌÒ (RTC) in 2021. A weaker ruble will drive export initiatives but will harm margins from domestic sales due to increased costs of imported breeding flock, feed additives, veterinary medicine, and equipment maintenance. Leading companies with complex value-added chains, multiregional presence and access to credit are more resilient to lower margins. Industry leaders will further increase their market shares at the expense of smaller and less efficient players. The forecast for 2020 production is raised to 4.715 MÌÒ (RTC). One percent growth year-over-year reflects better-then-expected exports, namely to China, and low immediate impact on broiler industry operations from the pandemic-related recession. As of the date of the report, no Covidrelated closures of chicken farms and processing plants have been reported.

2021 exports are forecast at 220,000 MT (RTC), the growth of shipments to traditional and recently opened markets continue at a smaller pace compared to 22 percent year-over-year growth of exports in 2020, when Russian exporters successfully entered the market capturing the benefit of rising Chinese imports.

Domestic consumption is forecast flat at 4.715 MMT (RTC). The segment of population in difficult economic conditions continues to grow in Russia due to Covid-related deterioration of disposable incomes. The current economic environment limits opportunities for growth of chicken meat sales.

Moreover, competition with pork will intensify, pork prices are falling due to rising domestic supply from the modernized pork industry.

In response to Ruble depreciation and a spike in wheat exports in the first quarter of 2020, the Government of Russia (GOR) introduced a series of measures to contain domestic prices of wheat and forage grains. The GOR limited exports of locally harvested grains and oilseeds, simplified imports of soybean meals and activated State Grain Reserves. GOR will likely pursue protectionist policies in 2021, and forage grains prices will remain attractive in the market.

Considering the stagnating domestic demand, chicken meat producers are striving to maintain their gains in China and expand in other export markets. These goals are threatened by risks related to ongoing spread of Highly Pathogenic Avian Influenza (HPAI) on the European continent and in Asia. The epizootic environment was favorable in Russia until August 2020, when HPAI outbreaks were reported in Chelyabinsk and Omsk regions. In the case of further spread of the disease, the moderately optimistic production and export forecasts shall be revised.

Key Macroeconomic indicators are forecast to decline in 2020 due to Covid-related disruptions: GDP — 4.5/ — 5.5 percent; Real Disposable Incomes — 3.8 percent. Real Disposable Incomes have fallen a record 8 percent in the second quarter. The Ruble depreciated 15.5 percent against the U.S. dollar in year-todate terms as of August, 15, 2020.