If the rapid growth in poultry exports from Russia doesn’t materialise then the country should consider introducing a policy of self-limitations for industry growth, according to local officials.
First deputy chairman of the Federation Council Committee on Agrarian and Food Policy, Sergei Lisowski, said Russia would need to introduce such measures in order to avoid an oversupply crisis which could lead to the collapse of prices on the domestic market.
Growth threshold reached
Lisowski has been supported by several market participants and agricultural experts, who believe that in various segments of the meat industry Russia has reached a threshold where further growth becomes impossible.
According to official information, in the first six months of 2016 Russia increased poultry production 4.9% compared to the same period of 2015 to 1.9 million tonnes. In quantity terms, this growth reached 100,000 tonnes. At the same time, export supplies remain at the level of 2015 close to 45,000 tonnes.
Consequences of over production
Considering this, Lisowski claims that “Russia is increasing production, not thinking about consequences.” He explained, that talks about self-limitation in the poultry industry have been taking place for a while, but so far there were no actions in this direction. A large number of poultry manufacturers have put their hopes in increased export supplies, in particular Cherkizovo, who announced their first chicken sales to Egypt and Tanzania in August 2016.
However, Lisowski suggests that Russia is not making much headway in the large poultry export markets. He noted recent talks with China on the establishment of poultry export, as well as recent approval of export supplies to the Middle East, but expressed Russia most likely will not be able to establish significant export supplies within the next 5-10 years.
Dependent on poultry exports
A similar opinion has been expressed by the head of the National Meat Association, Sergey Yushin. He stated that, in general, Russia has the ability to significantly increase the volume of production for basic types of meat, including poultry and pork, but it will be senseless, since all major markets remain closed and this also coupled with the fall of consumption inside the country. According to Yushin, the further development of the country’s meat industry will be almost fully dependent on exports.
At the beginning of 2016, several meat producers already applied to the Russian government for state support in new projects in meat production, claiming that this threat of oversupply is likely within the next 1-2 years. The Russian Ministry of Agriculture so far hasn’t refused state subsidising of new projects, saying only that it is closely monitoring the situation.
Geopolitical issues holding back exports
At the same time, Russian agricultural experts suggest that the development of poultry exports from the country is uncertain due to geopolitical issues, as well as a lack of experience of Russian companies in promoting their production in international markets. In particular, according to Vladimir Nikandorov, agricultural analyst, Russian companies promote their production as ecologically clean, especially in China, where at the moment there are significant demands for such type of food products.