Is Russia’s egg market heading into a new crisis?

It is reported that Russian poultry farmers blame the largest retailers, who use their dominant market position to force egg manufacturers to sell eggs below production costs. Photo: Canva

Nearly 2 years after the Russian egg market faced an unprecedented shortage, farmers are now grappling with an oversupply. If this situation is not swiftly addressed, it may lead to a fresh wave of challenges.

At the end of May, the average wholesale price of a dozen eggs dropped to Rub 30 (US$0.38), including logistics costs, which is at the lowest threshold of production costs ranging between Rub 30 and 40 ($0.38 to $0.41). As a result, Russian farmers are culling their hens on a large scale, reducing their flocks by 25-30%, according to local press reports.

“We are facing an oversupply – there is literally nowhere to sell eggs,” said Galina Bobyleva, general director of the Russian Union of Poultry Farmers, adding that in response to the 2023 egg crisis, farmers expanded operations, adding 700 million eggs per year to the existing supply. Now, those quantities are no longer needed.

Ramping up exports could partly mitigate the oversupply problem, Bobyleva added.

Back to old ways

Troubled farmers believe the state regulators must step into the market to bring it back to balance.

“The chicken egg market in Russia requires urgent and decisive measures for stabilisation,” Vladimir Petrovich Belkov, deputy director of the Tchaikovskaya Poultry Farm, told local news outlet Dixi News.

In addition to state support measures, Belkov suggested that the government must impose tight control over prices and possibly even consider reintroducing elements of the Soviet-style command planning economy.

“We need to move towards a planned economy, [to] know how much is needed for consumption, how much for production industries, establish export of processed products, and partially close the borders for product imports,” Belkov added.

Retailers dominance

Russian poultry farmers blame the largest retailers, who use their dominant market position to force egg manufacturers to sell eggs below production costs.

Around 60% of eggs in wholesale are sold in Russia on the spot through a competitive bidding procedure – a situation which makes business less predictable and incurs losses to farmers.

Restricting imports

Quite a few farmers have called on the government to constrain egg imports. During the peak of the egg crisis, the Russian government permitted imports from Turkey, Iran, Azerbaijan and Belarus. The imports have continued, even though the market situation has changed drastically.

A new crisis

Russian farmers warn that the new egg crisis is becoming more real as the number of hens rapidly declines. In 2022, a similar situation led to an egg shortage when a series of bird flu outbreaks hit several industrial farms in the country.