For the first time in the last 20 years, analysts have noted a decline in the production of chicken meat in Russia. This trend is sustainable, but the reduction in supply is unlikely to lead to higher prices for chicken meat, experts say. According to their forecasts, we will see in the near future a sharp reduction in the number of players in the industry, and those companies that remain in the chicken sector will be forced to look for new markets, the portal agrovesti.net notes.
"Since the end of last year and the entire Q1, for the first time in the last 20 years, we have seen a decrease in the production of chicken. For the Q1, it is small and amounted to slightly more than 2% compared to the same period in 2018. Nevertheless, this is a new trend in the market which is likely to continue throughout the year," Albert Davleev, AgrifoodStrategies research company CEO, says. According to Rosstat, in January-March 2019, poultry production in Russia fell to 1.59 million tons by 2.1% compared with the Q1 of last year.
Experts explain that the current decline is the result of the 'difficult' 2018 year. "82 outbreaks of bird flu occurred in 2018 in Kursk, Oryol, Penza, Samara, Saratov and other regions, which led to the bankruptcy of several companies," commercial director of the IMIT analytical agency Lyubov Burdienko explains. In particular, production is not carried out at the Belaya Ptitsa Group enterprises, which, according to its own estimates, occupied about 5% of the Russian poultry meat market in 2017.
Another reason for the decline in the market is to reduce profitability. "If 4-5 years ago this indicator was about 10% or even higher, now the average profitability in the sector reaches only 5-7%, and it tends to zero in some medium and small companies," Albert Davleev commented. Experts associate the profitability decline with constantly growing production costs, in particular, with more expensive feed and fuel. According to experts, prices for chicken meat have been declining since the beginning of the year along with production volumes. In January 2019, the wholesale price for a carcass was RUR 120-125 / kg., in April RUR 112-115 / kg., and in May already RUR 102-105 / kg., analyst of the Institute for Agricultural Market Studies Anna Kudryakova noted. According to her, the simultaneous reduction of prices and the volume of supply in the market can be explained by the fact that the demand for products is not growing. In an effort to prevent further decline in demand, market players are forced to lower prices, she explains.
Last year, Russia produced 4.9 million tons of poultry meat. Consumption is 31 kg / person per year, and this figure has not changed since 2016, Lyubov Burdienko comments. As the commercial director of the Roskar poultry farm, Maxim Zhemchuzhnikov, noted previously, production exceeds consumption in Russia by about 4%. Experts predict that in the coming years, production at best will remain at its current level, although it has only recently increased annually by 10-15%. Such a situation on the market will most likely lead to its further consolidation, strengthening the position of large agricultural holdings, which can reduce costs (for example, through own feed production), and the SMEs leaving, Albert Davleev said.
Experts believe that sector players could strengthen their business through meat exports. In particular, in the coming years, exports to China may increase due to the fact that in November last year, Russia and China signed protocols on mutual deliveries of agricultural products. In the coming years, poultry meat exports to China could reach 150,000 tons annually.
