The Russian poultry industry has had to find alternative sources of feed additives, hatching eggs, equipment, packaging and labels as supplies from Western countries have been stopped or interrupted.
The current crisis is the biggest challenge facing Russian poultry farmers since Soviet times. Russia’s invasion of Ukraine has caused a massive exodus of Western companies from the Russian market.
At the time of this writing, 500 Western brands had publicly announced their decision to exit the country. Unprecedented Western sanctions hit the logistics and financial sectors as 70% of Russia’s banking system was put under restrictions and major global shipping lines canceled bookings to and from Russia.
The sanctions list is not final as the US and European Union continue to consider new economic attacks against Russia. For years Russia has tried to move away from imported food to bolster its economy against Western sanctions. In 2018, Russian President Vladimir Putin said the goal had been achieved as the country became completely self-sufficient in staple foods, including chicken and eggs.
The impact of recent sanctions has made it clear that things are not so simple. Russia produces 4.2 billion hatching eggs and imports about 300 million. Nevertheless, when it comes to breeding stock, Russian poultry farmers have proven to be very vulnerable.
Imports of most poultry industry products have been suspended as the European Union ordered Russian and Belarusian trucks to leave their territories by 16 April after imposing a fifth wave of sanctions measure.
Under the latest package of sanctions, trucks from Russia and its ally Belarus are legally barred from entering her EU member state. The new transport restrictions promise to further limit the way European goods enter the Russian market.
Russian poultry farmers will have to overcome their dependence on imported equipment. 80% of the equipment installed on Russian poultry farms is imported. However, most of them were installed in the last 5-6 years and are fairly new, so the level of wear is still low.
The economic crisis is reducing the purchasing power of the Russian population and threatens to curb protein consumption. The Russian economy is likely to contract by 12% this year since Ukraine’s invasion, reports London-based consultancy Capital Economics.
Against this backdrop, private consumption is likely to struggle. Analysts at Renaissance Capital expect inflation to peak at 24% this summer. This was a big problem for the Russian authorities, and price control measures on items such as sugar were counterproductive.
Russian government agencies have warned of fines for companies that raise food prices too high. But Russian poultry farmers warn they will have no choice but to switch due to significant increases in production costs.
Poultry and egg prices on the Russian market are rising due to bank interest rates, the cost of spare parts, feed ingredients, containers and packaging. Prices have skyrocketed due to the appreciation of the exchange rate.
The Russian government is warning producers to curb price increases for staple foods, including chicken. Sharp price increases are likely to undermine the purchasing power of Russian buyers, but poultry farmers could suffer losses if prices are artificially suppressed.
Russian products have lost their place in foreign markets as Western grocers have sold out Russian vodka, caviar and various other products. However, the boycott is unlikely to affect Russian poultry exports, as Russian poultry primarily ends up in markets in countries considered friendly.
In 2021, poultry meat was exported to 50 countries around the world, but 80% of exports went to five separatist countries: China, Saudi Arabia, Kazakhstan, Ukraine and Vietnam.
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