High grain prices may cause losses to Russia’s poultry and pork industry
Farmers are appealing to the government to subsidise feed costs
While Russia’s grain producers are benefiting from record-high grain prices, another branch of the Russian agriculture is bearing increased costs. Livestock producers are struggling, as domestic prices for feed grain depends on export prices.
Record-breaking grain prices could impair growth in the Russian poultry and pork industry and make thousands of farms loss-making, says All About Feed. Grain prices in the local market are tied to export prices, which have surged since the beginning of the year due to the COVID-19 pandemic and the continuing devaluation of the ruble. Thus, in the past few months, the price for feed wheat in Russia increased by 20% and reached 14,650 rubles ($184) per tonne, excluding VAT. The price in ruble terms is currently the highest ever recorded in the domestic market.
At the same time, most Russian farmers sell their products for rubles. The cost of poultry production in Russia is expected to increase by 15% to 20% this year, as grain makes up a significant part of the production cost of growing broilers. According to Elena Stepanova, deputy director of the Russian Union of Poultry Producers, the current price dynamics are rather critical. “Assessing companies’ profitability and marginality under new conditions at the end of the year, we realised that in the best-case scenario, the biggest companies, which have reserves and rainy day funds, could hit a breakeven point, while a large number of producers could become loss-making,” Stepanova said adding that the situation could lead to a fall in production performance.
At the moment, poultry accounts for 47% of Russian meat production. According to Stepanova, poultry companies are limited in their ability to compensate for the rise in production costs by increasing prices for their products. Thus, Russian producers have asked the country’s Ministry of Agriculture and the Ministry of Industry and Trade to subsidise purchases of grain for feed production.
Dmitry Rylko, director of the Russian Institute for Agricultural Market Studies, said that his organisation would probably support the position of the Poultry Union regarding the subsidies to reimburse expensive feed costs. “We would advise [the authorities] to follow this path as a less painful solution for the Russian agricultural industry,” he stated.
For Russian pig farmers, high grain prices are also a problem, especially against the backdrop of the low pork prices in the local market. “The new challenge we all have to face in the fourth quarter of 2020 and in 2021 is associated with a brand new price situation in the domestic grain market,” said Yuri Kovalev, chairman of the Russian Union of Pork Producers, on 16 October.