Turkey farming in Russia and lessons from the price crisis of 2023

Moscow , January 10. - Despite a record surge in prices across the entire range of MEAT and poultry products in the second half of the outgoing year, the selling price of turkey meat showed a minimal increase.

In October 2023, the average price of broiler chicken from producers, according to Rosselkhozbank analysts, was 51% higher than in October 2022 (143 and 215 rubles/kg, respectively), the same increase of 51% was shown by the cost of pork ham ( from 226 to 342 rubles/kg). At the same time, the increase in average prices for turkey products was almost three times lower and amounted to only 13.9% (270 rubles per kilogram in 2022 versus 307 rubles per kg in 2023). At the same time, turkey-breeding enterprises operated at full capacity, and product inventories in producers’ warehouses in recent months were practically zero. Lower prices for turkey helped contain the rise in the cost of other types of meat - beef, pork and lamb.

However, for Russian turkey farmers this positive consumer factor also had a negative impact. Despite this year's near-record grain harvest, there has been no reduction in the cost of turkey meat production due to supposedly cheaper feed. On the contrary, the industry experienced a “perfect storm” - a series of price challenges that increased production costs by an average of 13-15% compared to 2022.

The main surprise was the worsening crisis in the labor market in almost all sectors of the economy, as a result of which the heads of turkey farming enterprises were forced to raise wages: in November 2023, they increased by 28% compared to November last year.

The increase in the exchange rate between the euro and the US DOLLAR , for which almost all equipment, spare parts andconsumables for turkey production amounted to 27%. And the increasing complexity of logistics, requirements for full prepayment and “parallel imports” have led to a 40-60 percent rise in the price of these goods themselves. Vaccines have increased in price by an average of 17%, but for some items by 70–100%. In addition, the cost of purchasing hatching eggs also increased by 27%.

The increase in prices for feed premixes ranged from 15 to 22%, an average of 18%, and for soybean meal - their main protein component - by 20%. The situation in the processing sector does not look any better: spices, functional additives, crackers, and aromatics have become more expensive from 9 to 71%, and on average by 17%. Here we can add an equally impressive, but still noticeable increase in tariffs for electricity (+13%) and gas (+12%).

An additional serious factor in the increase in product prices was the record increase in the cost of transport services - by 34% - from the delivery of raw materials, feed components, consumables and other cargo to the delivery of finished products to distribution centers, retail outlets, wholesale depots and meat processors.

In addition, from the point of view of the financial stability of enterprises, the increase in the key rate of the Central Bank to 16% made commercial loans for turkey producers practically unavailable.

Another challenge for the industry was a decrease in the safety of the turkey population by 1–1.5% due to the tense epizootic situation throughout the year, as well as the stoppage of supplies of certain foreign veterinary drugs vital for the industry and the transition to new vaccination programs based on Russian ones. analogues. Unfortunately, the domestic bioindustry was not ready to quickly satisfy the needs of poultry farmers for these products, and it will take several years to increase the necessary volumes of production of highly effective veterinary drugs and develop new ones.

However, domestic turkey farmers do not lose optimism: turkey meat is becoming increasingly popular among all consumer groups, successfully complementing and replacing more expensive beef and pork. New turkey farming projects are being developed in the Altai Territory and Crimea with a total capacity of about 32 thousand tons of finished products per year, after the elimination of the outbreak of avian influenza, one of the largest enterprises in the south of RUSSIA, Agro-Plus in the Stavropol region, is increasing production with an output of 15 thousand tons in year, the Ak-Bars diversified holding is restoring a bankrupt turkey farm in Tatarstan with a capacity of up to 8 thousand tons, small regional companies have planned to increase turkey production in 2024 by an average of 5-7%, and the industry leader, Damate Group of Companies, will complete construction two new fattening sites with a capacity of about 26 thousand tons per year in the Penza region and another one in the Rostov region - with a capacity of 20 thousand tons per year.

However, preliminary calculations of the cost of turkey meat production in the coming year may cast doubt on the possibility of implementing these plans. Among the increases in prices for various cost components already announced by industry suppliers in 2024, one can note a further increase in prices for vaccines (+30%), feed additives methionine +36% and threonine +24%, electricity tariffs +5% (+9.1% from July 1, 24), gas +5% (+9.1% from July 1, 24), rail transportation (+10.1% from January 1, 24), transport services of third parties, forwarding and warehouse operators (+10% from March 1, 24), packaging and spices +27% (corrugated packaging +38%, bags +16%, films +15%, trays +19%, pallets +29%, labels +20%), materials , spare parts and maintenance +10% and indexation of fuels and lubricants +8% from January 1, 24. In addition, the increase in labor costs is projected at 25%, including additional staffing due to the expansion of production and the necessary indexation of wages.

That is why the sustainability and further growth of Russian turkey farming in 2024 and in the next decade will depend entirely on government support in the form of preferential investment and operating loans, the provision of which is already being considered by the government for broiler enterprises. Such support should concern not only the commercial production of turkey meat, but also breeding turkey breeders of the 1st and 2nd order to replace the import of hatching eggs with domestic ones.

The Russian turkey farming industry needs a new National Project, similar to the one that made it possible to increase the production of domestic turkey meat almost sevenfold - from 48 thousand tons in 2010 to 330 thousand tons in 2020. It must be comprehensive and provide for the simultaneous growth of the material base for the production of all necessary components - veterinary drugs, feed additives, equipment and consumables - as well as a number of compensatory measures to reduce the negative impact of rising tariffs on goods and services. If such a national project is implemented, the industry’s plans to achieve production volumes of up to 650 thousand tons per year by 2030 will be successfully implemented.