The cost of egg production continues to rise. Profitability of enterprises falls due to price disparity

Despite the decrease in the cost of grain after the introduction of EXPORT duties, the costs of egg producers are increasing, both for feed and other inputs. However, the leading players do not reduce their production volumes.

Last year, the largest poultry farms maintained high egg production and even increased it. Thus, the market leader, Volzhanin (Yaroslavl region), produced about 1.5 billion eggs, which is comparable to the volume in 2019. This year the company plans to keep the figures at the same level. The Sinyavinskaya poultry farm (Leningrad region) produced 1.44 billion eggs in 2020, which is more than in 2019, when the volume amounted to 1.35 billion eggs. “We did not increase the capacity of the enterprise, the growth is due to the fact that we are constantly improving the productivity and safety indicators,” Artur Kholdoenko, general DIRECTOR of the poultry farm, explained to Agroinvestor. This year, the company expects to increase production to 1.46 billion eggs.

At the same time, the cost of production is growing every year, Kholdoenko notes. “Now, thanks to the introduction of an export duty on grain, its prices have really fallen, but other feed components — oil, oilcake, meal, amino acids, protein supplements, premixes — have increased in price, which compensated for the decline in grain prices,” he says. The packaging is also getting more expensive. Cardboard and cardboard containers, according to the HEAD of Sinyavinskaya, are already 48% more expensive than in November last year. “Moreover, we are promised a further rise in prices for cardboard. For film materials, prices have risen by 40% over the past three months, pallets have risen in price by 30% in the last quarter. Transport logistics costs increased by 12-15%. We don’t have any hope that the cost of egg production will decrease yet,” complains Kholdoenko.

The general director of Volzhanin, Lyudmila Kosteva, also notes an increase in the cost of resources used in production. “The weakening of the ruble, the pandemic and the fall in oil prices have led to an unprecedented increase in grain prices on the world market. Prices for Russian milling wheat reached a historic high. The price of meal, cake, sunflower oil continues to rise,” she commented to Agroinvestor. The rise in prices for corn as the main raw material in the production of amino acids immediately affected the cost of the amino acids themselves. Prices for some amino acids doubled in early 2021, according to the National Feed Union. The increase in the cost of raw materials was accompanied by an increase in prices for packaging materials: for various types of containers, according to Volzhanin specialists, it ranges from 35% to 50%.

Lyudmila Kosteva, General Director of the Volzhanin Poultry Farm

Against the background of a decrease in the purchasing power of the population, as well as an increase in prices for MEAT products, there is an increase in demand for eggs, when the consumer switches to animal protein at a more affordable price - that is, from meat to egg, and in the "egg" segment - to a cheaper category.

Kosteva adds that the most important reserve for regulating prices for socially important food products is the so-called trade margin, which retail trade adds to the producer's price. “Price disparity continues to persist for the main cost components — raw materials for feed production and prices for our products. The increase in egg producer prices, according to Rosstat, in 2020 compared to 2019 amounted to 4.3%. At the same time, grain has risen in price by more than 25%, cake and meal - by 55%, sunflower oil - by 75%, lysine - by 40%, methionine - by 20%, ”Kosteva lists.

There are no ways to optimize the cost price in the industry, comparable with the growth rate of raw materials costs. “Projected to fall in profitability due to disparity in prices for the main components of the cost and prices for chicken eggs. At the same time, many enterprises are implementing investment projects with the participation of bank funds, Kosteva emphasizes. “For timely payments on the principal debt, it is necessary to ensure a minimum level of profitability.” Therefore, strict administrative regulation of egg prices by the state, if it occurs, can lead to a sharp deterioration in the financial situation at individual enterprises, and as a result, to a decrease in production volumes, she warns.

“The support measures proposed by the government in terms of increasing the maximum volume of preferential short-term loans are likely to be ineffective due to the lack of sufficient margins for egg producers,” the head of Volzhanin believes. The only effective measures to support producers can be subsidies for part of the cost of production, she believes. “In the future, to curb price growth, it would be advisable to consider the possibility of creating a state reserve fund of raw materials,” adds Kosteva.

In early March, key industry players affiliated with the National Poultry Union agreed to contain the price of poultry and eggs in order to keep products affordable for consumers. At the same time, the industry is discussing the possible risks of price regulation by the state. According to Rosstat, for the week from March 10 to March 15, the price of chicken meat on average in the country rose by 1.6%, compared with December, the increase was 10.5%. Prices for eggs for the week increased by 0.9%, relative to December - by 4%. The Ministry of Agriculture has proposed a number of new measures that should maintain the financial stability of producers and stabilize prices for poultry meat and eggs. In particular, the department plans to increase the maximum limit on preferential short-term loans for poultry enterprises from 1 billion rubles. up to 1.5 billion rubles. per borrower