Russian egg industry in a state of crisis
A sharp drop in wholesale prices on the Russian egg market has driven most companies below the profitability edge, the Russian union of poultry producers Rosptitsesoyuz said in a statement.
Wholesale and retail prices
Since early May, the wholesale prices dropped on average by 19.5% on the top quality eggs, and by 10.9% on the second-grade eggs, the Russian newspaper Vedomosti reported, citing the Russian Agricultural Ministry. The downward rally hit most producers, who have to bear substantial losses, Rosptitsesoyuz warned.
Galina Bobyleva, general director of Rosptitsesoyuz, estimated that retailers purchase eggs for 26 to 46 Roubles (USD 0.36 – USD 0.63) per 10 units, excluding VAT, while the production costs range between 49 and 52 Roubles (USD 0.67 – USD 0.71) per 10 units.
Some retailers estimated that the prices dropped by as much as 46% during the past few months, although some part of this decline is attributed to the seasonal factor, as eggs are traditionally getting cheaper in Russia following the orthodox Easter.
Balance between price and costs
The balance between price and costs has also been affected by a sharp rise in the price of grain, feed additives, and hatching eggs. All in all, production costs in the Russian egg industry jumped by 20% to 25% during the past year, Bobyleva said.
Egg producers would not be able to keep operating at such low prices for much longer. They would have to cut production in order to tame their losses, Bobyleva said.
The Russian National Union of Poultry Producers has appealed to the Russian government offering to improve communication between producers, retail chains and government agencies in order to establish a fair price-setting system on the market, Sergey Lakhtyukhov, general director of the National Union of Poultry Producers said.
The average prices per 10 eggs at electronic auctions in Russia dropped to 27 to 29 Roubles (USD 0.37 – USD 0.40), said general director of the Sinyavskaya poultry farm Artur Holdoenko. To some extent, this happened because retailers purchased too many eggs before orthodox Easter, so currently, they have large stocks of eggs, he added.
Market participants warned that the Russian egg market could face product shortage in the future if too many producers would decide to decrease production in the current circumstances.
Hatching eggs increasingly become a pressing issue
Russian poultry producers reportedly discuss a possible decrease in broiler meat and eggs production due to a shortage of hatching eggs.
The Russian press reported that companies providing 20% supplies to the domestic poultry market might cut production due to the lack of hatching eggs. The shortage emerged after significant restrictions were introduced on imports from the European countries.
However, according to Russian government, it is planned to achieve full self-sufficiency and abandon imported hatching eggs by 2024. Firstly, this problem can solved through support measures including the interest rate for the creation of local facilities for production of hatching eggs for poultry farming. And the second direction is to introduce and increase the import duty for imported hatching eggs.