While Russia has successfully expanded its exports of poultry meat to China, leading poultry integrator Cherkizovo Group is taking a new approach to the trade in order to develop exports further.
Only last year, China opened its market to imports of poultry meat from Russia. Driven by a shortage in domestic production, Russia rose to third position for the first half of 2020 as a supplier of poultry meat to China, according to Cherkizovo Group.
While this performance is a good achievement, the company has been exploring avenues to build on this success. This will become increasingly important if Russia’s leading poultry producer is not to lose trade to growth in China’s poultry sector, or to other international suppliers, such as the U.S.
“This more challenging environment calls for harder effort when it comes to growing our position on the Chinese market,” said Andrei Terekhin, Cherkizovo’s head of exports. “In particular, it would involve capturing shares in more premium, high-margin products. We need to make this leap in quality.”
While the export product portfolio currently centers on frozen chicken feet, thighs, and wings, Terekhin said that Russia will in future also offer to supply value-added products. This could include further processed heat-treated meat products, such as chicken in marinades, or as nuggets and cutlets. For chicken feet, individual packaging could replace the current 10-kg boxes.
Before Cherkizovo (and other companies) can progress on these strategies, Russian agencies — including the Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor), and Ministry of Agriculture (Agroexport) — will need to negotiate an agreement with the Chinese authorities.
According to Terekhin, adding value-added products to the export mix to China would offer promising prospects for Russian poultry producers.
For the month of July, Cherkizovo reported a 1% year-on-year reduction in chicken sales at 59,480 metric tons (mt). The average price achieved by the firm was also 1% below the level from one year previously. Monthly sales were, however, significantly higher than in June — by 14% — with no change in the average price.
With annual slaughterings of 397 million birds, Cherkizovo Group is the leading poultry producer in Russia, according to the Top Poultry Companies database from WATT AgNet. It is ranked in 4th position among European companies.
One month ago, Cherkizovo Group signed a preliminary agreement with Cargill to acquire its chicken processing facility, located in Efremov, in the Tula oblast.
Slower growth forecast for China’s poultry meat production
Recent expansion in domestic chicken production is likely to continue into 2021. However, the pace of growth is expected to be slower than in 2019, according to the USDA Foreign Agricultural Service (FAS).
In 2019, Chinese poultry producers raised output to fill the gap in demand for meat resulting from loss of the pig population to African swine fever (ASF). As the return of pork production to pre-ASF levels will take time, poultry meat is expected to continue to displace pork in China for some time to come.
FAS puts China’s chicken production in 2019 at 13.75 million metric tons (mmt), increasing to 14.85mmt this year, and to 15.30mmt in 2021. Imports are forecast to jump to 925,000mt in 2020 from 580,000mt the previous year. However, China to require just 775,000mt in imported chicken next year as consumption is forecast to reach more than 15.65mmt from this year’s 15.40mmt.
Citing data from China Customs, FAS reports that Brazil supplied 62% of China’s chicken meat imports in the period January to May of this year. Other international suppliers were Thailand (10%), Argentina (9%), Russia (8%), the U.S. (6%), and other nations (5%).
Prior to a resumption in the trade in November of 2019, the U.S. had been excluded from exporting poultry to China for 5 years. According to FAS, China became the third largest export destination for U.S. chicken meat over the first 5 months of 2020 — behind Mexico and Taiwan.
