How sanctions could impact Russia’s poultry sector

Following the Russian invasion of Ukraine in February of 2022, some governments introduced a series of intensifying sanctions against Russian trade and top officials.

(Lakmal Weerasinghe | Bigstock)
(Lakmal Weerasinghe | Bigstock)

Following the Russian invasion of Ukraine in February of 2022, some governments introduced a series of intensifying sanctions against Russian trade and top officials. 

Some expected these measures would cause immediate and catastrophic damage to the country’s economy. Predictions of a 30% contraction have not come about, according to Financial Times. However, the impacts have been felt across the economy, as Russian businesses are unable to rely on supplies and technology from other countries. The source reports that Russia’s egg producers were deprived an important source of day-old replacement pullets when this trade from The Netherlands was halted last year.

Among the impacts of the sanctions is rapid growth in the unofficial import-export sector, it reports. In suitcases and trucks, individuals bring into Russia key technology and spare parts on which Russian businesses depend for their continuing operation.

Furthermore, Russian firms will likely have sought these key items from alternative sources.

As a net exporter of grains and oilseeds, Russian poultry and livestock companies are unlikely to be facing a shortage of raw materials for feed, or the rising prices experienced elsewhere. 

Russia’s growing deficit

Last month, Russia recorded a fiscal deficit of 3.3 trillion rubles (RUB; US$47 billion), reports The Moscow Times. After a peak during the height of the coronavirus/COVID-19 pandemic in 2020, this is the second highest monthly deficit in the country’s modern history. Some analysts have put the figure as high as RUB3.9 trillion.

This gap in the nation’s economy is attributed to the costs of the ongoing military operation in Ukraine, and the European Union ban on seaborne crude oil exports from Russia.

Introducing a number of adjustments to the figure, Russia's Finance Minister informed a recent government meeting that the deficit amounts to just 1.8% of gross domestic product (GDP). According to the minister, this is close to the planned figure of 2%.

Looking ahead, The Moscow Times reports, recent EU sanctions and a gas price cap make the Russian economy more vulnerable in the coming year. In 2023, the country will no longer be able to rely on commodity exports for economic support. 

Growth in Russia’s meat production

Despite the pressure on the country’s economy, industrial meat supply was up 6% year-on-year at 848,000 metric tons (mt; carcass weight equivalent) in the month of November. This is according to the latest figures from Russia’s leading meat company, Cherkizovo. The figures represent an index based on domestic commercial production, imports and exports, and calculated using a proprietary formula.

For the January-November period of 2022, the index for poultry, pork and beef combined was 8.64 million metric tons (mmt). This is 4% above the figure for the same period of the previous year.

For the month of November, Cherkizovo calculates the index for all poultry meat (chicken, turkey and other birds) 6% higher year-on-year at 419,000mt. While production was reported to have expanded by 7.1%, imports were down 24%, and exports by 5%.

At 345,000mt, the pork index in the same month increased 3% compared with November of 2021. Domestic output was up by 3.6%, and exports by 9%, while there was an 85% fall in pig meat imports.

For beef, the index was up by 21% year-on-year at 84,000mt. Production expanded by 2.9%, and imports by 64%, while exports were reduced by 38%.

For the January-November period, the company reports the indices for poultry at 4.34mmt (+3% year-on-year), pig meat at 3.58mmt (+8%), and beef at 720,000mt (-3%).

Soon after the Russian invasion of Ukraine began last year, quick service restaurant chains McDonald’s and KFC announced they were halting their Russian businesses.

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