World Grain - May 2021 - 30

FEATURE QUARTERLY: RUSSIAN FEED INDUSTRY INVESTMENT SLOWING

the Russian analytical agency Agrifood Strategies.
" Despite challenges related to the local currency depreciation, the country has huge water and land resources,
along with a substantial population, which provides for
further growth of poultry, pork and beef production,
along with industrial fish farming.
" Russia meat exports are growing, covering a wider
area and offering an increasing variety of meat products. Besides, the share of backyard farms, especially
in the swine sector, is being taken by industrial enterprises. Therefore, the demand for high-quality feeds
will be growing even if we see considerable improvements of feed conversion rates across the board. "
Independent mills dying out
One way or another, it is clear that not all segments
of the Russian feed industry have room for growth.
The share of independent feed mills in Russia has been
decreasing during the past few decades. As explained
by Mikhnyuk, they currently account for around 10%
of the Russian feed production. This figure is likely to
decrease further as independent feed mills are facing a
truly dark time now.

Tough times have come, and
everyone (in the Russian feed
industry) sees its financial
models put under question.
Sergey Mikhnyuk, chairman of the
Russian National Feed Union
" Differently from many countries of the world,
Russia has very few purely independent feed mills, as
most of them are being either built from scratch or reconstructed from the existing facilities by big livestock
producers, " Davleyev said.
" Feed mills that do not make part of agricultural
holdings - multi-business vertical integrators - usually specialize in specific types of feeds or value-added
recipes, " he added.
Independent feed mills are frequently going bankrupt or being put up for sale.
In May 2020, Cargill sold its feed mill in Leningrad
Oblast to CBS Commodities. Russian newspaper
Kommersant, citing its sources close to the deal, reported that Cargill initially tried to sell the feed mill
for 160 million rubles ($2.1 million) but then had to
cut the price, so at the end, it was limited to 60 million
rubles ($850,000) since the economic prospects of running the asset were rather unclear.
The feed mill produced 95,700 tonnes of feed in
30

2018 and less than 20,000 tonnes in the first half of
2019 when the production was halted.
In 2018, RUFP forecasted that the share of independent feed mills in Russia would drop to 5% to 7% in the
next several years. This decline primarily is associated
with the ongoing crisis of independent and backyard
farms in Russia. Small-scale poultry farmers cannot
withstand competition with big agricultural holdings,
while pig farmers fall victim to African swine fever.
During the past few years, no new independent feed
mills have been launched in Russia, and local market
participants are confident this niche will keep shrinking.
Expensive raw materials
The COVID-19 pandemic has exposed a long-standing
problem of excessive grain use in the Russian feed industry. It is estimated that the share of grain, on average, in the Russian feed industry amounts to 68%. This
factor has driven production costs in the Russian food
industry to record heights during the pandemic.
" The poultry feed costs are soaring, " said Dmitry
Ivanov, general director of local poultry producer
Saratov Poultry. " By 60%, it consists of wheat, the
price of which almost doubled compared to the last
year from 8,000 rubles ($105) to 15,000 rubles ($200)
per tonne. Plus, the Russian ruble's exchange rate has
changed. There are things like vitamins, amino acids, veterinary drugs, which are not manufactured in
Russia. "
Since the beginning of the pandemic, food prices
have become a hot-button issue in Russia, amid falling
living standards. In December 2020, the government
introduced price caps for some staples, followed by tax
hikes on exported grain in February 2021.
" These measures let us slow down the rise in prices
for grain and feed, " said Russian Agricultural Minister
Dmitry Patrushev during a press conference in early
March. " Their ultimate stabilization is anticipated in
the coming two months. In order to support livestock
companies and processors, the soft loan program has
been expanded. In 2021, the borrowed funds could be
used to purchase meal, premixes and feed. "
In a bid to constrain the price rally on the domestic market, the government also has called producers
and supermarkets not to rewrite price tags too often,
threatening those who disagree with penalties from the
Russian Antimonopoly Service.
As explained by Dmitry Vostrikov, director of the
Russian Food Producers and Suppliers Association,
" The producers feel like being caught between the
hammer of expensive raw materials and the anvil of
the state price regulation. "
" Food producers are in the grip of tight price regulation and expensive feed, " said a source in the Russian
May 2021 / World Grain / World-Grain.com

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World Grain - May 2021

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