A steady Russian currency devaluation in recent months is expected to take a toll on the feed industry, as dependency on foreign suppliers remains tight, according to local sources.
The weakening ruble could trigger a price hike in the Russian food market, said Maria Dolgova, associate professor of the department of state and municipal finance at the Plekhanov Russian University of Economics.
Feed additives are only one field where the Russian livestock industry strongly depends on imports. Russian farmers also import veterinary pharmaceuticals, packaging, technology and breeding material, she added. Russia's import dependency in the feed additives market ranges between 80% and 90%, with most suppliers currently coming from China, reported Feedlot, a Moscow-based think tank.
Last month, the Russian ruble reached its lowest value since the early weeks of the war in Ukraine, as a result of a collapse in export revenues and growing budget spending. During the past 12 months, the Russian ruble lost nearly half its value against the hard currency.
"Naturally, the exchange rate [fluctuations] affect the cost of imported products," said Sergey Mikhnyuk, executive director of the Russian National Feed Union, adding that a sharp rise in prices of amino acids of the specialties category in China also contributes to prices dynamics on the Russian market.
On 19 August, the Russian Federal Antimonopoly Service said it had kicked off an investigation to find out whether the price increases in the poultry, feed and veterinary pharmaceuticals market in the previous months was justified by economic factors.
The ruble's devaluation is one of the factors fueling a rise in production costs in the Russian poultry industry, according to Vladimir Mkhitaryan, general director of Novorosiik, a Krasnodar Krai-based poultry farm. Other reasons, he added, are rising fuel prices and the Russian Central Bank's decision to jack up the key interest rate from 8.5% to 12% in response to the ruble's depreciation.
The exchange rate turbulence is expected to change neither the volume nor the range of feed additives supplied to the Russian market, Mikhnyuk stated, adding that, on the other hand, some of the market conditions could pave the way to the Russian market for new players.
"Also, a registration of new suppliers from Asia Pacific, South America and other regions seems possible,” he said.
