After many years of contraction following the collapse of the Soviet Union, the Russian feed industry has expanded significantly in recent years and the growth is expected to continue for the foreseeable future, according to a recent report from the U.S. Department of Agriculture’s Foreign Agricultural Service.

The GAIN (Global Agricultural Information Network) report provided highlights from the Russian Feed Industry 2017 Conference, held April 14 in Moscow, Russia. Speakers from the conference presented the current state and future prospects of feed production in Russia and the impact on the sector from developments in the poultry and meat sectors.

Conference participants estimated that since 2008, the Russian feed sector experienced annual growth of 7% to 10%. This growth has been buttressed by strong growth in the livestock and poultry sectors, the introduction of new technologies, and improvements in the quality of the feed produced, the GAIN report noted.

Kharon Amerkhanov, director of the Livestock and Breeding Department of the Russian Ministry of Agriculture, provided a brief overview of the development of the livestock sector in Russia during the conference.

In crop year 2016, meat and poultry production rose 464,000 tonnes from the previous year, up to nearly 14 million tonnes. He forecasts an increase of 1 million tonnes per year in these sectors through 2020.

He said the Ministry of Agriculture estimates Russia’s current production capacity for feed at 38 million tonnes. Amerkhanov also noted that the government is co-financing 77 feed production projects at a total cost of 22.3 billion rubles. The share of the state support for these projects is projected to be about 5 billion rubles, he said.

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Gains expected over the next decade

The GAIN report said Valeriy Afanasyev, president of the Russian Feed Union, gave a report on the feed sector at the conference in which he said Russia’s production of compound feeds in 2016 was estimated at 25.8 million tonnes, about a 4% increase over feed production in 2015. Afanasyev forecasts that over the next 10 years the annual growth in feed production will average between 3% and 4%, driven by feed demand from the pork, livestock and aquaculture sectors.

By 2025, he predicts the country’s compound feed output will reach 38 million tonnes, with feed for poultry making up 18 million tonnes of that total, a 29% increase from 2016. The most significant increase will occur in feed for pork, which will rise 61% to 15 million tonnes, while feed for livestock is forecast to reach 2 million tonnes, a 50% increase over 2016.

Afanasyev also noted strong potential in the production of feed for aquaculture. The Russian Feed Union estimated feed production for aquaculture at 150,000 tonnes in 2016.

The Russian feed sector does face some serious challenges, Afanasyev said. He said that as a result of the use of non-balanced feed ratios (in terms of proteins and amino acids) animals in Russia often have to consume twice the amount of feed compared with the prescribed norms in other countries. He emphasized the importance of developing a more balanced feed ratio in Russia, incorporating byproducts from the food industry in the production of feed, such as corn gluten, molasses, dried sugar beet chips, brewers waste and distillers dried grains. Currently, the Russian Feed Union estimates the share of grain in animal feed in Russia at 70%, compared to only 40% to 45%, on average in the European Union.

Afanasyev added that because of the higher percentage of grain in feed rations, large fluctuations in grain prices can severely impact feed prices. For some poultry producers, the price of ingredients becomes the major factor in choosing a feeding formula. He said in 2015-16 and 2016-17, the supply of fodder grains increased and, as a result, prices for fodder grains decreased. However, the cost of other ingredients such as soy, vitamins and minerals, as well as the cost of production of compound feed, may increase in 2017-18, and poultry producers may continue using more grain in feed than is prescribed by optimal feeding formulas.

He also reported that the total production of premixes jumped 68%, going from 186,000 tonnes in 2013 to 275,000 tonnes in 2016. The largest increase in premixes during this period was seen in the poultry sector, with a 70% rise, followed by the pork sector with a 68% jump. The GAIN report said the Russian Feed Union forecasts production of premixes to reach 400,000 tonnes by 2025, primarily as the result of the steady development of both the pork and livestock sectors and the use of better feeding ratios.

The report said in 2016 there were 235 feed facilities operating in Russia. This number includes 134 facilities with an annual production capacity between 10,000 tonnes and 50,000 tonnes. Reportedly, there is a trend toward construction of facilities with larger production capacity. The Russian Feed Union projects that the number of feed facilities with an annual production capacity between 100,000 and 300,000 tonnes will increase from 52 in 2016 to 70 by 2025. It also forecast no increase in the number of feed production facilities with output capacity between 10,000 tonnes and 20,000 tonnes.

Afanasyev said the biggest challenge for the Russian feed sector is the trend toward vertical integration among the large agricultural holdings, where feed production facilities are part of the holding. As a result, the feed sector is not developing as an independent industry, he said. And with less competition in the sector, there is a decline in feed quality.

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Are the official numbers low?

Nadazhda Orlova, general director of the research company Abercade, said during his presentation at the conference that while official statistics estimate 2016 Russian feed production at 25.9 million tonnes, the country’s actual feed output may be closer to 40 million tonnes because of underreporting.

Orlova noted that while Russian production of premixes and biological mineral concentrates continue to climb rapidly, the country is still dependent on imports of raw materials, mainly vitamins, amino acids and ferment preparations. He said this need for imported inputs tends to increase the overall cost of feed in Russia. He said nearly 100% of feed vitamins, 85% to 95% of feed antibiotics, 80% of amino acids, and 70% to 80% of probiotics and prebiotics are imported.

The GAIN report said Abercade forecasted that by 2021 total feed production will increase by 22%, or by 5.6 million tonnes. Production of feed for poultry will increase by 18% and reach 16.7 million tonnnes, feed for pork will jump 32% to 12.4 million tonnes, and feed for livestock will rise 4% to 2.2 million tonnes.

A presentation of a study conducted by AgroInvestor Magazine highlighted the top 20 feed producers in Russia in 2016. According to the study, 20 companies own 56 feed production facilities and their total feed output is estimated at 12.6 million tonnes, almost 49% of Russia’s total feed production.

The feed production leader, according to the study, is the Cherkizovo Group. It increased feed production in 2016 by almost 100,000 tonnes, to 1.6 million tonnes, compared to 2015. Cherkizovo’s increase in production is attributed to the expansion of its pork and pork segments, and it has a goal of producing 1.7 million tonnes of feed in 2017.

The second largest agricultural holding, Miratorg, increased its 2016 feed production by approximately 200,000 tonnes over its output of 1.33 million tonnes in 2015. The GAIN report said Miratorg’s upward trend in feed production is attributed to continued expansion of the holding’s meat business. Thus, in 2016 the company increased pork production by 6.2%, up to 409,000 tonnes, broiler production by 37% to 102,200 tonnes, and beef production by 53% to 62,100 tonnes.

The third largest feed producer in 2016 was Prioskolye Group. The feed facilities in this group saw a decrease in feed output, going from 1.28 million tonnes in 2015 to 1.26 million tonnes in 2016. However, the Prioskolye Group continues to be a leader in poultry production in Russia, with its output in that sector estimated at 627,300 tonnes in 2016.

Coming in at No. 4, according to the study, was U.S.-based Cargill, with an estimated feed production output of 850,000 tonnes in 2016, unchanged from the previous year.

Interestingly, the report said that following the conference presentations, during open discussion, a number of participants were less optimistic about the production forecasts presented by the Russian Feed Union and Abercade.

Vladimir Petrichenko of ProZerno noted that starting in 2017 the feed sector’s growth has stabilized with an expected average annual growth rate between 500,000 and 1 million tonnes. He attributed this lower growth rate to a lower demand from consumers as well as specific dynamics in the livestock and poultry sectors that are both forecast to develop without major escalation. He said that declining prices for feeds in 2016, as a result of the good harvest of forage grains and the ruble appreciation, will not spur production in the feed sector because Russia has “reached a certain plateau for consumption of forage grains.”