Required Report - public distribution

**Date:** 10/19/2007

**GAIN Report Number:** RS7073

RS7073

**Russian Federation**

**Poultry and Products**

**Annual**

**2007**

**Approved by:**

![](media/image1.wmf)Allan Mustard

American Embassy

**Prepared by:**

Erik Hansen, Mikhail Maksimenko, and Mikael Pyrtel

**Report Highlights:**

Domestic poultry production is expected to continue to increase in
Russia, but demand for bio-fuels is contributing to rising feed costs,
and reducing incomes and investment. The Russian government continues to
search for a middle ground between protecting domestic poultry producers
and protecting consumers from rising food prices. The average price for
domestic frozen chicken products increased 7.4 percent from March to
August 2007 but import prices remained relatively flat. The Russian
government is expected to change soon the procedures for allocating meat
and poultry import quotas. Additionally, the Russian veterinary service
plans to expand the list of countries whose meat and poultry imports
will be subject to electronic verification.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Moscow \[RS1\]

\[RS\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 3](#production)

[Feed Production 6](#feed-production)

[Epizootic Situation 6](#epizootic-situation)

[Consumption 6](#consumption)

[Trade 6](#trade)

[Table 1: Russia: Poultry Imports, January-June 2005-2007
7](#table-1-russia-poultry-imports-january-june-2005-2007)

[Table 2: Russia: Poultry Meat / Offal Imports, by Country, Jan-Jun
2005-2007
7](#table-2-russia-poultry-meat-offal-imports-by-country-jan-jun-2005-2007)

[Domestic Prices 8](#domestic-prices)

[Table 3. Moscow Wholesale Poultry Meat Prices, April 2003 -- August
2007 (RUR/kilo)
8](#table-3.-moscow-wholesale-poultry-meat-prices-april-2003-august-2007-rurkilo)

[Customs Commodity Position for Chicken Leg Quarters Changed
8](#customs-commodity-position-for-chicken-leg-quarters-changed)

[Electronic Verification for Meat and Poultry Imports
9](#electronic-verification-for-meat-and-poultry-imports)

[Stocks 9](#stocks)

[Policy 9](#policy)

[Special Inserts Will Accompany Brazilian Meat And Poultry Products
9](#special-inserts-will-accompany-brazilian-meat-and-poultry-products)

[Marketing 10](#marketing)

[Table 4: Russian Frozen Carcass vs. U.S. Chicken Leg Quarters
10](#table-4-russian-frozen-carcass-vs.-u.s.-chicken-leg-quarters)

[Other Relevant Reports 11](#other-relevant-reports)

# Executive Summary

Domestic poultry production is expected to increase in Russia, but
demand for bio-fuels is contributing to rising feed costs, and reducing
incomes and investment. The Russian government continues to search for a
middle ground between protecting domestic poultry producers and
protecting consumers from rising food prices. The Russian Poultry Union
proposed several measures, including government assistance to control
feed prices and additional protection from imports. Rising grain prices
are revealing inefficiencies in domestic poultry production and some
Russian producers are resorting to invalid comparisons between domestic
and U.S. imported chicken in an effort to sway Russian consumers away
from imported poultry. The average price for domestic frozen chicken
products increased 7.4 percent from March to August 2007 while prices
for imports remained relatively flat.

Turkey products are a relatively new product on the Russian market and
investors are committing resources to increase production capacity.
Producers are positioning Turkey as a healthier, more affordable
alternative to red meat. Consumption is expected to fall, however, as
increases in customs duties curtails imports. Domestic production may
compensate some for the loss of imports.

The safety of food imports continues to be an important issue in Russia,
and an agreement was reached with Brazil to assist Russia in tracking
Brazilian meat imports into Russia. Additionally, Russia is expanding
the list of countries whose imports will be subject to electronic
verification.

Avian influenza outbreaks were confirmed in Moscow and Kaluga oblasts in
February 2007 and in Krasnodar kray in September 2007.

# Production

Broiler production increased 15 percent in 2007 and is projected to grow
another 11 percent in 2008, but the profitability of poultry production
is declining due to increasing feed prices. Rising feed prices are
reducing producer incomes and limiting investment. In response, the
Russian Poultry Union proposes that the government establish a feed
intervention fund, or limit retail trade profits, which reached 50
percent during the summer as low-income consumers switched to less
expensive imported poultry products, according to the Union. Another
measure offered by the union is to increase the import duty on poultry
products from 25 percent to 80 percent to slow imports and compensate
domestic producers.

Domestic turkey production is expected to increase 30 percent in 2007
from 2006 estimates, and by 20 percent in 2008 over 2007 estimates.
Several investors signed a \$100 million agreement this summer to build
a turkey production facility in southern Russia. Currently four major
players dominate the market and they are steadily increasing turkey
production. The total turkey meat consumption potential in Russia is
approximately 150,000 MT, according to some estimates. Turkey is a
relatively new product for Russia, and it is advertised as a healthy,
less expensive alternative to beef. In retail trade turkey prices are
40-80 percent higher than broiler meat, and profits are up to 10 percent
higher.

Victor Zubkov, the new Russian Prime-Minister, believes Russia should
balance domestic meat output and meat imports, since domestic producers
should remain the first priority. Nevertheless, since prices are
increasing rapidly for food products, there is considerable pressure on
the Russian Government not to take measures restricting meat imports.
Meat and poultry prices were the largest contributors to the overall
growth of the cost of a consumer basket of goods from January through
September, 2007, compared with the same period in 2006.

<table>
<colgroup>
<col style="width: 17%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 1%" />
<col style="width: 7%" />
<col style="width: 0%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Country</td>
<td colspan="6">Russian Federation</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Commodity</td>
<td colspan="6">Poultry, Meat, Broiler</td>
<td colspan="5">(MIL HEAD)(1000 MT)(PERCENT)</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td>2006</td>
<td>Revised</td>
<td colspan="2"></td>
<td colspan="2">2007</td>
<td>Estimate</td>
<td></td>
<td>2008</td>
<td>Forecast</td>
<td></td>
<td>UOM</td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td colspan="2">Post<br />
Estimate<br />
New</td>
<td colspan="2">USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td></td>
</tr>
<tr class="even">
<td>Market Year Begin</td>
<td></td>
<td>01.2006</td>
<td colspan="2">01.2006</td>
<td colspan="2"></td>
<td>01.2007</td>
<td>01.2007</td>
<td></td>
<td>01.2008</td>
<td>01.2008</td>
<td>MM/YYYY</td>
</tr>
<tr class="odd">
<td><p>Inventory</p>
<p>(Reference)</p></td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(MIL HEAD)</td>
</tr>
<tr class="even">
<td><p>Slaughter</p>
<p>(Reference)</p></td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(MIL HEAD)</td>
</tr>
<tr class="odd">
<td>Beginning Stocks</td>
<td>59</td>
<td>60</td>
<td colspan="2">59</td>
<td colspan="2">43</td>
<td>44</td>
<td>53</td>
<td>52</td>
<td>0</td>
<td>42</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Production</td>
<td>1180</td>
<td>840</td>
<td colspan="2">1180</td>
<td colspan="2">1300</td>
<td>0</td>
<td>1350</td>
<td>0</td>
<td>0</td>
<td>1500</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Whole, Imports</td>
<td>85</td>
<td>85</td>
<td colspan="2">85</td>
<td colspan="2">100</td>
<td>0</td>
<td>90</td>
<td>0</td>
<td>0</td>
<td>90</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Parts, Imports</td>
<td>1104</td>
<td>990</td>
<td colspan="2">1104</td>
<td colspan="2">1090</td>
<td>0</td>
<td>1090</td>
<td>0</td>
<td>0</td>
<td>1090</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Intra-EU Imports</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Other Imports</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Total Imports</td>
<td>1189</td>
<td>1075</td>
<td colspan="2">1189</td>
<td colspan="2">1190</td>
<td>0</td>
<td>1180</td>
<td>0</td>
<td>0</td>
<td>1180</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Total Supply</td>
<td>2428</td>
<td>1975</td>
<td colspan="2">2428</td>
<td colspan="2">2533</td>
<td>44</td>
<td>2583</td>
<td>52</td>
<td>0</td>
<td>2722</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Whole, Exports</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Parts, Exports</td>
<td>3</td>
<td>1</td>
<td colspan="2">3</td>
<td colspan="2">1</td>
<td>0</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Intra EU Exports</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Other Exports</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Total Exports</td>
<td>3</td>
<td>1</td>
<td colspan="2">3</td>
<td colspan="2">1</td>
<td>0</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td><p>Human</p>
<p>Consumption</p></td>
<td>2382</td>
<td>1930</td>
<td colspan="2">2372</td>
<td colspan="2">2480</td>
<td>0</td>
<td>2540</td>
<td>0</td>
<td>0</td>
<td>2680</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Other Use, Losses</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td><p>Total Dom.</p>
<p>Consumption</p></td>
<td>2382</td>
<td>1930</td>
<td colspan="2">2372</td>
<td colspan="2">2480</td>
<td>0</td>
<td>2540</td>
<td>0</td>
<td>0</td>
<td>2680</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Total Use</td>
<td>2385</td>
<td>1931</td>
<td colspan="2">2375</td>
<td colspan="2">2481</td>
<td>0</td>
<td>2541</td>
<td>0</td>
<td>0</td>
<td>2681</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Ending Stocks</td>
<td>43</td>
<td>44</td>
<td colspan="2">53</td>
<td colspan="2">52</td>
<td>0</td>
<td>42</td>
<td>0</td>
<td>0</td>
<td>41</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Total Distribution</td>
<td>2428</td>
<td>1975</td>
<td colspan="2">2428</td>
<td colspan="2">2533</td>
<td>0</td>
<td>2583</td>
<td>0</td>
<td>0</td>
<td>2722</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>CY Imp. from U.S.</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>CY Exp. to U.S.</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Balance</td>
<td>0</td>
<td>0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td>-44</td>
<td>0</td>
<td>-52</td>
<td>0</td>
<td>0</td>
<td>(1000 MT)</td>
</tr>
<tr class="odd">
<td>Inventory Balance</td>
<td>-16</td>
<td>-16</td>
<td colspan="2">-6</td>
<td colspan="2">9</td>
<td>-44</td>
<td>-11</td>
<td>-52</td>
<td>0</td>
<td>-1</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Production Change</td>
<td>31</td>
<td>0</td>
<td colspan="2">31</td>
<td colspan="2">3</td>
<td>-100</td>
<td>14</td>
<td>-100</td>
<td>0</td>
<td>11</td>
<td>(PERCENT)</td>
</tr>
<tr class="odd">
<td>Import Change</td>
<td>-3</td>
<td>0</td>
<td colspan="2">-3</td>
<td colspan="2">3</td>
<td>-100</td>
<td>-1</td>
<td>-100</td>
<td>0</td>
<td>0</td>
<td>(PERCENT)</td>
</tr>
<tr class="even">
<td>Export Change</td>
<td>-57</td>
<td>0</td>
<td colspan="2">-57</td>
<td colspan="2">0</td>
<td>-100</td>
<td>-67</td>
<td>-100</td>
<td>0</td>
<td>0</td>
<td>(PERCENT)</td>
</tr>
<tr class="odd">
<td>Trade Balance</td>
<td>-1186</td>
<td>-1074</td>
<td colspan="2">-1186</td>
<td colspan="2">-1189</td>
<td>0</td>
<td>-1179</td>
<td>0</td>
<td>0</td>
<td>-1179</td>
<td>(1000 MT)</td>
</tr>
<tr class="even">
<td>Consumption Change</td>
<td>11</td>
<td>0</td>
<td colspan="2">11</td>
<td colspan="2">3</td>
<td>-100</td>
<td>7</td>
<td>-100</td>
<td>0</td>
<td>6</td>
<td>(PERCENT)</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>TS=TD</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>-44</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

  -------------- ------------ ---------- ----------- ---------- -------------- ----------- ---------- ---------- ----------- -----------
  PSD Table                                                                                                                  

  Country        Russian                                                                                                     
                 Federation                                                                                                  

  Commodity      Poultry,                                       (MIL                                                         
                 Meat, Turkey                                   HEAD)(1000                                                   
                                                                MT)(PERCENT)                                                 

                 2006         Revised                2007       Estimate                   2008       Forecast               UOM

                 USDA\        Post\      Post\       USDA\      Post\          Post\       USDA\      Post\      Post\       
                 Official     Estimate   Estimate\   Official   Estimate       Estimate\   Official   Estimate   Estimate\   
                                         New                                   New                               New         

  Market Year                 01.2006    01.2006                01.2007        01.2007                01.2008    01.2008     MM/YYYY
  Begin                                                                                                                      

  Inventory      0            0          0           0          0              0           0          0          0           (MIL HEAD)
  (Reference)                                                                                                                

  Slaughter      0            0          0           0          0              0           0          0          0           (MIL HEAD)
  (Reference)                                                                                                                

  Beginning      0            0          0           0          0              0           0          0          0           (1000 MT)
  Stocks                                                                                                                     

  Production     19           18         19          21         0              25          0          0          30          (1000 MT)

  Whole, Imports 1            1          1           1          0              1           0          0          0           (1000 MT)

  Parts, Imports 95           85         95          100        0              55          0          0          45          (1000 MT)

  Intra-EU       0            0          0           0          0              0           0          0          0           (1000 MT)
  Imports                                                                                                                    

  Other Imports  0            0          0           0          0              0           0          0          0           (1000 MT)

  Total Imports  96           86         96          101        0              56          0          0          45          (1000 MT)

  Total Supply   115          104        115         122        0              81          0          0          75          (1000 MT)

  Whole, Exports 0            0          0           0          0              0           0          0          0           (1000 MT)

  Parts, Exports 0            0          0           0          0              0           0          0          0           (1000 MT)

  Intra EU       0            0          0           0          0              0           0          0          0           (1000 MT)
  Exports                                                                                                                    

  Other Exports  0            0          0           0          0              0           0          0          0           (1000 MT)

  Total Exports  0            0          0           0          0              0           0          0          0           (1000 MT)

  Human          114          103        114         121        0              80          0          0          74          (1000 MT)
  Consumption                                                                                                                

  Other Use,     1            1          1           1          0              1           0          0          1           (1000 MT)
  Losses                                                                                                                     

  Total Dom.     115          104        115         122        0              81          0          0          75          (1000 MT)
  Consumption                                                                                                                

  Total Use      115          104        115         122        0              81          0          0          75          (1000 MT)

  Ending Stocks  0            0          0           0          0              0           0          0          0           (1000 MT)

  Total          115          104        115         122        0              81          0          0          75          (1000 MT)
  Distribution                                                                                                               

  CY Imp. from   0            0          0           0          0              0           0          0          0           (1000 MT)
  U.S.                                                                                                                       

  CY Exp. to     0            0          0           0          0              0           0          0          0           (1000 MT)
  U.S.                                                                                                                       

  Balance        0            0          0           0          0              0           0          0          0           (1000 MT)

  Inventory      0            0          0           0          0              0           0          0          0           (1000 MT)
  Balance                                                                                                                    

  Production     12           0          12          17         -100           32          -100       0          20          (PERCENT)
  Change                                                                                                                     

  Import Change  -10          0          -10         17         -100           -42         -100       0          -20         (PERCENT)

  Export Change  0            0          0           0          0              0           0          0          0           (PERCENT)

  Trade Balance  -96          -86        -96         -101       0              -56         0          0          -45         (1000 MT)

  Consumption    -7           0          -7          17         -100           -30         -100       0          -7          (PERCENT)
  Change                                                                                                                     

                                                                                                                             
  -------------- ------------ ---------- ----------- ---------- -------------- ----------- ---------- ---------- ----------- -----------

## Feed Production 

Significant growth of the bio-fuel market globally is contributing to
rising costs of grain and oilseed products, according to some experts,
and the current market conditions for grains could continue through
2008. Grain prices increased rapidly in Russia through the middle of
July before stabilizing at high levels as harvest progress reports were
released. Higher prices attract exports and domestic sales, and the
current environment may stimulate investments in grain production in
2008.

Prepared animal feed production from January -July 2007 was 6 percent
higher than the same period in 2006. The growth of poultry and swine
industries encourages imports of soy meal, and from July-August 2007
Russia imported 165,00 MT of soy meal, which is 50 percent more than in
the same period of 2006.

## Epizootic Situation 

In February 2007 outbreaks of avian influenza (AI) were discovered in
the Moscow and Kaluga oblasts. The outbreak was considered eradicated by
the end of February, according to a VPSS report, with Russian officials
citing illegal poultry imports as the source of the outbreak.

A dead swan infected with AI was discovered in September 2007 near a
poultry farm in Krasnodar kray in southwest Russia. Over 400 hens in the
region died of bird flu and more than 20,000 were destroyed. Earlier
reports stated that 410 birds died at the farm laboratory test sites of
the Krasnodar Veterinary Laboratory. Laboratory studies confirmed the
presence of the H5 bird flu virus. Russian veterinary authorities said
that the AI outbreak in the Krasnodar region was successfully contained
by the end of September.

# Consumption

Poultry meat consumption will continue to grow, and is projected to rise
by 5 to 6 percent compared to the more rapid growth in domestic
production of 11 percent.

Consumption of turkey meat is declining in Russia, but growth in
domestic turkey production is expected to compensate some for the sharp
decrease in turkey imports caused by stricter measures in assuring
declaration of full customs values.

# Trade

Russian broiler imports from 2007 through 2008 will be flat due to
regulatory changes in April 2006 that increased the minimum price
permitted for customs declarations. Previously, low indicative prices
allowed importers to underreport the value of products, sometimes
creating situations where significant increases in world meat prices
tempted specialized offshore middle companies to take advantage of the
difference between the prices declared at customs and the real prices.

Russia imported 8 percent less poultry in the first six months of 2007
compared to the same period in 2006, but the value was 9 percent higher
due to the increase in the minimum declared price for customs duties.
Poultry imports into Russia decreased from 582,727 MT to 534,566 MT,
when comparing the coverage periods, while the value of imports
increased from \$384.4 million to \$418.7 million, according to the
Russian Customs Service. By the end of August the difference between
import volumes decreased to 10,000 MT, and by the end of the year the
import volumes will likely come close to matching.

The current livestock environment in Russia makes imported broiler meat
a source of animal protein for Russian consumers. As reported in
previous GAIN Reports (see Other Relevant Reports), cattle production
has not yet begun to recover in Russia and pork production growth is
below Ministry of Agriculture expectations. Additionally, rising feed
prices are slowing investments in the domestic broiler industry.

### Table 1: Russia: Poultry Imports, January-June 2005-2007

+---------------------+-------+------------+------------+------------+
| HS                  | unit  | Jan-Jun    | Jan-Jun    | Jan-Jun    |
|                     |       |            |            |            |
|                     |       | 2005       | 2006       | 2007       |
+---------------------+-------+------------+------------+------------+
|                     |       |            |            |            |
+---------------------+-------+------------+------------+------------+
| 0207 Poultry        | \$    | 3          | 3          | 4          |
| Meat,Offal          |       | 59,415,948 | 84,496,000 | 18,722,000 |
+---------------------+-------+------------+------------+------------+
| 0207 Poultry        | MT    | 577,515    | 582,727    | 534,566    |
| Meat,Offal          |       |            |            |            |
+---------------------+-------+------------+------------+------------+
| 0207 Poultry        | ￠    | 62         | 66         | 78         |
| Meat,Offal          | /kilo |            |            |            |
+---------------------+-------+------------+------------+------------+

Source: Russian Customs Service

### Table 2: Russia: Poultry Meat / Offal Imports, by Country, Jan-Jun 2005-2007

**in metric tons**

  ------ ------------------- ------------- ------------- ------------- ---------
  Rank   Country             Jan-Jun       Jan-Jun       Jan-Jun       \% Change

                             2005          2006          2007          \- 07/06
                                                                       -

  0      \--The World\--     577,515.076   582,727.257   534,566.538   -8.26

  1      United States       363,898.523   416,691.595   378,791.231   -9.1

  2      Brazil              103,665.806   91,715.032    83,740.621    -8.69

  3      Germany             43,064.978    23,965.957    28,368.515    18.37

  4      France              33,930.965    19,707.574    22,358.056    13.45

  5      Belgium             8,246.343     8,523.132     6,518.268     -23.52

  6      Netherlands         3,461.330     5,934.935     4,863.915     -18.05

  7      United Kingdom      7,758.317     9,091.631     3,659.624     -59.75

  8      Canada              5,506.555     2,360.483     2,385.792     1.07

  9      Finland             958.935       2,398.395     1,429.123     -40.41

  10     Argentina           2,713.077     1,043.582     1,304.374     24.99
  ------ ------------------- ------------- ------------- ------------- ---------

Source: World Trade Atlas

## Domestic Prices

The average price of the consumer basket of staple foods in Russia
increased 12.4 percent in August 2007, according to the Federal State
Statistics Service (Rosstat). Prices for meat and poultry products
increased 4.2 percent from January-August, 2007, according to Rosstat.

Price data provided by the Institute of Agrarian Market Research (IKAR)
indicate that from March to August 2007, domestic poultry products
increased an average of 7.4 percent, while prices for imported whole
birds flattened. For example, the price of domestic frozen chicken
breast and frozen leg quarters increased 6.26 percent and 8.67 percent,
respectfully.

### Table 3. Moscow Wholesale Poultry Meat Prices, April 2003 -- August 2007 (RUR/kilo)

+--------+-----+--------+--------+--------+--------+--------+--------+
| **     | *   | **Do   |        |        | **Im   |        |        |
| Date** | *Ex | mestic |        |        | ported |        |        |
|        | ch. | Chi    |        |        | Chi    |        |        |
|        | Ra  | cken** |        |        | cken** |        |        |
|        | te, |        |        |        |        |        |        |
|        | R   |        |        |        |        |        |        |
|        | U/\ |        |        |        |        |        |        |
|        | $** |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
|        |     | **     | **     | **     | **     | **     | **     |
|        |     | Frozen | Frozen | Frozen | Frozen | Frozen | Frozen |
|        |     | carca  | b      | leg    | carca  | b      | leg**  |
|        |     | sses** | reast, | quar   | sses** | reast, |        |
|        |     |        | bone   | ters** |        | bone   | **quar |
|        |     |        | less** |        |        | less** | ters** |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 04/3   | 31  | 41.77  | 55.67  | 44.50  | 41.90  | 56.38  | 34.42  |
| 0/2003 | .10 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 06/3   | 30  | 49.07  | 59.32  | 49.50  | 48.27  | 73.08  | 39.77  |
| 0/2003 | .35 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 09/3   | 30  | 59.96  | 108.00 | 61.09  | 58.58  | 107.77 | 45.45  |
| 0/2003 | .61 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 12/3   | 29  | 56.02  | 93.33  | 60.63  | 55.65  | 88.32  | 45.39  |
| 0/2003 | .25 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 03/3   | 28  | 54.07  | 84.50  | 52.50  | 52.51  | 80.30  | 44.96  |
| 1/2004 | .49 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 06/3   | 29  | 52.80  | 82.50  | 50.32  | 45.94  | 84.45  | 42.94  |
| 0/2004 | .03 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 09/3   | 29  | 49.62  | 90.25  | 47.82  | 44.20  | 89.77  | 43.76  |
| 0/2004 | .22 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 12/2   | 27  | 50.17  | 90.08  | 52.24  | 49.34  | 89.98  | 42.28  |
| 9/2004 | .78 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 03/3   | 27  | 61.42  | 85.00  | 56.10  | 63.17  | 87.33  | 54.66  |
| 0/2005 | .83 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 06/3   | 28  | 69.35  | 93.00  | 67.13  | 68.56  | 93.75  | 56.60  |
| 0/2005 | .67 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 09/3   | 28  | 65.19  | 98.00  | 63.07  | 66.64  | 107.38 | 60.14  |
| 0/2005 | .50 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 12/3   | 28  | 53.64  | 95.00  | 57.50  | 56.27  | 97.08  | 48.93  |
| 0/2005 | .75 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 03/3   | 27  | 48.56  | 91.82  | 53.42  | 52.54  | 102.38 | 43.23  |
| 0/2006 | .76 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 06/3   | 27  | 47.51  | 95.60  | 56.33  | 46.51  | 94.83  | 46.21  |
| 0/2006 | .08 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 09/2   | 26  | 57.94  | 93.35  | 54.00  | 54.68  | 92.28  | 41.92  |
| 8/2006 | .79 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 10/2   | 26  | 58.93  | 96.80  | 58.33  | 58.03  | 94.78  | 45.25  |
| 6/2006 | .90 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 12/0   | 26  | 60.42  | 95.22  | 59.00  | 62.62  | 96.67  | 41.75  |
| 7/2006 | .19 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 12/2   | 26  | 58.58  | 94.82  | 60.67  | 63.53  | 91.50  | 42.89  |
| 8/2006 | .34 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 01/2   | 26  | 60.01  | 95.80  | 60.28  | 62.40  | 97.00  | 45.32  |
| 5/2007 | .49 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 02/2   | 26  | 57.79  | 97.50  | 56.20  | 61.37  | 109.33 | 49.03  |
| 2/2007 | .20 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 03/3   | 25  | 56.51  | 111.42 | 56.50  | 60.90  | 124.00 | 54.67  |
| 1/2007 | .56 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 04/3   | 25  | 57.91  | 115.25 | 58.50  | 61.50  | 130.51 | 55.51  |
| 0/2007 | .69 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 05/2   | 25  | 58.94  | 117.28 | 58.78  | 59.62  | 132.25 | 57.56  |
| 4/2007 | .90 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 06/3   | 25  | 60.41  | 120.40 | 60.20  | 60.38  | 128.10 | 56.50  |
| 0/2007 | .67 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 07/3   | 25  | 61.08  | 123.15 | 64.83  | 60.00  | 133.02 | 57.46  |
| 0/2007 | .41 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+
| 08/3   | 25  | 60.70  | 118.40 | 61.40  | 61.30  | 125.28 | 52.35  |
| 0/2007 | .76 |        |        |        |        |        |        |
+--------+-----+--------+--------+--------+--------+--------+--------+

Source: Institute of Agrarian Market Research (IKAR)

## Customs Commodity Position for Chicken Leg Quarters Changed 

The Russian Customs Service changed the commodity code for chicken leg
quarters from 020714700 to 020714200. The effective date of the code
change was anticipated in September, but information about the approval
of the code change was only recently reported. The indicative price(s)
for the new code 0207142001 (within the quota volume) are shown below:

-   0.60 USD/kilogram - USA

-   0.90 USD/kilogram - Brazil, Argentina

-   1.00 USD/kilogram - Other countries

## Electronic Verification for Meat and Poultry Imports

The Russian veterinary service plans to expand the list of countries,
meat and poultry imports from which will be subject to electronic
verification. The system is designed to detect counterfeit veterinary
certificates, and support efforts to reduce smuggling of illegal
livestock products into Russia. The new system was launched in early
2007 for Australian imports of red meats. The new electronic system will
soon be applied to beef, pork and poultry imports from the United
States, Canada and Denmark, and eventually to all countries, according
to representatives of the Russian veterinary service. Russian veterinary
officials have publicly stated that because of an "increasing number of
cases where accompanying documentation was filled with errors," they are
specifically targeting U.S.-origin meat and poultry products.

# Stocks

Growing domestic poultry production and stable poultry imports provided
sufficient stocks of poultry products for retail trade, meat processing,
and catering industries. Carryover is whatever amounts are needed for
normal commercial purposes.

# Policy

The Russian government will soon change the procedures for allocating
meat and poultry import quotas, according to the Russian Ministry of
Economic Development and Trade. Russian officials plan to introduce a
new mechanism for distributing meat and poultry import quotas. In August
2007, members of the Consultative Council on the Monitoring of Chicken,
Beef, and Pork Imports considered a draft measure that would change the
methodology used to determine tariff rate quotas for 2008 and 2009.
According to Russian officials, the draft measure reflects ongoing
market changes exemplified by the implementation of the National
Priority Project in Agriculture. Under the new proposal, the share of a
tariff rate quota an importer would receive in 2008-2009 would be based
on the average share that importer received in 2005-2006. The draft
proposal was sent to several Russian ministries for comment, and market
analysts expect its approval by November 2007.

Ministry officials also stated their opposition to increasing the
customs duties on meat supplies in excess of the quotas. The import
volume under tariff quotas does not satisfy the needs of the Russian
market, according to officials, and considering the existing high
customs duties for meat import in excess of quotas, imports are not
depressing domestic meat prices.

## Special Inserts Will Accompany Brazilian Meat And Poultry Products

Russia's Federal Veterinary and Phytosanitary Surveillance Service
reached an agreement with the Brazilian Agriculture Ministry\'s Animal
and Plant Protection Secretariat to tighten safety controls over
Brazilian pork and poultry meat imported by Russia. Effective October 1,
2007, special inserts will accompany Brazilian meat, and Russian
authorities will be prenotified of the shipped cargo and the numbers of
veterinarian certificates. The same measure was introduced for beef on
July 5, 2007. Brazil and Russia signed a protocol to set up a working
group that will draft a memorandum of understanding between the Federal
Veterinarian and Phytosanitary Control Service and the Brazilian
Agriculture Ministry's Animal and Plant Protection Secretariat. The
memorandum is to be signed by November 2007.

# Marketing

Some Russian poultry producers are casting Russian chicken products as
healthier and a greater value than imported chicken from the United
States, but their argument is problematic. Domestic producers are
attempting to show Russian poultry as a better value than U.S. imported
poultry by comparing the fat and protein percentages, and pricing
information, of dissimilar poultry products (see Table 4 below).

For example, since frozen carcasses are larger than leg quarters, and
include breast meat areas, fat comprises a smaller percentage of the
total product. Thus the ratio of protein-to-fat is greater in frozen
carcasses relative to leg quarters, and this gives frozen carcasses a
higher meat yield. The meat yield is combined with pricing information,
and domestic producers can show that although the retail price for
frozen carcasses is about 9 percent higher per kilogram than imported
leg quarters, consumers pay about 17 percent less per kilogram in terms
of meat value, and receive more protein.

However the argument is problematic, again, because it rests on
comparing dissimilar products, and hides inefficiencies in domestic
production relative to imports. A new analysis between similar chicken
products would give Russian consumers accurate information.

### Table 4: Russian Frozen Carcass vs. U.S. Chicken Leg Quarters

+-----------------------+-----------------------+-----------------------+
|                       | Frozen carcass,       | Chicken leg quarters, |
|                       | Russia                | USA                   |
+-----------------------+-----------------------+-----------------------+
| Protein               | No less than 20%      | Less than 15%         |
+-----------------------+-----------------------+-----------------------+
| Fat                   | No more than 12%      | Up to 28%             |
+-----------------------+-----------------------+-----------------------+
| "Pure" meat yield     | 72%                   | 42%                   |
|                       |                       |                       |
| (without bones, skin  |                       |                       |
| or fat)               |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Retail price          | 75.6 Rub. per 1 kg    | 69.1 Rub. per 1 kg    |
+-----------------------+-----------------------+-----------------------+
| Pure" meat value      | 100 Rub. per 1 kg     | 120 Rub. per 1 kg     |
+-----------------------+-----------------------+-----------------------+

Estimated by "Rosptitsesoyuz" experts

Source: Rossiyskaya Gazeta, June 15, 2007

# Other Relevant Reports

RS7068 Grain and Feed / Grain Export Tariffs Coming in November

http://www.fas.usda.gov/gainfiles/200710/146292716.pdf

RS7320 Grain and Feed / Grain Interventions and Export Tariffs Likely

http://www.fas.usda.gov/gainfiles/200709/146292480.pdf

RS7067 Livestock and Products / Annual

(As of this report's submission, not yet posted to the FAS website)

RS7059 Grain and Feed / September Monthly Update

http://www.fas.usda.gov/gainfiles/200708/146292218.pdf

RS7020 Agricultural Situation / Progress of the National Priority
Project in Agriculture

http://www.fas.usda.gov/gainfiles/200702/146280251.pdf

RS7019 Poultry and Products / Poultry Production Continues to Grow

http://www.fas.usda.gov/gainfiles/200703/146280308.pdf

RS7018 Pest/Disease Occurrences / Avian Influenza Outbreaks in Moscow
Oblast

http://www.fas.usda.gov/gainfiles/200702/146280231.pdf

RS7005 Agricultural Situation / Federal Law \"On Development of
Agriculture\"

http://www.fas.usda.gov/gainfiles/200701/146279991.pdf