Russia’s largest turkey producer sets sights on expansion

The company has been the largest turkey meat producer in Russia since 2016, when it had the capacity to produce 60,800t of turkey meat, in slaughter weight.

According to a press release from the firm, the Russian Agricultural Bank, Rosselkhozbank, has been given permission by Russia’s Ministry of Agriculture to issue a soft loan to Damate of RUB14bn (US$240m) at an interest rate no higher than 5%.

The project includes the construction of new poultry houses, refitting the processing plant with the installation of several new lines and the expansion of a feed mill, as well as grain storage facilities located primarily in Penza Oblast, Russia.

The expansion is set to take two years, so Damate said it expected to achieve its new production capacity by 2019. When the project is complete, the total level of Damate’s investment into its turkey division should reach RUB41bn (US$700m).

Despite a request from GlobalMeatNews​, Elena Firsova, press secretary at Damate, declined to reveal any further details on the project.

An uneasy market​

Damate has embarked on the expansion program at an uneasy time in the domestic turkey market. The second-largest turkey producer in the country, Eurodon, had to cut production capacity in early 2017 due to two major outbreaks of highly pathogenic avian influenza at its facility in Rostov Oblast, Russia.

Meanwhile, the Bashkirskiy poultry complex, named Mazhita Gafuri, which is believed to be the third-largest manufacturer, according to reports in several Russian media in late September, nearly ceased breeding turkeys altogether. In 2016 the company generated a net loss of some RUB898m (US$15.6m), compared to a net loss of RUB91.7m (US$1.6m), according to an official state database.

The company is reported to have slashed its turkey stock from 700,000 head in January to 45,000 head in September, due to harsh financial conditions. In particular, data from the country’s arbitration courts revealed that several lawsuits had been filed against the company from different organisations to reclaim debts. State-owned bank Rosselkhozbank has demanded RUB485.7m (US$8.45m) from the poultry complex, while Russia’s Ministry of Agriculture has filed for the return of a debt of RUB47.8m (US$810,000).

In late September, Galina Gocharenko, a spokesperson from the municipal authorities in the city of Meleusa, where the complex is based, said in a statement that the company required RUB1bn (US$17.5m) to repay its debts and restore operations.

In addition, the Ascor poultry complex, which has a production level close to 72,000t of turkey meat per year, has been hit by similar problems. The company started operating in February 2016, but just several months later, officials from the government of Udmurtia Republic, where the company’s production site is based, reported that Ascor faced a “sudden external challenge​”, but did not detail what this entailed. During a press conference in late September, Udmurtia’s first deputy minister of agriculture and food Alexei Vikharev said the company faced financial difficulties due to a lack of raw materials.

As a result, Ascor failed to reach its designated production performance and, in addition, its supply chain was interrupted. In these circumstances, the company failed to reach financial stability, he emphasised. In particular, Vikharey noted that the company did not have its own incubator, meaning that breeding stock and eggs had to be imported.

On 28 September, Damate filed a lawsuit demanding that Ascor be declared bankrupt, due to an alleged debt of RUB30m (US$500,000) owed by the Udmurtian firm to Damate, according to information from the arbitrations courts in Udmurtia.

Russia’s turkey industry currently has a total production level of 210,000t to 230,000t, according to various estimates. This is likely to double by 2019, due to the Damate expansion project and plans by Eurodon to double its production volumes from December 2017, bringing them to nearly 12,000t per month. However, despite some efforts by both Damate and Eurodon, as well as several other turkey manufacturers, to export turkey meat, most industry experts anticipate an oversupply problem in the domestic turkey market, as soon as the declared projects reach their planned production performance.