A sharp decline in egg prices is unprofitable for Russia

Experts explained why citizens will not see a decrease in the cost of this product, despite the import of eggs from friendly countries

Russia received the first batch of eggs from Turkey in the amount of 316.8 thousand pieces, which corresponds to almost 19.4 tons. Customs duties on this product were abolished by the government last year; in addition, Azerbaijan, Belarus and even Iran pledged to increase the supply of eggs to Russia. According to the laws of the market, when there is an excess supply, prices for goods should go down. Experts explained to MK why such a scenario would be unprofitable for Russia and why egg prices should not be expected to return to summer values.

The drama surrounding eggs became the most striking in the Russian food market last year. Let us remind you that in November 2023 they rose in price by a little more than 15% compared to October, and since the beginning of the year their cost has increased by almost 40%. The government paid attention to this: “in high offices” they began to take measures to stabilize the market, reduce the hype and prevent a shortage of this product. One of them was the limitation of markups. The Federal Antimonopoly Service (FAS) recommended that retail chains introduce markup limits on eggs of up to 5% by March 5. Some sellers themselves decided to limit the markup on eggs, even without instructions from above.

The second measure that the “powers that be” quickly began to implement was an increase in production. In particular, Deputy Prime Minister of the Russian Federation Victoria Abramchenko instructed the responsible ministries to take measures to increase egg production in the country. And although this path is strategically correct, it will not give a quick effect, so the authorities have moved on to more stringent steps. In particular, the Prosecutor General’s Office instructed prosecutors in the regions to check the activities of producers of chicken eggs and retailers of these goods and take action on identified violations. This was the government’s third measure to combat rising egg prices.

The fourth such step was a whole package of decisions adopted by the Ministry of Agriculture, including the abolition of the import duty on eggs from other countries until June 30, 2024. At the same time, the first delivery of eggs from Azerbaijan in the amount of 36 tons (612 thousand pieces) took place on December 19. Two days later, on December 21, another 18 tons (306 thousand pieces) of this product arrived in our country from this state. And the third delivery from Azerbaijan took place on December 24: 306 thousand eggs were brought to Russia. At the end of December, Rosselkhoznadzor opened deliveries of hatching eggs from six Turkish enterprises, and on January 3, the first batch of eggs in the amount of 19.36 tons (316.8 thousand pieces) crossed the Yarag-Kazmalyar checkpoint. In addition, states belonging to the Eurasian Union, primarily Belarus, and even Iran promised to help with supplies. As a result, the Ministry of Agriculture expects egg prices to stabilize after the New Year against the backdrop of an increase in its own production and the arrival of products from friendly countries at zero duty.

However Executive Director of the Rusprodsoyuz Association Dmitry Vostrikov argues that agreements with retail chains will most likely help stop the rise in egg prices. “Imports may provide a small additional supply of goods, but egg prices in some of the listed countries are higher than in Russia,” he explained. “At the moment, network exchange trading shows much higher prices due to a shortage of egg volumes than in the summer, when networks forced poultry farmers to sell eggs below cost, which led to the reorientation of some poultry farms to the production of chicken meat.”

In addition, you need to be careful with foreign manufacturers. According to Associate Professor of the “International Economic Security” program at the Institute of World Economy and Business of the RUDN University Khadzhimurad BelkharoevWhen developing a new market, they purposefully reduce the cost of supplied products – in order to create unacceptable competitive conditions for local producers. When exporting, they receive significant preferences from their countries; when they cover the maximum volume of the market that they can saturate, the cost of products gradually increases. At the same time, domestic production is falling, since the business is not operating at a loss. To radically change the situation, it is necessary to create conditions for Russian producers; in 2022-2023, due to lack of profitability, poultry farms in our country gradually began to close. Over the past two years, about 12% of production has been mothballed – these capacities need to be brought into economic circulation. Russian producers purchase hatching eggs, day-old chicks, vitamin supplements for poultry feed, antibiotics through imports, that is, the rise in the dollar exchange rate in the second half of 2023 also played a role here. In addition, the cost of energy resources has increased, as well as the salaries of poultry farm employees, the cost of borrowed money, tax deductions, transportation costs – all these factors determined the cost of the final product, the expert noted. Thus, it turns out that a sharp reduction in egg prices is not entirely suitable for the state, because it will put local producers in extremely unfavorable economic conditions and will force the “powers that be” to support the industry with administrative measures, while “in high offices” they always advocate for market pricing mechanisms. Accordingly, it is most reasonable for Russians to expect stabilization of egg prices, and not their reduction or return to the level of six months ago.