Eggs, Eggs, and Fewer Eggs
Cost of Self-sufficiency and Sanctions, War Machine Priority Over Civil Needs
Dear BWR Subscribers,
Happy Orthodox New Year!!
As I announced in the previous BWR, on Wednesday (17 January) I will launch BWR’s inaugural issue of “MT799 Authenticated,” the Independent Contributors column. It will be the first of a twice-a-month publication written by independent contributors with a variety of views on topics ranging from Russian economics to Russian geopolitics and war.
In last week’s BWR, I discussed 2024’s outlook for the Russian economy, domestic politics, and war on Ukraine.
In this week’s BWR, I will discuss the egg shortage and what this means for the Russian economy and the upcoming presidential election. It is a symptom of a larger problem.
Takeaways:
ECONOMY: The egg crisis is the tip of the iceberg of economic problems caused by economic distortions resulting from sanctions, government takeover of the economy, and government military and security expenditures taking priority over the needs of the people - food on the table.
SELF-SUFFICIENT: Putin has long advocated the need for Russian self-sufficiency and reliance on domestic production. This comes at a monetary and political cost in an interdependent global economy, and the egg crisis is evidence of this cost. Animal vaccines and additive feedstock are just a few agricultural inputs of which Russia must import to feed the people.
ELECTIONS: Food shortages and high inflation contribute to civil discontent and unrest. Putin is keenly aware of this, and the Kremlin is doing everything possible to ensure an event-free period between now and the presidential elections in March 2024.
Threatening Egg Crisis:
Egg prices soared more than 40% last year due to falling egg production, but prices have stabilized somewhat since the beginning of the year. During Putin’s 14 December press conference, he offered a rare public apology – saying:
“it was a failure in the government work…. market demand exceeds supply, and imports have not been opened in a timely manner.”
Putin also said:
"I recently spoke with the agriculture minister, asking him how everything was with eggs. He said everything is 'great.'"
It should be noted that the Minister of Agriculture is Dimiti Petrushev, the son of Nikolai Petrushev, the powerful Secretary of the Security Council and Putin’s Muse.
Addressing this food problem, Minister Patrushev told Komsolskaya Pravda:
“In the future… we will build a system to monitor for monitoring demand for all key food products. This will make it possible…to increase production in these areas.”
His response reflects the continuation of a decades-long trend of increased government control and presence in the Russian economy.
As a measure to resolve the egg shortage crisis, the government has announced that it has temporarily lifted import tariffs on eggs and plans to import 1.2B eggs in the first half of 2024. The government further declared the eggs would be sourced from “friendly” countries, such as Türkiye, Azerbaijan, and Iran. The procurement of these eggs will require “hard currency” as the “friendly” countries are unlikely to accept the volatile Rouble for settlement. Furthermore, 1.2B imported eggs will not close the gap between production deficit and market demand. As per Interfax, Russian egg production in 2022 was 46.1B/annual.
At the heart of the egg shortage are poultry producers struggling to source vaccines and feed additives abroad because of the high costs due to a weakening Rouble and often restrictions imposed by Western countries and the Ministry of Agriculture (Minselkhoz). BWR’s “Black Sea Grain Initiative (BSGI) – Incentives & Influence” discussed Russia’s dependence on Western agricultural inputs and equipment. As a result of the higher cost of inputs and restrictions, poultry producers have been experiencing operating losses for the past two years.
Other poultry industry problems have been bird flu and labor shortages in 2023. According to Poultry World, bird flu was found in 24 Russian provinces last year, resulting in a significant loss of broiler and layer hens. Replacing layer hens is costly, and it takes time for the layers to produce, and their most productive period is between 6 months and two years. As a young banker for Banco do Brasil, I recall sourcing 25M day-old chicks for our Brasilian client. The need and market for day-old chicks has not changed.
Regarding the labor shortage, farms compete with the military and the military-industrial sector for labor. One must remember that the Russian government is spending nearly 40% of its budget on military and security-related expenditures (See BWR All For the Front, All for...What?: Russian Military-Industrial Production). Wages for contract soldiers and death compensation are more attractive than farm wages. Death compensation in many Russian regions allows families to purchase housing.
The egg deficit primarily affects the Russian provinces and villages, not the elite and wealthy bubbles of Moscow, St. Petersberg, and Nizhny Novgorod proper.
Follow-ups & Quick Bites:
Follow-ups:
Nothing to report this week.
Quick Bites
Boris Akunin Awarded Honorary иностранный агент (Foreign Agent) Status
The Kremlin this past week labeled the exiled writer Boris Akunin as a foreign agent. Akunin has been vocal about opposition to Putin’s war on Ukraine.
The Russian Ministry of Justice stated:
“Grigory Chkhartishvili opposed the special military operation in Ukraine…he has disseminated inaccurate information aimed at forming a negative image of Russia and its army”.
Congratulations to Akunin for his honorary accession to an elite club of true Russian patriots.
US Intelligence Estimates Russian Combat War Casualties at 315,000
A declassified U.S. intelligence report assessed that the war cost Russia 315,000 casualties, nearly 90% of the number of troops with which Putin launched the unprovoked war.
This would mean 100,000 dead and 200,000 wounded, significantly exceeding the Soviet Union’s casualties of approximately 50,000 from the Afghan War.
Watch this space for more frequent and organized protests from discontent mothers and wives of soldiers coming home in body bags.
Vol 2, No 02 - BWR 14.01.2024
Thank you for reading “Barbershop Whispers....Russia” written by Adam A Blanco! “Barbershop Whispers…Russia” is a product of e8Q Technologies, a consultancy with insights on all things Eurasia. Subscribe for free to receive new posts.