Current average live weight price remains strong at 116 Roubles/kg ($1.79/live kg) With corn currently at 10,540 Roubles/tonne ($213/metric tonne), profitability remains very high at between 3,479 Roubles per pig ($48.3) for the average producer and well over 5,000 Roubles ($78.2) for efficient producers killing pigs at heavier weights, writes Simon Grey, Genesus General Manager Russia, CIS and EU.
Retail prices are 350 Roubles/kg ($5.40/kg) for the highest value cut which is neck and 280 Roubles/kg ($4.32/kg) for the lowest value cut, which is ham!!
Internally total meat consumption is falling a little from its peak of 75kg per person in 2013. This is due to the effects of high prices and a devalued Rouble, caused by reduced supply as a direct result of import restrictions in response to American and European sanctions against Russia. Meat consumption has dropped by about 3% and is expected to fall by another 6% meaning it is set to reduce to about 70kg per person (which is still higher than the 60 kg per person in 2010.
Consumption is still expected to reach 82kg to 83kg per person in 2020. This consumption will be driven by increased production within Russia and growth in the economy after adjustments following sanctions.
As a % of total consumption it is expected that pig-meat will increase from 33% to 38% (of all meat) by 2020. This means Russians are expected to be eating 31.35kg of pig meat by 2020. An increase of about 6.6 kg per person from its peak in 2013.
A simple calculation says this is another 957,000 Tonnes of pig-meat required or the production from about 320,000 productive sows!
Better Meat Eating Quality
One factor that is very clear is a move towards pig meat with better meat eating quality. In the first major expansion of production in the 2nd half of the 2000’s the trend was to follow Europe. A lot of very lean sire lines were imported. This as we all know leads to lean, dry and tasteless pig meat. The reason that neck is the most expensive cut in Russia is because it contains fat and tastes good. Russia is a country that likes to eat pig fat ‘Sala’…….
I have heard many Russians complain about the meat produced by some of the new producers using these very lean boar types, and praise the meat quality from the companies that have opted for Duroc sires that have high levels of marbling. This at the extreme means employees of one integrator actually buying meat from another integrator because it tastes better!!
Globally as pig farmers to grow our business’s we have to increase profitability. This means increasing sales (volume and price). Why would we align our product with lower valued poultry (white meat), why not higher value beef and lamb (dark meats)?
When we buy a new car we do not aspire to buy the lowest specification, we aspire to buy as near to the premium model or brand that we can afford!!
Russia burns bacon.
Earlier this week Russia started to destroy illegally imported food, including bacon. Where ever prices are high a black market is created. So far about 550 Tonnes of food has been destroyed and another 320 tonnes stopped at the border. The list of countries prevented from exporting food to Russia has been increased in an attempt to stop black market imports.
Tighter Regulation On Back Yard Production.
In another move to strengthen internal production pressure is being put onto small holders to be registered and comply with the law. Still today 30% of pig meat production is grown in ‘back yards’. This production, as in most places, goes largely un- regulated.
30 % of total production means about 500,000 sows.
Russia’s current largest pig producer, Miratorg, has announced it is putting a planned $2 billion expansion on hold until vet authorities can get better control of African Swine Fever, which continues to be a problem within Russia. Although some outbreaks have been on large commercial farms, the majority of outbreaks continue to be within the back yard and wild pig population.
The serious producers have put in place internal bio security procedures to protect their own business. Getting into a modern Russian farm to see pigs is not easy! People who work inside farms are forbidden to keep pigs at home, but most still live in villages where pigs are kept.
On some of the older farms, where historically people took pigs (along with feed and medicines) to compensate for poor wages, the habit continues. If people can’t earn a living wage they are forced to steal!
Obviously the way to stop the threat of ASF is to destroy its host (contaminated pigs and meat).
The Future Is Bright
For modern and efficient producers the future looks very good. No wonder the majority are planning to grow production.
Growth and sustainability both require profits to allow for new investments, the Russian government is certainly helping to create market conditions within Russia to create growth.
There is today no evidence of this changing in the near future.