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All news / Russia Hog Market

  • 12 Oct 2015, 11:55

Pig price continues to remain stable at 112 Roubles per live kg ($1.71). This is despite a reported increase in pig meat production of 8 per cent over last year. Russians like to eat pig meat.

Current talk is all about business growth and more new farms, feed mills and slaughter plants over the next 4 years. The numbers being talked about are well over 500,000 new sow places. How is this likely to impact on the market over time? There is also huge demand for real genetic progress with new Nucleus farms that are properly managed and achieving genuine genetic progress.

After years working in the UK through all the legislation changes and an ever decreasing sow herd, it is very inspiring working in a pig industry that has been and continues to think only about rapid growth.

Since 2005 Russia has been investing in re-developing all areas of agriculture to get food security. This has seen the growth of many new and large integrated pig producers. This growth has had government support with both subsidies and market manipulation which keeps pig prices high. Globally pig farmers are envious of the high level of support the Russian government gives to its pig farmers.

Other than for a short period of a few months when Russia joined the WTO and import duties were scrapped on pig meat pig farming in Russia has been very profitable, especially for the new and efficient producers. The political fallout over the Ukraine crisis has led to Russia once again putting pressure on food producers to increase local production.

What are the medium to long term scenarios?

  1. The large efficient producers will continue to grow and take Russia nearer too (and even past) self-sufficiency.
  2. Domestic (back yard) production will continue to decline and be replaced with the new production.
  3. There are some old badly managed and in-efficient farms in Russia with high costs that survive only because of the very high sales price. These farms will at some time go bankrupt and close.
  4. Russians pig meat consumption will over time increase.
  5. To fund the borrowing that is required for the new farms expect prices to remain high enough to allow debt repayment. In Russia this is 5 to 8 years! Where there is political will in is not difficult to create a market situation for this to happen.

This will leave Russia about self-sufficient in Pig Meat that will be managed by modern efficient pig producers.

How About Exports?

Russia already exports small amounts of pig meat, but has the potential to become a major exporter. This depends largely on continued good relations and trade with China.

New slaughter plants are all European designed and built to the highest standards. Getting EU and USDA approval is at least in theory not a problem. However it seems unlikely today that Russia will export to either.

Having said that the EU continues to increase pressure on animal welfare with some major producing countries like Germany talking about United Kingdom type legislation. History says that this will reduce the herd size by 50 per cent ! If that were to happen across Europe we could be looking at losing up to 6 million sows.

If Russia does become a major exporter of pig meat it is most likely that it would be to the east!

Global population is increasing and therefore so is the demand for food in general. China has massive demand for pig meat. Of course some will always come from USA (with Smithfield in Chinese ownership). However there is limited opportunity for considerable increase in production.

Where can China get its pig meat from in the long term? We can rule out mass expansion in USA and Canada. In Europe sow numbers are only likely to reduce. This leaves South America, Africa and Russia (and customs union countries). Of all of these Russia is the most logical place.

Politically China and Russia are getting closer. Both are BRIC Countries (In economics, BRIC is a grouping acronym that refers to the countries of Brazil, Russia, India and China, which are all deemed to be at a similar stage of newly advanced economic development).

Russia and China have a land border of 4,209 km. A new rail road (on the old silk trail) is currently under construction. This makes transportation low cost.

Russia has a vast land mass, much of which today is not being cultivated that is estimated at 10 million Ha. Add to this the land that is farmed but has the potential for increased yield (official statistics say only 50 per cent of land is fertilised).. Russia can produce a lot more food!

Vast lands also mean no problems with building pig farms. Yes there are strict environmental standards and a requirement of 1 Ha of land per sow for slurry disposal, but Russia is not full of NIMBY’s (Not In My Back Yard) who make building farms in EU and North America virtually impossible.

Russia can build large and efficient pig farms and has the skilled manpower today to manage these farms.

Could Russia end up being the 2nd largest producer in the world. It’s not impossible!