The East European country can take advantage by the evolution in the EU pig industry.
Russia’s target is to become the worlds 5th largest exporter of pigmeat. Russia target revenues of $45 billion from the export of agricultural product from Russia by 2020.
The pig price this week in Russia is 117 Roubles ($1.76) per kg live including 10% VAT. According to Russian Pig Producer’s Association, the average production cost for the average producer are in the mid 80 Roubles per kg. This means today the average producer is making about 2400 Roubles per pig ($36) and the top producers who have costs below 60 Roubles are making 5400 Roubles ($81), states a Genesus report on the Russian pig market.
Following a chart of pig prices around the globe, "Russian pig producers should be very concerned. The pig price in the net exporting countries is always considerably lower than the price in the net importing counties. Russian consumers, of course, will be very happy!!!
Russia wants to go from being a net importer, where pig price can be manipulated by restricting imports and keeping the balance of supply and demand in the favour of the producer, to a net exporter, where pigmeat HAS to be exported every week to avoid catastrophic price reduction!", says Simon Grey - Genesus General Manager for Russia, CIS and Europe.
Nevertheless, in 10 years, Russia may actually be able to achieve this goal as long as the current situation in the EU pig industry is going to persist. "Except for Spain, Europe is losing sows year after year. The major producing countries of Europe (Germany, France, Holland, Denmark) all expect pig herd to reduce (due to a high cost of production). Currently, farmers in Denmark are going bankrupt weekly! You can have the highest born alive in the world, but if your costs are too high you still go bankrupt!!
I would expect the EU within 10 years to become a net importer of pigmeat if production continues to reduce at the current rate.
For Russia, this means the competition for the export market will be with USA, Canada and Brazil. One issue is that the Russian market opens for Brazilian imports in January – and what effect will that have on price!!
The most likely scenario over time is that the pig price in Russia will align with the US, Canada and Brazil. That means prices in the 60’s Roubles per kg will be the norm.
For Russian pig producers this means to remain profitable costs need to be in the late 50’s or early 60’s Roubles/kg," added Mr Grey.
That, of course, it will happen if Russian pig farmers will stay focused on cost. It also means that the Russian pig industry must follow success examples such as Canada's. " If you want to understand low-cost pig production in Russia – look towards Canada and the USA and not Europe!! Russia naturally has so much more in common with Canada and certainly the northern half of the USA. The climate is very similar, so feed raw materials can be the same. Buildings and microclimate systems that work well in Canada and USA will also work in Russia. Even methods of construction can be the same", says the report.
The feed system must be modified along with genetics and building investment in order to respond to the pressure existing in the global pig market.
"I always used to tell farmers the best management tool ever is a calculator. To be honest when pig price has been in the range of 90 Roubles to 130 Roubles the only reason for a calculator was to work out how many $millions you were making. With pig price in the 60’s Roubles you really need to start calculating what everything costs and which costs you can immediately get rid of (anything that does not increase production).
If you are currently building, you seriously need to look at building what you can afford – not what you want!! Canada does not have a low cost of production by accident!!!", says Simon Grey.