Simon Grey, General Manager Russia CIS and Europe, Genesus Inc.
simongrey@genesus.com
Pig price is currently 82 Roubles ($1.34) per kg liveweight and going to a time of the year, after New Year and Russian Christmas, where price usually falls by about 5 to 6 Roubles per kg.
For years Russia has been towards the top of the rankings for global pig price on Genesus weekly global market report. Today just USA and Canada are lower! The reason is local supply and demand. Production in Russia continues to increase and demand in Russia is virtually static due to weak growth in disposable income on the back of general slow economic growth. Continued international sanctions will restrict future economic growth.
Russia is exporting small quantities of pig meat, some to Hong Kong, which we can assume ends up in China. It will take a considerable increase in exports to have serious effect on local supply and demand. As Russia is a country positive to ASF then without importing countries excepting regionalisation is unlikely to happen any time soon.
For Russian pig producers, the challenge is maintaining profitability in a market with a lower pig price. This requires getting more local pork consumption. There are 2 obvious ways to increase consumer demand.
- Reduce the price of pork in the shops.
- Improve eating quality.
- Advertise – tell the consumers what has been done!
- Reducing cost. Here there are 2 key targets.
Reduce non-production costs.
Russia has very high levels of management and administration that most of us can’t even begin to comprehend. I have spent a lot of time on Russian pig farms. As far as I can see 90% of this administration is totally pointless, has absolutely no benefit for the business and is just a cost. This comes from Soviet times where it was illegal not to work and there were massive amounts of job creation! I have seen administration and management costs as high as $9 per pig in Russia vs around $1 per pig in North America!
Increase in slaughter weight.
Growing pigs faster in the same space at the same time requires only food.
Let’s take a pig slaughtered at 115kg and at a cost of production of 70 Roubles per kg or 8,050 Roubles/pig. Pigs in Russia tend to be slaughtered at 170 to 180 days of age. Genesus customers are quite used to having pigs about 135 kg at this age. To get from 115 to 135kg requires only about 60kg of feed. The average feed cost for a final finisher diet is about 15 Roubles per kg.
New cost of production is 60 X 15 = 900 + 8,050 = 8,950 Roubles.
8,950 / 135 = 66.3 Roubles cost of production. A reduction of 3.7 Roubles per kg!
In Russia, it costs about 2,000 Roubles to slaughter, process and pack one pig. This is 23.5 Roubles per kg for a 115kg pig but just 19.8 Roubles for a 135kg pig.
A combination of these saving is 7.4 Roubles per kg at point of sale. You can sell the 135kg pig for 7.4 Roubles per kg less than a 115kg pig and make the same profit per kg!! Sell more kg because you have reduced the price and you make more profit!!
Improve Eating Quality.
There is one meat quality factor that surpasses all others in terms of tastier pork. That is marbling or intramuscular fat. This is internationally recognized in beef, same principle for pork, of course!
Genesus has been selecting for marbling since 1998 (22 years) and is the only of the 4 remaining global genetics company to do so. The other 3 (PIC, Danbred and Topigs Norsvin) have focused on reducing back fat. There is a strong genetic correlation between lack of backfat and low levels of marbling. This selection policy, of course, reduces marbling and creates pale tasteless pork. If people want to eat pale tasteless meat they will buy Chicken or Turkey, which also costs less in the shops!
Incidentally, the low-fat lobby are trying to say correct pH is more important. Even if it were true (there are no science or consumer trials to support this) it is totally un-marketable. ‘Buy correct pH pork’. Don’t think the best marketing brains in the world could come up with a way to sell that one!
Advertise.
Russia has both a National Pig Producers Association and National Meat Producers Association. Part of the role of these bodies is to promote pork as a product to help producers sell more and therefore be more profitable!
Today neither are involved in national advertising campaigns promoting pork consumption. The best way these associations can support their members is to help them maintain profitability by getting more pork sold.
Categorised in: Featured News, Global Markets
This post was written by Genesus