Simon Grey - General Manager Russia, CIS and Europe.
Pig prices have fallen in Russia and currently stand at 94 Roubles per kg liveweight ($1.46). This is a reflection of the economy and peoples buying power reducing. Local reports are that meat sales rise following people receiving salaries.
In a recent speech the Chairman of the Russian Pig Producers Association warned that many Russian pig farms with the highest costs risk bankruptcy. This is unusual news for Russia, which has seen high pig prices for years on the back of controlling imports and massive expansion of pig production, much of which was subsidised. Historically lowering pig prices have triggered government support. These days this is not likely to happen.
The issue in Russia is not really one of a generally low pig price, it’s one of high cost of production. The policy of import control and subsidies is good for getting growth but not for creating efficiency.
Of-course getting the border with China open will be a short term solution. Countries that are able to export to China are seeing record pig prices in their internal markets. This is because the price in China is so high currently. However, these counties are seeing prices that are about 10% higher and were seen also in Russia a few months ago – don’t get too excited!!
As far as I can understand Russia has to deal with ASF by regionalising. In Europe, countries that are positive can’t export to China, those that are negative can. Russia is about 4 times larger than Europe and many Russia Oblasts (states) are bigger than many European countries. It seems negotiating to be able to export from areas that are free of ASF should be possible.
The other issue is CSF. Today in Russia all pigs, by law, have to be vaccinated for CSF which in my understanding is a barrier to exporting. Russia has in reality dealt very well with ASF without a vaccine, seems it would do equally as well if not better with CSF also with no vaccine.
Ultimately the only solution for the current business’s with high costs is to reduce cost. There are some golden rules for reducing cost:
1. Cut overheads
These are any costs not directly related to production. The levels of bureaucracy are incredible in Russia. I would estimate there could easily be $10 per pig extra cost as direct and indirect cost of excessive administration. This one really needs to be sorted for Russian pig producers to become globally competitive in the future.
2. Maximise output
From a production point of view this is the first and most important golden rule. Maximum output means maximum sales. As pig farmers sell only one thing, kg of pig meat, this should be easy to understand. Sell the most kg possible…………
Maximising output maximises income and minimises fixed costs which in pig production are about 50% of all costs.
It amazes me how many pig farmers seem not to understand how to achieve this one. Simply FILL nursery and finisher with the FASTEST growing pigs. It seems so obvious. If you do not fill buildings or use pigs that you know grow slower how can you expect to maximise output ?
Filling nursery with enough weaned piglets is mostly affected by how many sows are bred and how many farrow and not how many piglets are born alive!!! This is another factor many do not understand.
% Effect On Number Of Piglets Weaned:
- 60% – How many sows are bred.
- 30% – Farrowing rates (how many sows farrow).
- 5% – How many piglets born alive per litter.
- 5% – Piglet mortality (how many piglets survive to weaning).
This is very simple to understand. If you do not breed a sow you get ZERO piglets weaned. If a sow does not farrow you get ZERO piglets weaned. For every modern sow that farrows you are likely to get somewhere between 14 and 16.5 piglets born alive and wean somewhere between 12.5 and 14.5 piglets. This is why mathematically born alive and piglet mortality have little % effect on total number of piglets weaned.
3. Focus on feed
Feed accounts for 60 to 70% of cost and finisher feed at 50% of cost is the only real variable cost in pig production (to only one that varies with sales). Russia in Soviet times used just 7 diets (and sometimes 6):
- CK1 = Gestation.
- CK2 = Lactation.
- CK3 = Pre-starter.
- CK4 = Nursery
- CK5 = Grower
- CK6 = Finisher 1
- CK7 = Finisher 2 (not everyone uses).
These numbers are still used today as are for many the same number of diets. Feeding more diets means nutrition is nearer to pigs daily requirement for Lysine and Energy more of the time. This means faster growth rate, leaner pigs and less feed!!!
4. Use the very best genetics
This does not guarantee a result but does give the highest (genetic) potential for getting the best results.
Something I notice with the higher cost producers vs lowest cost producers is that the higher cost ones want to be very independent. They want to have their ‘own nucleus’ not linked to a major global companies genetic program or even just have their own ‘do it yourself’ way of producing replacements. They want to do their own nutrition and not rely on independent consultant nutritionists or global nutrition companies. They often want to sell lighter leaner pigs. All of these are ‘to reduce cost’……… yet these are the companies with the highest costs!!! I wonder why?
Even buying all of your genetics as F1 and Semen cost will be less than 1% of all cost. Buying GP gilts and boars then genetics will be considerably less than 1% of all cost.
Having the best Genetics, which means having the fastest growth (all of the 4 global genetic companies have no issues weaning enough piglets to fill nursery) allows you to maximise sales and minimise fixed costs.
Knowing the Genetic’s you have means you know exactly the Genetic Potential for Lean Growth. This means you know exactly how much Lysine and Energy pigs need daily. Feeding can be optimised. With ‘Do It Yourself’ genetics you have lower potential for growth and you have no idea what the Genetic Potential for Lean Growth is – so you have to guess with nutrition (or use standards).
Less output, lower income, higher fixed costs and more expensive feed! There a reasons why low cost producers are low cost and high cost producers are high cost!!
Categorised in: Featured News, Global Markets
This post was written by Genesus