Russian Market Report, August 2018
Simon Grey, General Manager Russia CIS and Europe, Genesus Inc.
The Russian pig price remains strong at 123 Roubles (US$1.81) per kg live-weight including VAT.
Russian pig farmers continue to be profitable. Like many parts of the world, Russia after a cold winter has had a hot dry summer. Grain yields are lower, some estimates are 15% lower, than expected which is having an effect upon feed costs. However, in Russia many producers own land and grow their own cereals and proteins. Higher prices mean only the farming part of the business gets paid more for grains from the pig side of the business!!
New farms continue to be built, mostly by top 10 integrators. These are the companies that are able to get financing to build. Russia, the world’s largest country by land mass still has a lot of land that is not but could be cultivated and a lot of land to build pig farms on.
Unlike many parts of the world there it is still possible to get enough skilled workers prepared to work on farms. Worker productivity is low compared to higher salaried countries in the EU and America. The best farms have about twice as many workers as the most labour efficient farms globally. The worst can have four to five times the number of people. Higher salaries require labour efficiency to increase. There is a lot of potential to reduce staffing number on Russian pig farms and increase salaries. This would mean skilled workers available for the new farms!
The buzz word in the industry is still export. A lot of effort is being put into developing export markets for Russian pigmeat. Russia is certainly a country that could produce a lot more pigmeat to feed the worlds growing population. Last year Russia exported just 21,000 tonnes of pigmeat. The target is to increase this to 85,000 tonnes by 2018!
With the first case of ASF being announced in China, demand for pig meat in China could potentially be set to increase significantly. With such a large population of back yard pigs in China and a history of disease spread, it may prove difficult to contain. Without a doubt in Russia and now Europe, humans and back yard production have been a major reason for the spread of ASF. Human’s can’t carry ASF, except physically (contaminated shoes, clothes, hair and skin).
For the Chinese pig industry, hopefully the outbreak of ASF is a one off and has been contained. Once it gets into the back yard population it will be very difficult (or based upon Russian and European evidence) virtually impossible to contain. In China, with 60% of the worlds pigs this could have a very significant impact on global pig meat market for years to come!
I recently visited a farm in Russia. It was selling 110kg pigs “because killing heavier pigs they were penalized 2 Roubles per kg for pigs being fat”. Like most farms killing light pigs the finisher buildings has a lot of empty space. In fact this farm could have not sold pigs for 2 1/2 weeks and still had enough space!
Lets look at the maths.
2.5 Weeks X 6kg / week = 15kg extra per pig – pigs can easily be grown to 125kg!!
110 Kg X 118 = 12,980 Roubles (US$190)
125 kg X 116 = 14,500 Roubles (US$213)
Difference = 1,520 Roubles ! (US$23)
The only extra cost this farm had to get these pigs to 125kg is food. Of course I was given all the usual arguments, what about depreciation, labour, utilities, treatments!! Depreciation and labour do not change at all. Yes there would be a very small use of water and electric (but these together are less than 1% of total cost so the difference irrelevant. Treatments – its illegal to treat pigs in the last 3 weeks of their life due to with-drawl periods for medicines!
So yes only real cost is food!!
Between 110 and 125 kg pigs will be converting at about 3.1.
15kg gain X 3.1 = 45.5 kg of food X 14 Roubles/kg food cost = 651 Roubles extra feed cost.
1,520 Roubles Income – 651 Roubles Cost = 869 Roubles (US$ 12.78) extra income/pig
For those that care!
Water use would be 45.5 X 3 = 136.5 liters. At 40 Roubles per m3 extra water cost = 5.4 Roubles! (US$0.08)
Lets say then extra profit is 850 Roubles (US 12.5) per pig ! This farm was selling 2,000 pigs per week and throwing away 88,400,000 Roubles (US$1,300,000) per year – selling light pigs because of a “deduction in price for fatter pigs”…..
I have seen this scenario so many times over the years. Even if the price for heavier pigs was 111.5 Roubles (6.5 Roubles per kg less) then the farm would be no worse off selling heavier pigs!! I wish more people could and would do this simple piece of maths!
Of course the final answer from the farm is always, we can’t keep pigs longer, “finisher is full”. If you have 36,000 finisher places and 29,000 pigs then as a fact you have 7,000 empty places!!!! Allowing for 2000 places empty for washing (1 week) then in this scenario there are 5,000 usable places!
There may well be pigs in every pen, but there are still 5,000 usable places. How do we use these spaces!! Very simple. When you stock a finisher building simply fill it! Actually over fill it by the expected mortality. You want it full when the pigs are sold – not when it is loaded! If a room is only full when loaded you can guarantee not to sell target number of animals!!
Maximising kg sold always has and always will be a major driver of profit in pig production. To do this you need to fill finisher buildings with fast growing pigs. The major driver of growth rate is feed intake. Because of this Genesus has ,for many years, focused on feed intake as a very important genetic trait and includes it as quite a significant part of its sire line index.
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This post was written by Genesus