Eastern Europe Road Trip – Week 2
Last week Spencer, Aidan and I continued our trip thru Eastern Europe visiting both Poland and Ukraine.
Poland used to have almost 2 million sows. Now they have under 1 million. Structure used to be many small farms, industry consolidation and migration of small land holders to the cities and to other countries has cut production significantly.
Profits currently in the $30 US per head, up for breakeven a few months ago.
Smithfield Foods is the largest producer in Poland with about 90,000 sows and several packing plants.
Well over a million feeder pigs are imported to Poland a year. Most are from Denmark, the price currently is about $60 US
Poland has had several breaks of African Swine Fever (ASF) and consequently has lost some export markets. When we were in Poland the ASF break was observed in Romania at Europe’s second largest pig site, where 147,000 pigs were destroyed.
In Poland there are many small farm land holdings. If you are a farm you don’t pay income tax on all your income. As they say, follow the money trail. No income tax for farmers leads to many farmers.
With so many small property owners, it is getting ever and ever more difficult to build new swine farms.
The “not in my backyard” syndrome has developed for pig production. Poland’s economy has got stronger due to large financial support from the European Union. As Poland has become more prosperous, the desire for having pigs in the country has declined.
Our read of market, in Poland pig production will held relatively steady in the future.
After Poland we traveled to Ukraine. We met several producers and the executive of Ukraine Pig Association.
African Swine Fever (ASF) and low profitability has lead to about a 17-20% reduction in Ukraine sow herd.
Sow herd currently 300,000 sows in commercial production and 200,000 in backyard. Almost all the recent ASF breaks are in backyard operations.
The official population in Ukraine is 42 million. It is estimated over 5 million of this number is living outside Ukraine. Farm workers are being paid, we understand, between $200-$300 US per month. Certainly, explains why we get so many job application from there.
The current hog price is $78 US liveweight a lb. Profits currently are over $30 US per head
We were at farms weaning over 30 pigs per sow per year. The survivors in the business are generally good.
Several of the pig production people have been in Denmark on work permits. The Danish don’t allow much immigration; so, most of the Ukrainians, after working a while, must return home. In Denmark they are trained well in the swine production learning how to get results from a hard pig to work with. This training benefits Ukraine’s production.
Corn last week in Ukraine was $4.37 US a bushel
Feeder pigs last week were selling for $85-$95 US for a 25kg pig.
Ukraine is currently importing pork – 12.2 thousand tonnes year to date. There is gate price threshold that can limit imports. While in Poland there were discussions of the desire to send more pork to Ukraine.
Ukraine has the ability to produce lots of grains. In our travel we saw excellent corn, soybean, sunflower crops. The wheat had been harvested. Current laws we understand prevent foreign ownership of farmland.
There has been always speculation if Ukraine would become a major pork player. It has the land, crops and production expertise. The big challenge comes in capital availability and its government stability for investors. There was orange revolution in 2004 and the troubles in 2014. Instability does not encourage capital investments when there’re other places where capital can go.
Summary of trip:
We were in three countries: Russia, Poland and Ukraine that have the African Swine Fever (ASF). We met people who have had ASF. In almost every discussion there was dialogue on what is going on in China. Most we talked to think is will be a huge challenge for China to control, mainly because of the backyard pigs that still are a major part of China’s production – maybe 6-10 million sows.
The thing with ASF is that pigs die either from disease or being destroyed. It is quite final.
The other point, all three countries we visited are profitable mainly from $30 to $90 US per head. In all three countries they talked about exporting pork. Be careful what you wish for. USA-Canada-Brazil, major pork exporting countries have hog market prices half of the three counties. Making money is way more important then winning export medals.
Spencer and Aidan now go back to school. Spencer, final year university (maybe); Aidan into grade eleven. It was nice to travel with my boys, they got to see parts of the world where for me at their age just were places on a map. Big world, with rapid travel and rapid communication so much has changed. Developing a Global company is a challenge but is fascinating and interesting meeting smart and good people all over the world.
We feel so fortunate.
This post was written by Genesus