Jim Long President – CEO Genesus Inc. email@example.com
Russia Road Trip
May 25, 2015
We arrived in Russia at the end of last week. We are visiting and touring swine companies. Our observations to date:
- Current Russian market hog price is 115 rubles per kilo or about $1.05 USD liveweight per pound.
- Good producers are making $120 USD per market hog.
- It’s Christmas every day for Russia hog producers. Santa Claus obviously works more than one day a year in Russia!
- Feed prices are similar to the USA taking about $95 USD for sow, nursery, and finishing per hog marketed.
- The trade sometimes imposed on most of world preventing pork and live pigs to be imported into Russia is leading to a motherlode of profitability for Russian producers.
- Brazil is the only major exporting country of pork excluded from the trade ban. The four major sources of pork in Brazil are having a wonderful time supplying the obviously pork short market. There are 200 buyers chasing these four major suppliers. Russia pork importers are getting little, if any margin on the Brazilian pork.
- The high profitability of pork producers is leading to very serious plans for sow herd expansion. From what we can figure, plans are in the works for about 250,000 – 300,000 sow barn capacity in the next three years.
- Large tracts of farmland are being consolidated and assembled, to build the new production on. Many will be 2,500 – 3,000 sows on one site production farrow to finish. Russia benefits from the ability to build barns and infrastructure that could be maintained as minimal disease. Most of the barns in Russia are built and equipped by Big Dutchman as they have over 60% market share.
- Land holdings of the major Russian swine producers are in the 100’s of thousands of hectares (and/or acres).
- Some of the new hog barn development is being built to supply pork to China, Japan, and South Korea. Some barns will be built close to the China border. Russian producers also have observed over 7 million sows liquidated in China and expect there will be pork market opportunities in the future. Russia has land, grain production capacity, expertise, and capital to undertake these large projects.
- One of the major shortcomings on new Russian swine production is the shortage of stock people to operate the new farms at a high level. Training is underway but it’s a slow process.
- There are global trade sanctions on Russian goods and vice – versa, many foreign goods that could be exports to Russia. If we measured damage to the Russian economy by constructive activity, in Moscow there are new buildings going up at a high levels, certainly more than we have observed in North America.
- Another observation is that it appears President Putin has become more popular. Many stores have different types of products featuring his likeness. If there is a cult of personality it appears to be driven by large consumer demand. Russia Nationalism and the support for Putin has certainly become more pronounced since we were here in Russia last summer.
- Our tour continues this week and we will make further observations.
Categorised in: Pork Commentary
This post was written by Genesus