Pork Commentary

Jim Long President – CEO Genesus Inc. info@genesus.com

Russia Road Trip Part 2

June 1, 2015

This past week we spent in Russia meeting with customers and other industry participants. Our Observations:
  • Russia’s producers are receiving 114 ruble a kilogram ($1.00 US liveweight per pound) and are having profits per head of $125. It is going very well.
  •  Much of the proposed new construction will be one site, 3,000 sows farrow to finish. The cost of roads, services, power, land acquisition, and security both from theft and health. Multi-site in the Russian structure has had mixed results. The cost of the facility is almost $7,000 US per sow.
  •  There is lots of land in Russia available for swine building and the rules say you need 1 hectare (2.2 acres) for every sow (farrow to finish). I.E. 3,000 sows need 6600 acres.
  •  We met over the last week with different groups planning in total to expand 400,000 sows plus over the next four years.
  •  Expansion will have to coincide with new or expanded slaughter plants as the major plants are currently maxed out. We met with four groups planning new slaughter plants or expansion.
  • Russia’s goal is to be self – sufficient in pork production and with the long term goal of becoming an exporter to the Asian market.
  •  We get a sense that the Russian industry will do everything possible to keep out imported pork from the E.U. Border control has created high profits. We expect the Russian Government probably knows these high profits are leading to expansion, pushing Russia towards self-sufficiency in pork. A many time stated goal. If you are a European producer we would suggest you look for other markets for pork in the long term.
  •  With the expansion in pork, Russia is starting to focus less on straight tonnage and pork as a raw commodity. The packers are now beginning to realize that long term demand is partially driven by better tasting flavourful pork. When in Russia we signed a contract to establish a Genesus Duroc Nucleus with one of the major producers. The farm already under construction will be stocked this year.
Summary Russian inventory is currently highly profitable. There will be major expansion but it will take some time to get the facilities built. Long term, Russia can be relatively cost efficient with feed, land, and biosecurity. Russia’s expansion sounds large but relative to China’s liquidation of 7 million plus sows over the last year not that significant. World Pork Expo This week we will be at the World Pork Expo. Visit us at the Genesus tent east of the varied Industry Building. Next week we will report our observations of the World Pork Expo.

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