Pig prices in Russia are falling
Isolation due to the long-lasting ASF situation in Russia led to a decline in pig prices, leaving only large producers unaffected by the situation in the domestic market. "The pig price in Russia has fallen to 92 Roubles ($1.43) per live kg. Half carcasses are selling for 140 Roubles ($2.19) meaning a margin of 1,436 Roubles ($22.4) for slaughter plants. For the large integrated producers, margins are still good, although lower than over the past few years. December, January and February are the months when Russia sees the price at its lowest. That is unless anything major, like Russian pork being allowed into China, happens," reports Simon Grey, General Manager Russia, CIS and Europe for Genesus Inc.
Miratorg is one of the Russian producers that increased investment in large pig farms expecting the opening of the Chinese market. Nevertheless, there is still work to do on that. "There is a lot of Government activity in Russia trying to make this happen. The issue remains that Russia is a country positive for African Swine Fever. Logic says that Russia being 4 times the landmass of Europe, it should not be difficult to regionalize with regards to ASF free regions. As with all things to do with trade agreements, logic does not always work", commented Mr. Grey.
He also thinks that following the Danish, Dutch, German or French model in the Russian pork industry may be a mistake since those countries have reduced their pork production in the last couple of years. " Many will be surprised that Denmark lost 7.1% of its production from 2018 to 2019, the biggest loser in Europe! The reason is simple, the cost of production is too high. There is another reason. The market in Northern Europe is very specific. The most valuable cuts are ham and loin and very lean pigs sell at a premium. This is opposite to nearly every other market in the world where it is the fatter cuts like Ribs, Belly and Neck that sell at a premium.
Europe has only one success story. Spain is the only country in Europe that is growing in pig production. There are simple reasons for this. Spain has the lowest cost of production in Europe and the Spanish industry reacted very quickly to changes in the global pork market. Spain recognized that the growing export market was Asia and that the Asian market required darker pork with more marbling," added Simon Grey.
In his opinion, for the higher cost producers, the winter is not looking good. New farms continue to be built and stocked and consumer spending pretty static. Increasing supply and no change in demand generally bring lower prices and that is not going to change unless Russia gets access to export markets where pork prices are booming.