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Pork Commentary: Road Trip to Russia

by 5m Editor
25 August 2010, at 9:57am

RUSSIA - This week, Jim Long writes, "This past week we spent in Russia."

Our Observations:

  • Russia’s economy is showing vitality if the number of buildings under construction is any indication.

  • The Russian Market Hog Price is up to 85 rubles a kilogram or about US $1.25 liveweight a pound. Top producers are making over US $150 per head.

  • Wheat is approximately US $4.00 or US $160 tonne in the Southern Kuban region 1,000 miles south of Moscow it is about US $5.00 a bushel in Voronezh, half way between Moscow and Kuban.

  • Soy meal is US $500 a ton.

  • When we were in Moscow Sunday, 15 August, the city was covered with smoke caused by forest fires in the area. It was nasty. Since then the weather has cooled and it has rained some and there are few if any forest fires. On Saturday the temperature was 65°F.

  • In the Voronezh region, 500 miles south of Moscow as we travelled around we saw many areas with forest fire damage. The scale of the fires we saw were not individually large with many just a few hectares or acres, but there were lots of them. Some houses were burned out.

  • Voronezh has soil like Illinois. It is black earth, the drought has been intensive. Record high temperatures in the 40°C or 104°F. and no rain for 6 weeks. We were in corn fields with 4 inch corn cobs. The only time I saw crop damage like this was in Northern Indiana several years ago.

  • The wheat crop had been harvested but it was only about 40 per cent of normal in the Voronezh region. Russian people told us the heat and lack of rainfall as unprecedented.

  • A week ago the Russian Government banned the export of grains until January 2011. Several producers told us they would not sell grain until the embargo is lifted. If non–sales happen to any great extent the Government’s attempt to limit grain prices might not work.

  • In the Kuban district in the south between the Black and Caspian Sea the wheat crop was harvested before the drought took a major toll. Yields in that region were down but not by much (60 – 70 bushels per acre). Currently seeding has begun for fall wheat. In Kuban, corn and sunflower crops have been hit by the drought being later crops.

  • One farm operation we visited had a large cropping enterprise with just less than 450,000 acres (200,000 hectares). 59 new John Deere Combines and 63 John Deere tractors. We have to admit we never thought in our life we would be discussing where to build a new swine barn in a 100,000 acre tract of land (50,000 hectares). Biosecurity distance is under control.

  • In Russia there is a wide range in productivity on swine farms. Some 12 pigs per year, others 24 plus. With the higher grain prices and the economic shock it will cause in some operations we expect there could be several low productivity producers go out of business. On the other hand, top producers are doing well. A 6,000 sow operation with Genesus Genetics is reporting to us 24.3 hogs marketed. In this operation we had placed full time Genesus management and a complete training program. With super high hog prices and 24 plus hogs per year per sow. It is happy days!!

  • As I wrote last week, I am travelling with my 13 year old son. It is an eye opening experience for him. Different culture, different language, and a different economic model. It is a good education. As per usual, when we travel we have been treated well by our hosts. I will always marvel on how Ag – people in general are so hospitable around the world. In one town of 70,000 people in Voronezh the police chief heard we were there. They don’t get many foreigners. He came to our hotel, introduced himself, and insisted we visit their new hockey arena (he’s a goalie), after he took us to a huge fertilizer facility with 3,000 employees. Russian’s like American’s are proud of their community.

This coming week we will be visiting Prague and the heart of Ukraine’s grain production.

Other Observations

Statistics Canada released 1 July Inventory Report. No big surprise as Canada’s swine inventory countries to decline year over year. Market hogs are down about 300,000 head while the sow inventory has declined over 60,000. Live exports to the US were down April – June about 200,000 in the quarter year over year. The bottom line is smaller sow herd, smaller inventory and smaller exports. This is price supportive now and in the future.

In the last two weeks prices in Brazil have risen 10 per cent across the country. Prices in the South – East are US $1.70 per kilogram live weight (75 cents live weight per pound) and in the South, US $1.40 a kilogram (about 65 US cents per pound). As we have written before, Brazil and North America are the big hitters in Global Pork Exports. To have high prices both countries need to have prices not undercutting the other.

Last week in China the price of pork had risen for 10 straight weeks and hit 17.09 guan per kilogram (US $1.10 per pound). Reports say the uptrend in pork prices was due to an outbreak of diseases. The rise in breeding costs, Government policies and the impact of the flood in some regions.

Summary

US hog prices are holding in the low 80’s lean per pound. We expect a seasonal price decline but we are buoyed by the prospect of prices staying strong. Canada’s hog supply is down. Brazil’s prices are up (meaning supply is down) and China’s prices are up (supply down). Less pork always leads to better prices.