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Pork Commentary: Eastern Europe Road Trip Week 2

by 5m Editor
3 September 2010, at 12:07pm

GLOBAL - "This past week we continued our tour of Eastern Europe ending our trip in Russia and then travelling to the Czech Republic, Austria, and then to Ukraine," writes Jim Long in this week's Pork Commentary.

Our Observations

  • The drought in Russia is for real. We saw thousands of acres (hectares) of crop land decimated by high temperatures and minimal rainfall.

  • In the entire country of Russia the wheat crop is projected to be down 30 – 35 per cent. Wheat is Russia’s number one crop. The effect of higher wheat prices is not only pushing bread prices higher but also feed prices. Last fall Russian wheat was US $2.50 per bushel, now it is depending on the region wheat is between US $4 - $5.50 per bushel. Wheat is the number one staple in Russia pig feeds. We expect the resulting higher cost of production will slow net Russian swine herd expansion. Of course a Russia hog price at almost $300 per head softens the economic blow.

  • When we travelled to the Czech Republic and Austria we immediately saw the relative small scale of farming. Fields of a few acres dot the countryside. In Russia thousands of acres in single blocks were normal. The contrast was riveting. It hit home to us the reason Russians who see scale like America are frustrated with the production practices they are being exposed to from European Union countries. Russians think big build big. Production design and training by countries who’s norm is 100 sows does not replicate real well in multiple thousand sow set ups.

  • In Ukraine we visited the eastern area, quite close to the Russia border. In the city of Dnepropetrovsk we learned until about twenty years ago it was a closed entry, no foreigners were allowed. For Dnepropetrovsk was the major center for Russian rocket construction and nuclear war heads. The rocket factories have evolved into other businesses over the last twenty years.

  • In Eastern Ukraine the crop land is quite good. 27 per cent of the World’s Black Earth is in Ukraine. Fortunately for them, the wheat harvest was completed before the drought hit hard. The company we visited harvested over 100 bushels per acre. The drought will affect sunflower and corn crops not yet harvested.

  • Hog prices are strong in Ukraine with market hogs bringing over $1.00 US live weight per pound. Hog production and Inventory is about 35 per cent of twenty years ago. Significant amounts of pork are imported to this country of 45 million people. 22 kg feeder pigs were costing $100 per head delivered to the farm from EU countries.

  • Ukraine like Russia is dotted by ruins of livestock facilities abandoned in the recent past. Most were collective farms that failed. It is hard to explain but the sight of one after another of abandoned livestock complexes is compelling.

  • Ukraine, like Russia has the land, grain, and internal market for increased pork production. In Ukraine, capital is harder to get than in Russia. Ukraine does not have the large exports of gas and oil to drive its economy. There is no question in our opinion that there is an excellent opportunity for swine production in Ukraine.

Summary

As I wrote last week I was travelling with my 13 year old son - 14 flights in 16 days. He started calling it the Amazing Race. We did some business – that is why we went. It was successful. Of course it is easy selling a competitive product in a demand driven market.

In the end, the most special part was seeing my 13 year old son wide eyed going through small rural villages with little apparent changes from the time of czars (except satellite dishes). We visited the Soviet Union second world museum in Kiev, this is a huge complex and very well done. It was eerie seeing the story and artifacts of a war that cost 25 million Russian people lives. It was a hard history lesson. It seems to make selling pigs kind of trivial.