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Pork Commentary: A Week in Russia

by 5m Editor
10 August 2011, at 9:29am

RUSSIA - "We spent this last week in Russia," writes Jim Long in this week's Pork Commentary.

Here are our observations:

  • Our visit was in the Southern Russia region of Kuban. Kuban is approximately 700 miles south of Moscow. The climate is much like Kansas – Nebraska warm with lower humidity. The area sits between the Black and Caspian Sea.

  • Kuban region is an extensive agriculture region with corn, wheat, barley, sugar beets, sunflowers, and livestock.

  • Last year much of Russia suffered from a drought. The Russian government put a total embargo on shipping of grain from the country. Consequently the world grain price became stronger due to a lack of Russian grain on the world markets. About a month ago Russia began allowing grain exports.

  • If you take no other message from this commentary be conscious of this: The Russia grain harvest where we were in the South is excellent. There has been timely rain and in the middle of summer a reflection of this is green grass everywhere.

  • We understand that Russia wheat is available currently at Black Sea Ports about $30.00 a tonne cheaper than anywhere else in the world.

  • The harvest of wheat has been done and storage is full. We saw many piles of wheat with no place to store waiting for export. Yields were strong 6 -8 tonnes per hectare. (80 – 100 bushels on average). Feed wheat locally is about $5.00 per bushel, barley $4.00 per bushel.

  • Corn and sunflower harvest will begin in a month and yields are expected to be strong.

  • In sugar beets the combination of expected yield and planting acreage (hectares) are expected to overwhelm processing capacity; a reflection of the good growing weather.

  • The bottom line is in the last 12 months the world Grain and Oilseed market price was enhanced by a lack of Russian exports. Now their back and it matters on prices going forward. Russia’s livestock numbers are not that large, there is no ethanol production, and the only outlet for the surplus grain – exports.

Nothing Better

Russian hog producers are in a wonderful place. Market hogs with good genetics are bringing about $325 US dollars per head or around $1.40 US a pound live weight. In a meeting with one producer we said you must be making $150 US per head, he corrected us it is $190. Imagine that wouldn’t fill an equity hole and to think some 12 pound pigs in the US are $10 each.

  • Now there are still many poor producers in Russia. One we met said his hogs take 300 days to reach 220 pounds (100kg), 14 pigs per sow per year. 35mm (1 ½ inch) back fat. They also receive about a $40 per head discount for poor quality. We calculated the difference in production cost and market price received was a minimum $100 per head less. The joke is they still were making $50 per head. It’s a fool’s paradise though as this will not last forever. They are dead men walking unless they upgrade their technology.

  • Russia is the largest exporter of oil and natural gas in the world. Approximately half of the Russian government’s revenue comes from oil and natural gas, or about $3 billion US per week.

  • The Russian government is looking at expanding swine production with financial support for the estimated $7 billion US dollars that is currently being planned to being invested in the Russian swine industry over the next five years which is 1 per cent of the expected Russian government petroleum revenue in the same years.

Our trip included Kubansky Bacon one of Genesus Nucleus Multiplication in Russia. Currently the genetic nucleus is being populated with registered purebreds, the fist 2500 sow multiplier will be ready to receive breeding stock in 10 weeks, and the second 2400 sow multiplier has begun construction. When completed, Genesus will have the largest supply of high health genetics in Russia. We have to admit it is a big undertaking and one never dreamed of as a child growing up on a 10 acre farm on a gravel road. I am travelling with my 14 year old son, he is having an opportunity to see, learn, and be exposed to a world I couldn’t ever imagine when I was his age.

Summary

Hog prices in Russia are strong and profitable. It’s a reflection of lack of supply. Russia will be importing pork for the foreseeable future. This will help US – Canada hog price to stay strong by supplying Russia pork. As the Russian economy grows we expect Russian pork consumption to increase. Russia has grain with an estimated 40 million acres of farmland not yet in surplus. Large tracks of land for bio security – Government money for expansion. Time will tell but it is a pretty exciting place for swine production right now. As we write we are on a plane flying from Moscow to Beijing. We will be in China all of this week. We will report our observations.