Market Report Russia March 2017
General Manager Russia, CIS, and Europe
Despite lent, when many Russians stop eating meat, the pig price remains good at 105 Roubles ($1.82) per kg live weight. With production cost for good producers around 65 Roubles ($1.12) per kg, profitability remains high. Interestingly, the price of lean meat and fat remains very similar. Producers killing really heavy pigs are very happy!
All of the talk within the industry continues to be developing an export market, and of course, the control of ASF, although there have been no recent outbreaks on large commercial farms. The majority of outbreaks over the summer have been linked to domestic pigs and farm workers in contact with them or the meat from infected domestic pigs. Big commercial farms are having more and more control, but this is not the problem. The majority of Russian farms already have excellent biosecurity.
The solution, at least on paper, is simple. Make it illegal to keep domestic pigs, or at least have the same rules for domestic pigs as there are for commercial farms as this would effectively make it impossible or un-economic to keep pigs at home. The next issue would be policing it! Belgorod Oblast has sort of done this. Despite having the largest population of pigs in Russia, there have been no outbreaks of ASF on commercial farms.
Outdated grading system.
Many Russians still talk about the carcass classification system. Although some plants do their own thing, the classification system is still used. There are discounts for lower classed pigs.
First Category: pigs from 70kg to 100kg live weight and with no more than 2cm of backfat
Second Category: pigs from 70kg to 150kg live weight with no less than 1cm of backfat and no more than 3cm of backfat.
Third Category: pigs to 150 kg live weight with over 3cm of backfat.
- Having a national grading system makes little sense. Slaughter plants should set their own prices and encourage farmers to produce the most profitable pigs for that plant by paying a premium for pigs which make them the most profit. Taking into account the excellent margins and the high cost of fat in Russia today, the heavier the pig, the more the profit!
- Having the highest class pigs in a weight range that is totally uneconomic to produce also makes no sense. Slaughtering pigs at less than 100kg is crazy. Light pigs cost more to produce (per kg) and give lower margin. Even with a premium price, it would make no sense to produce light pigs.
- Wide bands for backfat also make no sense. I do not believe a 125kg pig with 3cm backfat is so much more valuable than a 125kg pig with 3.1cm of backfat. Once again, when the price of lean and fat are virtually the same, the 2 carcasses will be worth the same money when cut down and sold.
Carcass classification systems should be designed to maximise profitability within a system. For on farm production, the math is easy. Bigger pigs = lower cost of production. For the slaughter plant, the bigger the pig the lower the cost.
The issue is only understanding what carcass gives the most profit or understanding how to maximise profit from heavier pigs with inventive butchery. With neck having the highest value in the shops, the more cuts that look like neck and that can be sold for a higher price, the greater the profit through the whole chain.
The last issue that a classification system should encourage is tastier meat! As an industry looking to make more profit, we need to sell more meat and at a higher price. There is nothing like a bad taste experience to put people off eating pig meat.
My own wife is proof of this. We are a family that live from pig farming. Coming from the UK, where pigs are not castrated, every now and again we would get pork that had boar taint. The risk of this meant that if we were ever entertaining guests, my wife would never risk serving pork just in case it was tainted. It always made me cross that we spent money earned from the pig industry to pay for another meat, because of the risk of a poor tasting product.
Russia is targeting Asia for exports of pig meat. Asians like darker meat with intramuscular fat. The highest value cut in Russia is neck. Maybe it is time for better classification systems to encourage maximum profit.
This post was written by Genesus