Russia's role in the pig market

It took 15 years and more than $10 billion, but now the Russian pig sector is completely self-sufficient. The first milestone was reached in the year 2018. At that time, the import figure and export volume reached the same level. One year later, production was again more than 150.000 tons higher and exports grew by 90.000 tons. In short: importing pork was no longer necessary from that moment on.

But these nice numbers also have a downside. As a result of the abundant production of pork, domestic pig prices have fallen dramatically in the past year. At the beginning of February, the Russian pig price was €1,18 per kilo (live weight). The average over the past few years is approximately €1,32 per kilo. In December 2019, a low of €0,88 per kilo was even reached.

Influence of corona
One 'benefit' for the Russian pig sector is that it has been much less affected by the global corona pandemic. This is because the crisis mainly affects sales to the catering industry and in Russia not so much pork goes to this sales channel. Thanks to the low prices – on average the selling price has fallen by 10% – pork sales have actually increased in the first four months of 2020. However, as a result of the tightened measures surrounding the virus, production costs have increased by 15%.

Although the combination of low prices and higher production costs is disastrous for some pig farms, the majority simply survive. This is partly because companies are vertically integrated. Currently, production costs in modern facilities are between €0,90 and €1,00 per kilo (live weight). Today, production costs are comparable to those of the most effective European or American producers. For the coming years (up to and including 2023), it is expected that at least $3,3 billion will be invested in the efficiency of the Russian pig sector.

African swine fever
Another challenge that the sector is fully aware of is the fight against African swine fever. And that comes at a considerable cost. For example, a modern Russian pig farm, with 2.750 to 5.000 sows, has to spend more than €550.000 to protect itself against the animal disease and maintain the additional biosecurity measures. An advantage of this is that Russia can guarantee that certain pork comes from a swine fever-free zone. With mandatory labeling (probably from 2022), the country wants to show the traceability of its pork even more transparently.

In addition, a disease such as African swine fever spreads extremely quickly via the so-called 'backyard farms'. In Russia, the share of backyard farms has decreased considerably, which means that the risk of outbreaks is decreasing by the year. In 2005, 1,1 million tons of pork was still produced on a backyard farm. This involved 70% of the total production. That share has now fallen to 10%, or 350.000 tons.

Eyes on China
But where is the most profit to be made? There is only one answer for the Russians: China. Given the geographic proximity, exports to China could be an important factor in returning to some normalization of pork prices in Russia. Partly also because the average price for pork in China is about 2,5 times higher.

The hope from Russian analysts is that in the future the country will have to export between 350.000 and 1 million tons of pork to China annually. However, for that to happen, the difficult trade negotiations must first take a new step. South Korea and Japan are also not very keen to continue talks with Russia. In short: that higher production is great, but what will the country be able to spend this on in the future?