Russian pig industry warning issued

By Vladislav Vorotnikov

- Last updated on GMT

Russian pig industry warning issued

Related tags Pork

Nearly 50% of pig farms in Russia will become loss-making in 2018, due to the poor conditions of the domestic pork market and the high debt burden in the pig industry, Yury Kovalev, the director of the National Union of Pig Producers (NUPP) warned during his speech at the NUPP’s meeting in Moscow earlier this week.

Russian pig farms manufactured 2.45 million tonnes (t) of pork in slaughter weight in the period from January to November 2017, up by nearly 6% compared to the same period of 2016, Kovalev has estimated.

During this period Russia also increased imports of pork by about 20% to 300,000t, primarily due to the strong exchange rate of the Russian rouble against hard currency.

Meanwhile, with average pork consumption in Russia now at 25kg per capita in the period from January to November, according to estimates from NUPP, the total consumption in the country amounted roughly to 2,650 million t. 

Russian pig producers have issued repeated warnings about a possible oversupply crisis in the domestic pork market. In mid-2016 several of the largest pig complexes even submitted a letter to Russia's Ministry of Agriculture, asking it to stop allocating state aid for any new projects in the pig industry, to prevent a collapse in prices, and not allowing new production quantities in the market.

Currently, the Ministry of Agriculture has applications for several dozen pig farming projects, due to be implemented up to 2020, with a declared capacity of around 700,000t. 

Prices under pressure

Russian consulting agency EMEAT has estimated that, from January to October, the price of pork in live weight in the European part of Russia dropped by 12.9% to RUB98.90 (US$1.60) per kg. In 2018 the prices are likely will drop even further, by an additional 5-15% from the current levels, according to EMEAT.

A reduction in prices affects the average profitability in the pig industry, according to Danil Hotko, senior analyst at Russian consulting agency ICAR. From its peak in 2014, average profitability has declined almost twofold in 2016 to only 15-20% and a further drop is anticipated in the coming years.

In 2018, according to Kovalev, domestic pigmeat production should rise by additional 3-4%, or 135,000t, compared to 2017. It will be still growing faster than the expected rise in consumption of only 1.5-2% or 50,000t-60,000t.

Djambulat Khatuov, first deputy Agriculture Minister, speaking during NUPP’s meeting, suggested that the focus of the country’s pig industry in the current circumstances should be put upon export development. He assured that the Russian government was doing everything it could to open access for Russian pork to major foreign markets.

Kovalev admitted that export supplies are growing rapidly, jumping 50% year-on-year in the period from January to November 2017, to 50,700t. In 2018, Russia could export 80,000t–85,000t of pork, even though access to the main and most promising export markets for the sector has not yet been granted.

Related topics Meat

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