In some Russian regions, wholesale pork prices have dropped to less than those for poultry meat, according to the president of the Russian consulting agency Agrifood Strategies, Albert Davleyev.
For example, he calculated, in May this year, pork prices dropped to 90 roubles ($ 1.10) per kg. Both pork and poultry prices have been seen steadily decreasing in Russia during the past few years, Davleyev told Pig Progress.
Davleyev said, “The growing penetration of pork in modern retail – supermarket chains, discounters, convenience, and grocery stores – allowed [producers] to increase the share of fresh, chilled pork in the product mix reducing additional costs related to production and handling frozen pork. The pressure put on the meat case forced suppliers of chicken meat also bring their prices down, causing the overall reduction of consumer prices for meat, including pork.”
Pork on a scales at a market in Russia. - Photo: Dreamstime
Low margins on pig production
The pig farmers’ profitability dwindles as the prices fall, and this process is continuing. Davleyev said, “As a result, margins of pork producers went down from 30-35% a few years ago to 5-10% and are still declining under the pressure of increasing competition from big vertical integrators which have own land, feed processing, nucleus, grow-out farms, slaughter, processing, storage, and distribution facilities. Some of their production costs are compensated by rapidly increasing exports, which provide good proceeds in hard currency for cheap swine by-products and offal.”
He added, “However, such a process cannot last forever, and soon the further price decrease will inevitably have to stop when business profitability reaches 3-5%. And pork will never be able to compete with poultry meat pricewise, just because of the Feed Conversion Ratio which is 1.7-1.8 in broilers and 2.2.-2.7 in swine.”
Continuous outbreaks of ASF
Davleyev said that amid the price reduction, there is also a drastic reduction of the backyard farming sector, which has been severely hit by continuous outbreaks of African Swine Fever (ASF). On top of that, there are forced restrictions with regard to the swine herd in small and backyard farms by federal and regional veterinary authorities.
Backyard farms historically had the highest production costs in all segments of the Russian pig industry.
Speaking earlier this year, Yuri Kovalev, chairman of the Russian Union of Pork Producers (RUPP), however, claimed that the Covid-19 pandemic could cause a recovery of backyard farming. He said that some Russian regions have begun giving piglets to people free of charge to mitigate the negative impact of Covid-19 and the nationwide lockdown introduced to slow down the spread of the virus on the protein consumption.