In the first half of 2016, Russian pig farmers produced 1.5 million tonnes of pork in slaughter weight – 12 per cent more than the same period last year.
This outstrips production in previous years and given the overall consumption of pig meat in Russia of about 25kg per capita or 3.5m tonnes per year in total, Russia is gradually moving towards self-sufficiency, according to Yuri Kovalev, of the National Union of Pig Producers (NUPP).
Yet it would be wrong to say that the pig industry in Russia is in a good place: the NUPP’s data reveals around two-thirds of all pig farmers in the country appear to be making a loss.
Competition between farming’s various sectors, industrial and private, is to blame.
According to Kovalev, agricultural organisations, which mostly account for industrial farming, showed record levels of growth for the first half of the year, achieving 15.5 per cent in year-on-year comparisons, forcing small- and medium-size farmers to reduce supply to the market by several per cent.
After the ban on pork imports from the EU and later food embargo, market prices hit a high, generating good margins for farmers.
But this year, according to the NUPP, the average price will be almost 20-25 per cent lower than 2015, amounting to about US$1.30-US$1.50/kg.
Falling prices are pushing profitability down, close to 2013 levels – the year after Russia joined the World Trade Organisation.
Increasing competition means efficient farmers will push out the least efficient, resulting in the loss of capacity for production of 400,000t of pork within four years.
It’s expected these small and medium producers will be replaced with the modern farms of agricultural holdings.
The Russian government has just introduced a new programme to tackle African swine fever (ASF), which in the opinion of market players will most likely change the balance of power in the industry.
It’s more accurate to say that it will not change the industry situation, but accelerate current trends. The main point of the initiative is that by 2018, all farms with low levels of biological security should be transformed to alternative types of agricultural activity.
In other words, small producers which obviously don’t have the same biological protection as large farms or agricultural holdings will have a choice: either close their business completely, or to start breeding poultry, sheep, goats or cattle. This initiative has been long awaited and has been lobbied for by agricultural holdings.
Reducing supply from small and medium farmers will ensure good profitability for the larger agricultural holdings for years, until they establish large quantities of exports and are no longer dependent on the Russian market. But it would be unrealistic to think the ban on import of pork from the EU and US would be lifted in the foreseeable future.
In September Alexandr Tkachev, of the Russian Agricultural Ministry, proposed to extend the food embargo until 2021 or 2022.
At the same time, there is a very different situation in Ukraine.
Here, pork prices remain a big problem. Production is set to match that of 2015 (750,000 – 760,000t), according to Artur Loza, the president of Association of Pig Breeders in Ukraine. He had forecast an increase in volume of several per cent.
Support may be on its way, however, in the last quarter of the year thanks to a move to cancel state regulation of prices for socially- important products. Pigmeat is on this list, and the inability to raise prices has been identified as one of the major factors limiting profitability among the big market players.
However, just as in Russia, Ukraine continues to suffer from an ASF epidemic – the discovery of the virus in Moldova indicates ASF has conquered most of the country from east to west.
For now, the number of outbreaks is expected to fall as the region heads into the cold season, the migration of wild boars dips and the virus proves less contagious.
This will just be a respite, though. Expect the number of outbreaks to increase again in April 2017.