Genesus Global Market Report: Russia, December 2020
Russia is potentially entering a situation not experienced for well over 10 years, a sales price lower than the cost of production! Production continues to increase, domestic consumption is static, and feed raw material prices are increasing by 20% to 25%.
Current sale price is fluctuating weekly between 100 and 110 Roubles per kg (US1.36 to $1.50) with average cost of production stated to be at about 92 Roubles ($1.26). So what can companies do in this situation to try to maintain profitability?
1. Sell more products.
- Export – difficult for a country with ASF
- Domestic market – this is the quickest and easiest market for increased sales! Look at the success of Chicken, which has more than tripled % consumption in Russia in the same market and at the same time pork has stayed almost static!
2. Reduce cost of production.
3. Allow a disease outbreak to kill a lot of pigs
Yes of course this is controversial but true. The most profitable country in the world today to produce pigs is China. A country with generally poor performance and a very high cost of production! American farmers made more profit during peak of PED than any time in the past few years.
Genesus has done and continues to do more than any other breeding company to develop tasty pork and to promote the idea of tasty pork as a way of maybe increasing sales. When it comes to tasty and tender pork, the key factor is marbling.
In pig genetics there are genetic correlations. That is one factor that strongly affects another factor. Higher marbling means increased backfat. In general you do not get very lean highly marbled pigs! Another really important one is the relationship between FCR and several other important factors. FCR is an obsession for many, because of the very false assumption that all pigs are the same and all feed is the same. Most definitely they are not! Selecting for FCR means selecting for pigs with a lower feed intake and also for pigs that are leaner. It also selects for pigs with more white muscle fibre and reduced red muscle fibre, meaning pale and dry pork – pork which is less desirable to the consumer!
Pigs with more marbling that are a little fatter, which means pigs with a higher feed intake. This means pigs that can be fed lower cost, lower protein diets. From a nutritional point of view, high energy, low lysine diets improve eating quality of pork.
So, let’s get back to maintaining profits with increasing cost and reducing sales price. Sell more and reduce cost. To get tasty pork, you need high marbled pork from pigs that eat lower-cost feed. When we compare Genesus finisher diets to ‘industry standard’ for lean tasteless genotypes Genesus is between 1,500 and 2,000 per tonne.
On a 5,000 sow farm this means a feed cost saving of 50,000,000 to 60,000,000 Roubles ($650,000 to $800,000). Cheaper feed cost and better-tasting meat! The economists that still think FCR is important need to re-check their calculations.
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