Genesus Global Market Report Russia, May 2021

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Genesus Global Market Report
Russia, May 2021

Simon Grey
General Manager Russia, CIS and Europe, Genesus Inc.

Current Russian pig price is 122 Roubles ($1.63)/live kg (with VAT). Despite higher feed costs pig producers in Russia continue to make profit.

When we look at profitability in pig production we always look at it in pig terms. Profit per kg, profit per pig, profit per sow. For many the most important element in terms of profitability is cost per kg produced … 74 Roubles per kg cost is better than 75 Roubles. Is this the correct way to calculate? As a metric to be able to compare profitability on different farms or business’s I think not!

In any business there are limiting factors or bottlenecks that limit production and profitability. In all business time is a limiting factor. There are only 365 (366) days in a year! Time passes, as in you can’t make up for lost time.. its gone.

What are the other limiting factors in the pig business. The pigs? NO – the pigs pass through the farms. The growing pigs we have today will all be gone within 6 months. The sows we have today will be gone within 2 years.

Our main limiting factor is the space we have to grow our pigs. Yes we can build more space, but once built again becomes the limiting factor. So kg sold/m2 of nursery and finisher space becomes a very important factor, especially in closed systems that are the majority in Russia.

Let me explain more. Let’s take two identically constructed 2,500 sow farrow to finish farms. Let’s assume also that on both of these farms there are 16,800 m2 of space in nursery and finisher which would be typical.

Farm 1 is selling 470 kg/m2 and Farm 2 is selling 495kg/m2.

m2 Nursery and Finisher

kg/m2

Total kg sold

Farm 1

16,800

470

7,896,000

Farm 2

16,800

495

8,316,000

Difference

420,000

On these two identical farms, Farm 2 is selling 420,000 more kg than Farm 1. Assuming a sales price of 110 Roubles/kg, this is an extra 46,200,000 roubles income ($607,895).

Let’s now assume that Farm 1 has a lower cost of production of 74 Roubles/kg vs Farm 2 at 75 roubles/kg.

Total kg sold

Cost / kg

Total Cost

Farm 1

7,896,000

74

584,304,000

Farm 2

8,316,000

75

623,700,000

Difference

420,000

39,396,000

So Farm 2, even with a higher cost of production, because it is selling more kg than Farm 1 the extra profit is 6,804,000 Roubles/year ($90,702).

MORE KG = LOWER COST

The reality is however that the farm selling the most kg is likely to have the lowest cost of production. This is because they extra kg produced really only require feed. All other costs (farm, labour, utilities, genetics etc) will be the same.

m2 Nursery and Finisher

kg/m2

Total kg sold

Farm 1

16,800

470

7,896,000

Farm 2

16,800

495

8,316,000

Difference

420,000

Extra Income at 110 Roubles / kg

46,200,000 ₽

Extra Feed assuming 3:1 FCR

1,260,000

Extra Feed Cost assuming 17 Roubles/kg feed

21,420,000 ₽

Extra Margin Over Feed (Profit)

24,780,000 ₽

$326,053

Manage SPACE and TIME, not pigs !

MORE SPACE = FASTER GROWTH

To put the same principle in another way. Let’s assume a finisher pen for 50 pigs at 0.65m2 per pig = 32.5m2. Let’s assume these pigs are growing at 900 g/day. This pen is producing 45 kg per day.

The recommendations of some European breeding companies is to stock pigs at 0.85m2 meaning 38 pigs in the same pen. To produce 45 kg per day these pigs would have to grow at 1,184 g/day! Not likely – giving pigs more space to chase higher growth rate has never made any sense to me.

Maximising profitability therefore requires pigs which can grow fast with little space and continue to eat and grow when faced with a disease challenge, that do not die, that do not eat each other!

Genesus has always believed these are all very important factors when looking at farm profitability. This is why Canadian Super Nucleus Farms are very commercial and pigs are stocked at commercial stocking rates. Selection for high feed intake creates high growth rates, resilience to disease and low rates of cannibalism. Lastly, leaving the last decision on selection to selectors creates pigs with strong structure.