Home Swine News Impact of the Ukraine-Russia War on the Meat and Livestock Value Chain

Impact of the Ukraine-Russia War on the Meat and Livestock Value Chain

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Last week, National Pork Board hosted a Checkoff-funded webinar – The Ukraine-Russia War and the Meat Livestock Value Chain – to provide pork producers with an analysis of the current situation. Panelists included:

Impact of War Has Market Consequences Worldwide

Rupert Claxton shared the global economic impact of the Ukraine-Russia War on energy, fertilizer, feed and the livestock markets.

Fertilizer

Russia accounts for 13% of globally traded fertilizer value, producing:

  • 23% of ammonia
  • 21% of potash
  • 14% of urea.

Since fertilizer prices are rising and the margins are tight, farmers are likely to buy less or conserve the fertilizer they already have, meaning potentially lower yields globally, reduced exports and higher grain prices.

Feed

Both Russia and Ukraine are massive producers and exporters of oilseeds and grain, specifically wheat. Prices were already increasing prior to the invasion due to weather events, supply chain disruptions and input costs, but the trade limitations and tapering production add additional challenges.

Source: Gira
Planting season is approaching, but prime regions of corn and wheat production in Ukraine are occupied by the Russian army. Additionally, the skyrocketing input cost, low liquidity, wartime obligations, labor and supply chain disruptions all factor in a low outlook in yield. Finally, the winter wheat will need to be harvested in July or August, so time will tell if it can be harvested. 
Rupert Claxton, from Gira, says to take a step back and look at long-range data to keep prices in perspective. “We can learn from what we’ve seen before.”

Meat Market

Overall, Claxton explained the immediate impact of the war centers more on higher feed costs compared to meat. Chicken is Ukraine’s primary protein commodity, and production has plummeted due to energy cuts, supply chain disruptions and labor shortages.

Claxton isn’t concerned about the direct impact of meat supply globally since other countries can backfill the need with Ukraine’s approximately 500,000 tons of lost protein, mostly chicken, halted in the export market. This is coupled with global consumption declining as inflation and higher gas prices squeeze disposable income.

“There’s a serious squeeze on disposable incomes. They’re probably our biggest concerns right now,” said Claxton.

A Reality Check on the Price of Hogs

As the big rock of the conflict overseas hits the small pond of U.S. agriculture, Joe Kerns explained that producers can manage their risk domestically and gave a reality check for the price of hogs during these volatile times.

Joe Kerns, Partners for Production Agriculture, said in times of uncertainty, people pull back on trade, but it’s important to put it into perspective.

Kerns shared how assumptions for hog production are significantly positive, regardless of the negative impact of weather events, increased feed cost and trade dilemmas.

“This is not all about what could be, it’s about what is,” said Kerns. “It’s a net positive for pork producers.”

Kerns continued to disclose how livestock insurance is a risk management strategy different than crop insurance tables. He focused on Livestock Risk Protection and Livestock Gross Margin.

“You must understand options in order to understand livestock insurance,” said Kerns.

Bullish: Quarterly Hogs and Pigs Report Analysis

USDA released a bullish Quarterly Hogs and Pigs Report on March 30. This report shows U.S. inventory of all hogs and pigs as of March 1.

  • Inventory of all hogs and pigs was 72.2 million head, down 2% from last year and down 3% from Dec. 1, 2021.
  • Breeding inventory was 6.1 million head, down 2% from last year, and down slightly from Dec. 1, 2021.
  • Market hog inventory was 66.1 million head, down 2% from last year, and down 3% from Dec. 1, 2021.
  • December 2021-February 2022 pig crop, at 31.7 million head, was down 1% from last year.
  • The average pigs saved per litter was 10.95 for the December 2021-February 2022 period, compared to 10.94 last year.

In addition to the report, Dr. Meyer shared how there is currently limited slack with slaughter capacity, regardless of the increased line speeds in a few plants that received waivers.

Analysts offered their pre-report estimates prior to the official report publishing on March 30. This chart shows the variance in the analyst averages (in black) and the actual results (in orange). Data indicates the results were bullish across all production statistics.
Dr. Steve Meyer shares an overview of the USDA Quarterly Hogs & Pigs Report released on March 30.

Watch the Full Recording

 

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