Pork crushed by prices – Newspaper Kommersant No. 192 (7393) of 10/17/2022

The fall in demand, the start of production and the shortage of labor led to a new drop in wholesale prices for pork. In some cases, the cost of production has already fallen below 2020 levels. Market participants are waiting for price cuts before the New Year holidays, counting on an influx of demand from consumers of fish and beef.

Preliminary contract prices for pork half carcasses for the week of October 17-23 fell below the level of 2020, reaching 159 rubles. per 1 kg, according to the report of the National Union of Pig Breeders. This is about 4.6% lower than a week earlier and 6.7% lower than a year earlier. The decrease in prices on the wholesale market is recorded in almost all segments, with the exception of some cuts, the report says. Prices for ham dropped to 232.8 rubles. per 1 kg, which is 3.8% lower than a year earlier. The cost of live pigs for the year decreased by 5.7%, to 119.2 rubles. for 1 kg.

Director General of the National Union of Pig Breeders Yuri Kovalev notes that in the Voronezh region, Agroeko (the fifth pork producer in Russia) has launched a new slaughterhouse, where it still produces only half carcasses, which leads to an increased supply. In addition, according to the report, a number of manufacturers of half carcasses are growing carry-over balances, including due to a shortage of personnel. According to Mr. Kovalev, this is due to the opening of new production facilities and the increase in capacity at existing enterprises. A Kommersant market source claims that partial mobilization has not yet affected the production of pork.

As Yury Kovalev notes, the continuing fall in pork prices was expected. According to him, the increase in the production of this meat reached 7-8% year-on-year, enterprises that suffered in 2021 due to the African swine fever virus recovered. According to the forecast of the National Rating Agency, in 2022 pork production will grow by 3-4%, up to 4.45 million tons in carcass weight.

Retail chains for the week of October 17-23 also reduced the volume of orders, indicating low demand from consumers, the National Union of Pig Breeders said in a report. According to Mr. Kovalev, consumption is usually negatively affected by the end of the barbecue season. In addition, he adds, autumn is the traditional season for slaughtering domestic pork, poultry, beef and lamb, which also leads to a drop in demand for meat from industrial producers.

The head of the National Meat Association, Sergei Yushin, adds that pork prices are also being weighed down by reduced exports due to the high exchange rate of the ruble and increased competition in foreign markets. According to the expert, the situation for producers is likely to become even more complicated next year, when pork output may increase by another 250,000 tons.

President of Agrifood Strategies Albert Davleev notes that the decrease in wholesale prices for pork has a negative impact on the cost of broiler and turkey meat. Wholesale poultry prices are also trending below averages in recent years, he points out. Meanwhile, the expert adds, the cost of poultry farming is growing and even low prices for grain of the new crop do not fully compensate for the rise in prices of other components, such as feed additives and veterinary drugs. The average cost of a broiler carcass is at the level of 143 rubles. per 1 kg, which is 13% lower than a year earlier, according to the report of the National Union of Pig Breeders.

Yury Kovalev notes that retail prices for pork remain stable, and taking into account promotions, they may also be lower than previous levels. Rosstat in September recorded a decrease in meat prices by 0.34% per month. Mr. Kovalev expects that the decline in wholesale prices for pork will continue until mid-November, and by the New Year holidays, the cost of products may support increased demand.

According to Sergei Yushin, pork producers manage to maintain profitability by stabilizing feed prices, in particular by reducing prices for grain and oilseeds. In addition, low prices could lead to a redistribution of demand for pork from other types of protein, primarily fish and beef, he adds.

Alexey Polukhin