This year, the Russian grain harvest came in 17 days earlier than usual and it promises to produce another bumper crop for Russian farmers. This was not expected. At the beginning of April, winter and spring plantings were down; the weather was bad; growth was slow and crop production forecasts were very pessimistic.

After last year’s four-in-a-row record crop this was inevitable and very understandable. Grain prices were falling, crop production costs were rising and grain stocks were at an all-time high. But during April and May, the Russian and Ukrainian weather turned exceptionally dry and warm.

This is what brought in the Russian and Ukrainian wheat and barley crops so early in June 2018. But the grain kernels haven’t filled completely and therefore they are a little shrivelled. Accordingly, bushel weights and yields of this year’s Russian and Ukrainian wheat and barley crops are all down by 5-6%.

But what they lack in volume, they make up in value. Specifically, current spot-prices for Russian and Ukrainian feed wheat and barley prices are $210/t (€178/t) ex port (FOB). That’s up $25(€21)/t on a year ago.

Alternatively, and wisely for them, Russian farmers have now started to add value to these agricultural commodities at home

At these prices, Russia and Ukraine are finding plenty of customers in Turkey, Egypt, Morocco, Saudi Arabia, South Korea, Vietnam and China. In addition to exporting wheat, barley, maize and oil seeds, Ukraine and Russia are now also processing and pelleting straw for export. Given the recurring and critical shortages of fodder in Ireland could we soon be importing straw pellets from Russia before this year is out?

Vanity v reality

TV football pundits and academic economists try to estimate the once-in-a-lifetime value of the FIFA World Cup to the Russian economy. But they overlook the permanent and annually renewable value of the Russian grain harvest to global livestock farmers, meat producers, and consumers. An annual grain harvest of around 130 million tonnes, valued at around $210/t, is worth more than $27bn a year to Russian farmers.

In comparison, the World Cup is only a vanity project, and a very expensive one too.

Putin’s red card

Over the last five years, bumper grain harvests in Russia and Ukraine were welcome for Irish pig and poultry farmers.

The resultant low world grain prices saved these Irish farmers when Putin flashed a red-card to Irish meat and dairy exporters and shunted them off the pitch as a result of the embargo on western imports. This was a loss of nearly €500m/year for Irish livestock farmers.

But it was also bumper grain harvests in Russia that ensured Ireland’s pig farmers found a safe refuge in fast-growing Chinese markets.

These were our safety-nets when we lost the Russian market overnight. However, it now transpires that that was only a temporary fix with prices back on the floor again.

After many false dawns, 2018 is the year Russian farmers eventually began to wind down exports of wheat and barley. Alternatively, and wisely for them, Russian farmers have now started to add value to these agricultural commodities at home. Specifically, they have done this by feeding them to their own livestock. As a result, Russian pork, poultry and beef production are all steadily rising. Furthermore, Russian meat prices, domestic sales and consumption are also rising.

Ramifications for Irish pig farmers

Pig production in Russia is massive-scale. Extraordinary mega pig farming companies have been set up which keep over 200,000 breeding sows and produce far more pigs per annum than the entire Irish pig industry. These giant farms cover over 100,000ha (250,000ac). They grow all their own feed (wheat, barley, maize, soya, sunflower, rapeseed, etc). Their labour costs are only a small fraction of Irish rates.

Russian pig prices are now $2.20(€1.87)/kgLW. That’s down 10% on a year ago. Still, it’s enough for Russian pig farmers to make $50(€42)/pig profit. Accordingly, Russian pig farmers have the potential to at least double production within the next five years.

Ironically, all this is being achieved thanks largely to Irish pig genetics, technology and advice specifically from one Kilkenny-based company: Hermitage Pedigree Pigs.

Given all these advantages, it is not surprising that Russian pig farmers are pushing prices down so hard in Chinese markets. Irish pig farmers shouldn’t expect any solutions to any of these problems anytime soon. Likewise, they are very unlikely to see any increase in pig prices, or reductions in feed prices, unless some catastrophe hits the Russian pig industry, eg African Swine Fever (ASF).

Brendan Dunleavy has over 20 years’ agribusiness project management experience in Russia and Ukraine.