Russia: livestock industry could face collapse due to rising feed prices

Until the middle of 2011 feed mills were using the stock of cheap feed grain crop yielded in 2009, but staring July it became impossible to restrain prices by reducing the margin. As a result feed producers have had to raise the cost of their products since August and by October the price difference will reach 50% compared with last year. Pig breeding companies are complaining that the prime cost of pork has already increased by 15-40%.

According to official statics the cost of animal feed last year increased by 22-30% compared with 2009. Since the beginning of the season grain prices have increased by about 50-75%. Increases in grain prices lead to increases in the price of animal feed, and they, in turn, increase production costs. The rate of this growth depends on the level of modernization of the company and could be anything from $ 0.2 to $0.4 per production unit.

Rising costs of feed do not have the same implications for all pig enterprises. New complexes which have been intensively developed for some time have a margin of profitability, allowing them to control feed costs. Additionally all large producers have their own grain companies and feed mills. But smaller complexes could face very serious troubles. Non-upgraded companies will become completely unprofitable. To overcome this problem the price of meat in the market should be lifted by about 15%, but this is unrealistic.