The agribusiness knowledge provider

May 13, 2016
   
Export demand drives Ukraine's poultry production
 
By VLADISLAV VOROTNIKOV
 
An eFeedLink Exclusive
 
 
In the past two years, Ukraine's poultry industry has been heavily affected by the country's economic crisis with devaluation of the hryvnia and falling purchasing power of the population, with the largest producers losing millions of dollars from the armed conflict in the east of the country. Despite this, Ukraine still probably has the strongest poultry industry among the post-Soviet states.
 
As of March 1, 2016, Ukraine has 190.2 million head of poultry, which is 4.4% lower compared to the same date last year, according to the Association of Poultry Producers of Ukraine. For industrial farms, the fall was greater at 7.5% to 108.5 million head, while the figure for private farms was more stable, with a decline of only 0.1% to 81.6 million head.
 
In terms of production volume, in the first quarter of 2016, Ukraine produced 254,000 tonnes of poultry, an increase of 6.4% compared to the same period last year. Exports also rose to 38,000 tonnes versus 34,000 tonnes in the first quarter of 2015. According to the head of the Association of Poultry Producers of Ukraine Nikolay Karpenko, the main contributor for the increase was MHP, the country's largest poultry producer.
 
For the private farm segment, despite the stability in poultry head count, production volume was reduced by 4% to 45,000 tonnes. Specifically, production volume for the smallest farms with a poultry flock size below 200-300 head were the hardest hit, experiencing a plunge of 30% to 10,000 tonnes. Nikolay Karpenko commented that current market sentiment is that production at small, private farms generally remains unprofitable.
 
According to consulting agency Dragon Capital, for the industrial farm segment, average profitability is 10-15%, with the average production cost per kilogram of poultry amounting to UAH 15. And average retail price of poultry in Ukraine currently stands at UAH 35, including a VAT of 12%. However, due to the economic crisis and devaluation of the hryvnia, the margin from domestic sales is very limited, prompting producers to focus on developing their export markets.
  
Mixed results for major players
 
A big loser from falling exchange rates was MHP, which in 2015 suffered US$419 million of non-monetary losses. Net loss for the company last year amounted to US$126 million, versus US$412 million in 2014. MHP had also lost its assets in Crimea and elsewhere east of the country where fights had taken place. As a result, company operations were interrupted, in particular due to the lost of access to the Shahtersky Nova factory in Donetsk Oblast. 25% of the company's hatching eggs were lost, compelling MHP to make purchases from abroad.
 
A similar dismal situation was observed by the former world's second-largest egg producer, agricultural holding Avangard, which in 2015 suffered a net loss of US$158 million, compared to US$26.9 million in losses in 2014. Like MHP which was caught in the geopolitical conflict, poultry flock size and egg production volume at Avangard last year were both reduced, with the latter plunging nearly 40%.
 
Problems experienced by some top producers significantly supported the operations of other producers, especially those with facilities located far away from the area of conflict. In particular, in the first quarter of 2016, Ovostar Union ate on the share of Avangard, increasing its egg production number by 15% to 317 million, with exports experiencing a sharper rise of 57%. Net profit for 2015 rose by nearly a quarter to US$31.9 million.
 
Poultry producer Agromars has not disclosed much about its operations, but it appears that the company has kept a strong position, with no assets lost from the conflict. At the end of last year, the company invested nearly US$40 million into the modernisation of its Kharkiv poultry farm, and some executives entered negotiations into the launching of poultry processing facilities in Germany. 
 
Export hopes
 
Ukraine is a strong exporter of poultry products, supplying annually about 120,000 tonnes of broiler meat, and large numbers of eggs and egg products. Country officials and market participants believe that Ukraine has the potential to become one of the world's leaders in terms of poultry meat exports, provided local producers are granted freer market access to the European Union (EU) with a looser quotation system, and access to the Chinese market too. Poultry market experts in Ukraine estimate the annual potential of the Chinese market at at least 100,000 tonnes, similar to the European market. So lifting of trade barriers is likely to boost Ukrainian poultry exports by nearly threefold.
 
Today, the largest consumer of Ukrainian poultry is Iraq with annual delivery volumes close to 30,000 tonnes. This is followed by Uzbekistan at 23,000 tonnes, Kazakhstan 19,000 tonnes, Moldova 10,000 tonnes, Georgia 8,800 tonnes, and the Netherlands 1,500 tonnes. The rest of the meat is exported to African countries, including Egypt and Libya, as well as the Middle Eastern countries – Syria, Jordan, Yemen, Oman and the United Arab Emirates.
 
For the first two months of 2016, Europe had granted market access rights to Ukrainian poultry producers to supply duty-free 20,000 tonnes of chilled poultry, and this quota had been exhausted.
 

Ukraine's poultry market indicators (tonne)

 

January to February 2016

January to February 2015

Poultry demand

212

197

Domestic market

190

179

Foreign markets (export)

22

15

Poultry supply

212

197

Domestic market

200

190

Foreign markets (import)

12

8

Source: Bulletin of the Association of Poultry Producers of Ukraine

 


All rights reserved. No part of the report may be reproduced without permission from eFeedLink.

Share this article on FacebookShare this article on TwitterPrint this articleForward this article
Previous
Subscribe To eFeedLink 
Copyright ©2017 eFeedLink. All rights reserved.
Find us on FacebookFind us on Twitter