February 12, 2004

 

 

Ukraine Poultry Industry, Demand Expanded In 2003

 

Despite surging feed grain prices, Ukraine's poultry producers continued to increase production in 2003 as rising incomes for the vast majority of Ukrainians led to significant growth in consumer demand. Growth in both demand and domestic production capacity is expected to continue through 2004.

 

Two major Ukrainian poultry producers, with nearly 60% combined domestic production, continued expanding in 2003 and announced further ambitious plans for 2004. The largest Ukrainian producer - Myronivsky Khleboproduct - began a US $116 million expansion project following approval of a US $30 million loan from the World Bank's International Finance Corporation.

 

Trade

 

Poultry imports for 2003 are currently registered at only 1,000 tons shy of the record high import level of 1997. U.S. exporters were not able to fully benefit from the surge in Ukrainian imports because the U.S. poultry meat import ban remained in effect for the first nine months of the year.

 

The Ukrainian veterinary service recently announced the lifting of the ban on poultry imports from Germany, Belgium and the Netherlands. The ban was imposed in spring 2003 following an outbreak of avian influenza. U.S. poultry exports benefited from the EU ban in late 2003 as European-sourced poultry had supplanted U.S. market share during the 2002/2003 U.S. ban.

 

Policy Issues

 

Ukraine recently announced a direct subsidy program for domestic poultry producers. While details of the program have not been finalized, it is expected that the direct payment for broilers weighting 2.0-2.4 kg will be 0.3 UAH (US $ 0.056) per 1 kilogram. The government has promised to establish this program in the nearest future. These subsidy payments are in addition to the previously announced initiatives to subsidize poultry breeding programs and to provide the industry with favorable loans. The later measure is intended to support domestic producers in the procurement of high-priced feed grains resulting from Ukraine's disastrous 2003 grain crop.

 

The government of Ukraine is trying every possible angle to limit poultry imports into Ukraine. Extraordinarily high import duties limit legal poultry imports to entry through the Free Economic Zones (see GAIN Report #UP3011). This has encouraged smuggling and other gray market activities as domestic poultry prices are quite high relative to frozen imports. Unable to effectively channel poultry imports to enter only through the Free Economic Zones, the government continues with plans to impose quotas limiting the quantity of processed product flowing from manufacturers within the FEZs to the rest of Ukraine. Traders report that there is a defacto quota system already in place that has begun to effectively limit poultry imports.

 

Further protectionist measures seem plausible given the increasing pressure from domestic producers on the government to reduce poultry imports.

 

 

Source: USDA