Ukraine plans to become one of the world's largest producers and exporters of chicken eggs over the coming years with regular egg supplies to Asia and the European Union. The latter, as a result of the battery cage ban, has been faced with the problem of egg shortage over recent months.
According to a recent report from the analysts of ABN Amro bank, the Dutch financial conglomerate, the cage ban that came into force in the European egg market has significantly disrupted the market, and stabilization is not expected in the short term.
Preliminary estimates suggest that the introduction of the new rules has resulted in a 15 percent decrease in egg production in the EU since the beginning of the year when compared with the first half of 2011. There is a possibility the decline will continue, as many EU egg producers were forced to leave, or are leaving, the market.
Opportunities for Ukraine
This decline in production and the ongoing unmet demand offer significant opportunities to emerging egg producers to fill a vacant niche and to gain a foothold in the large EU egg market.
One such producer is Avangard, one of Europe’s largest poultry and egg producers, which has recently announced its intention to start expanding into the EU egg market.
Currently, Avangard, headed by well-known Ukrainian businessman, Oleg Bakhmatyuk, is considered as one of the most ambitious and promising European producers of eggs, with production and export volumes rising significantly over recent years. Over the last 12 months, the company has increased its egg exports by more than 100-fold, from 1.3 million up to 110.8 million eggs in the first quarter of 2012.
The company is pinning its main export hopes on the EU, due to the bloc’s current problems and a recently granted permission to start exports there.
According to analysts of Dragon-Capital, Ukraine's largest investment company, Avangard has about 25.1 million birds, 20.5 million of which are laying hens, and this number is expected to grow to 28 million by 2013. The company’s annual volume of egg production is estimated at 7.9 billion.
Nicholas Takzey, head of Avangard’s marketing department, comments: “The global demand for eggs and egg products is steadily growing, which is reflected by the increase of global imports of these products.”
Over the past decade, the volume of global trade in egg and egg products has almost doubled in volume terms and tripled in value. Given that the Ukrainian eggs are currently among the cheapest in the world, further increases in exports are expected. By the end of 2012, the company plans to expand its exports to at least 30 countries.
Outlook unclear
Ukrainian analysts believe that the current situation in the global egg market may contribute to the successful implementation of Avangard’s plans. They argue that the EU will continue to experience egg shortage through 2012, and egg prices will not be high enough to warrant investment in new equipment.
At the same time, according to Konstantine Fastovtsev, a senior analyst at Ukraine’s Renaissance Capital investment company, the European Union will probably extend its quota for Ukrainian eggs.
However, he is also skeptical about Avangard’s plans, and those of other large Ukrainian producers, to conquer the European egg market in the short or medium term.
"The question is whether Ukrainian egg producers are ready to meet EU requirements. According to our estimates, these requirements are currently met by only a small number of Ukrainian poultry and egg producers," he says.
Analysts believe that importing regular supplies of Ukrainian eggs could be beneficial for the EU, taking into account the possibility of further a reduction of egg production by local farmers; however, Ukraine’s ability to be a source of supply will not only depend on meeting welfare rules but also on controlling disease and managing feed costs.
