Ukraine’s poultry production, exports to end 2020 higher

The Ukrainian poultry industry will end 2020 with higher production and exports, despite facing a number of difficulties.

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The Ukrainian poultry industry is expected to end the year in positive territory, despite the temporary loss of export markets at the start of the year and, like the rest of the world, having to deal with the disruptions of COVID-19.

Difficult start

Ukraine’s poultry producers entered 2020 with optimism. Investments in new plants, growing exports and the expectation of winning new markets as the year progressed all heralded a strong 12 months ahead. However, in the second half of January, the industry was hit by an outbreak of highly pathogenic avian influenza (AI). Over 100,00 birds were culled following AI N5N1 detection, which occurred close to the country’s largest and most modern production facility.

The outbreak was resolved by the first week of March. Nevertheless, access to export markets was temporarily lost, while discussion to export to China, for example, was suspended. Loss of export markets led to, for example, leading producer MHP, which accounts for 60% of national production, cutting output by 10% in February and March, reports United States Department of Agriculture’s Foreign Agricultural Service.

As normality was returning to the industry, Ukrainian producers, like their counterparts elsewhere, had to face COVID-19 restrictions. As in other markets, the hotel, catering and restaurant sectors collapsed. Retail sales fell slightly but staged a rapid recovery.

Fast track back

Ukraine was quicker than some countries in allowing the foodservice sector to start functioning again. In May, limited activity was resumed, with restaurants being allowed to offer food for outdoor consumption only, and then in June full service was resumed.

Interruptions at home, even if comparatively limited, and the temporary loss of export markets meant that stocks of chicken meat rose during the first half and prices fell. Nevertheless, the industry remained profitable. In its favor, no outbreaks of COVID-19 occurred in processing plants, meaning that production did not need to be halted and, thanks to government waivers on suspending construction work, investments in new facilities could be completed.

Despite the price of chicken in the country falling it remains high enough for the industry to make a profit. Output has grown slightly this year and is forecast to continue growing next.

Strengthening demand

Chicken accounts for half of the animal protein consumed in Ukraine and this is expected to increase next year.

Demand has remained strong, in part, due to worsening economic conditions, which tend to favor purchases of cheaper products. Additionally, the gap between the cost of chicken and more expensive red meats has grown this year, deterring consumers from purchasing other meats.

Exports

The Poultry Union of Ukraine reports that the volume of chicken meat exported over the first eight months of this year was 5% higher although revenues contracted by 7%. Key destinations have been Saudi Arabia and other Middle Eastern countries and the European Union.

The increase in exports is forecast to continue to year-end, meaning that export volumes in 2020 will exceed those of 2019. Further growth is forecast for 2021, with the country’s low production costs giving it an advantage in international markets.

Over the months ahead, the country’s export focus is expected to be on markets where it already has a foothold, including in Asia, the countries of the former Soviet Union and Africa.

EU rules governing imports of breast meat from Ukraine have been tightened. The EU market, once the biggest destination for prime cuts has already been overtaken by the Middle East, and this region’s importance will increase further for Ukrainian producers. Exports to China and Japan -  Ukraine gained official access to the latter market in late 2019 - are not expected to happen until 2021 at the earliest.

Ukrainian-broiler-statistics-2019-2020

Ukraine has traditionally imported large volumes of lower value poultry products and exported higher value meat. As the country’s broiler sector has grown, the need to import low-value cuts products has decreased. | USDA Foreign Agricultural Service 

Key players

A few large producers dominate Ukrainian poultry production – accounting for 89% of output. One company alone, MHP, has captured 60% of the home market, with a further 30% divided by six mid-sized producers. Numerous smaller producers account for about 9% of the local market.

MHP, Europe’s second-biggest broiler producer and the 14th largest in the world, completed a major expansion in 2019, resulting in a significant increase in poultry meat production. While this has proved to be beneficial for the company – with output between January and July significantly higher than over the same period last year – the benefits of the investment were, nevertheless, curtailed somewhat due to the country’s outbreak of AI.

Over this year, MHP’s output has remained above that of last, even if slightly weaker than had been hoped for. The company is thought to be considering several plans to increase its production outside of the country, particularly important where trade with Europe is concerned given the new, tighter export rules.

Smaller producers have remained profitable through 2020, with output either stable or rising, despite difficulties in home and export markets.

The country is expected to end this year with production and exports marginally higher, and further increases are forecast for 2021.

 

 

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