Ukrainian poultry and grain company MHP SE saw poultry production volumes in the first quarter 2022 increase by 5% from last year, but decrease by 13% from the previous quarter as a result of the war in Ukraine, which led to the decreased poultry capacity utilization.

During the first quarter, third-party poultry sales increased by 3% while chicken meat sales in Ukraine decreased by 6% year over year, partially due to decreased sales of fresh chicken as a result of the logistical challenges and lower demand in Ukraine due to the effects of the war.

Driven by significant disruptions to exports as a result of war-driven port closures in Ukraine, poultry exports increased only by 9% from the previous year; expected growth was around 15%. This was driven mainly by high export volumes in January-February 2022, but substantially decreased in March, and decreased by 15% quarter over quarter.

“Since the beginning of the war, the Company has been facing significant logistical and infrastructure challenges in Ukraine,” MHP said in a statement on the London Stock Exchange on April 22. “While MHP continued commercial sales in Ukraine since the war began, export sales have ceased as a result of ports being closed, while export delivery by truck remained practically impossible. During March, MHP team has been developing alternative logistic routes for exports, so that insignificant volumes have been delivered outside of Ukraine. Driven by restricted sales both inside and outside of the country, MHP had to decrease poultry capacity utilization to 80-85%.”

In mid-March, a warehouse rented by MHP was destroyed by a fire caused by shelling from Russian forces, causing the company to lose about US$8.5 million worth of poultry products. And, in mid-April, the company suspended operations at its Ukrainian Bacon plant due to the Russian invasion.

Poultry prices increase

In the first quarter, the average chicken meat price (domestic and export) constituted US$1.84 per kg of natural weight (excluding VAT), increased by 28% year-on-year, supported predominantly by strong export prices.

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Poultry prices in Ukraine increased by 8% year over year to US$1.60 per kg, mainly driven by a substantial poultry production cost increase since the second half of 2021, particularly the substantial price increase of utilities (mainly gas) since the end of the third quarter of 2021. The trend was also supported by strong price for all proteins in Ukraine.

Export prices for the quarter increased by 45% year over year to US$2.01 per kg, manly driven by strong prices of breast and fillet in Europe and Middle East/North Africa (MENA) as well as of quarters and small chicken in the MENA region. Export price increased by 13% quarter over quarter as a result of products mix change.

Winter crops in good condition, spring sowing started

MHP has up to 67,000 hectares (165,561 acres) under winter crops, of which more than 60% is sowed with winter wheat and around 40% with winter rapeseeds. All winter crops are in good condition. The spring sowing campaign is ongoing and, this year, MHP is going to harvest around 335,000 hectares in total, compared with 351,440 in 2021.

The company said that, despite significant challenges with export logistics, it is not substantially changing crop rotation as its priority is to produce crops for fodder production. Production in excess of this requirement will be exported.

“Currently, MHP has a key responsibility in the food security of Ukraine and it has continued its operations despite significant difficulties and disruptions. MHP fully understands how important poultry production is for Ukraine and its population at this difficult time,” the company said. “The company continues providing humanitarian aid (mainly through food supply) to the population of Ukraine since the beginning of the war and working hard to manage logistical challenges across all regions of Ukraine. Since the war began, the company has provided around 11,000 tonnes of free-of-charge poultry products, other food, equipment, cars, diesel and different materials as part of its humanitarian mission.”

In March, John Rich, executive chairman of MHP, discussed with Feed Strategy how the company is distributing food aid and maintaining its business in Ukraine amid the Russian invasion.