Plummeting Demand Likely to Decrease Ukrainian Pork Production

UKRAINE - Pork production is expected to decrease in both 2014 and 2015 as a result of plummeting demand and the political and economic crisis in the country.
calendar icon 11 September 2014
clock icon 3 minute read

All investments (significant in recent years) into pork production will slow down, thus undermining future growth perspectives. New projects are likely to be put on hold while producers concentrate on cost saving measures. The decrease is expected for both commercial-scale and household pork production. Household income is less elastic, so they feel the economic pinch much faster; immediate impacts also tend to be sharper.

Total bovine headcount is expected to decrease after some stabilization in the last two years. The decrease will be driven by a drop in fresh milk prices as the majority of beef produced in Ukraine is mainly for dairy. Specialized beef cattle as a subset of the total cattle population remain insignificant. Profitability in beef production remains weak. The largest drop is expected in non-specialized commercial farms where milk production is considered an auxiliary enterprise. Milk prices are expected to remain low in 2015 due to a Russia-imposed dairy product import ban. Since August 1, 2014, Ukraine is no longer eligible to export cheese and milk powder to Russia, thus losing a $353-million market. Animal population contraction will be followed by a short-term meat production increase in 2014.

Significant currency devaluation observed in early 2014 will have a damaging impact on pork and beef consumption. Although substantial currency devaluation gave local producers a temporary advantage over their foreign competitors, in fact, the economic crisis brought about more challenges than benefits to local meat producers. While many consumers will be priced out of beef and pork in 2014 and 2015, poultry will remain the most affordable animal protein on the market. Large poultry producers anticipate strong consumer demand in the domestic market and are preparing accordingly.

Beef and pork imports are expected to decline significantly in 2014-15 due to the currency devaluation. Brazil will dominate the pack of major exporters and US suppliers will likely occupy 10-12 per cent market share. In 2014, the European Union (EU) granted market access to Ukrainian beef and pork exporters under a Tariff Rate Quota (TRQ) system. None of the Ukrainian producers are eligible to export to the EU as they are unable to meet sanitary requirements. This trade opportunity will not be utilized in a year or two as overcoming of sanitary barriers required for entry into the EU are too costly to be considered.

Pork exports to Russia should remain close to nothing due to pressure exerted by the Russian authorities. Beef exports remain uninterrupted for now, though the situation is fragile.

Further Reading

You can view the USDA GAIN: Ukraine Livestock and Products Annual 2014 report by clicking here.

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