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17 October 2019

UCAB in media

14.10.2014

While importers are dodging currency devaluation, Ukrainian pig farmers are turning a decent profit

While importers are dodging currency devaluation, Ukrainian pig farmers are turning a decent profit

Capital

Ukrainians have reduced consumption of foreign pork. Over nine months of 2014 pork imports to Ukraine dropped 4.2 times to 26.185 mn t (US $68.01 mn) compared to the same period in 2013, according to the State Fiscal Service. President of the Association of Pig Producers Artur Loza says the share of imports of pork in 2013 reached 25–30%.

Ukrainian pig farmers lining pockets on pork

Currency devaluation is ousting importers of pork from the market. “Imported meat is quite expensive and meat processors have increased their demand for domestic raw materials,” says Agricultural Markets Expert at the Ukrainian Agribusiness Club Association (UACA) Alina Zharko. Temporary embargoes have also had an impact. Since the beginning of the year, as it was previously reported by Capital, pork imports have been banned three times due to the African swine fever virus. In January, these sanctions affected Lithuania, in February – Poland, in July – Poland and Russia.

Companies operating on Ukraine’s pork market took advantage of the situation and started expanding their capacities. The State Statistics Service has not calculated data for the nine months, but in the period January–August domestic production of refrigerated and fresh meat increased by 10.3% and production of frozen pork increased by 21%. Import substitution slowed the rise in prices, though not significantly. Since the beginning of the year pork prices have risen by 54% to UAH 26.3, according to UACA monitoring. “All additives and premixes are imported from abroad, so there is a chain reaction,” says Head of the National Association of Producers of Meat and Meat Products of Ukraine Ukrmyaso Volodymyr Popov.

But in September prices reached their peak and farmers were forced to tone down their appetites facing the falling demand. “On average, over the last two weeks the retail price of pork has fallen by 1–3%,” says Zharko.

Roll the bones on salo…

Ukrainian farmers believe pig breeding is a promising sector. Chairman of the Board of the KSG Agro Holding Serhiy Kasyanov hopes to save his company through pig farming. At the moment, the company is experiencing some financial difficulties. While it is currently engaged in talks with creditors to restructure its debt, Kasyanov does not plan to cut investments into the development of pig breeding. “In two years we will bring the capacity of pig farming to 240,000 heads and will reach the production rate of 20,000 t of pork a year,” he says. As of today, the company’s pig farming project with a total cost of US $60 mn has been implemented by 50%. In 2013, the company invested UAH 20 mn to open seven new buildings on the pig farm. “We would like to become one of the top 3 players on the market within three years,” says Kasyanov about his ambitious plans.

APK-Invest has no plans to cut its production either. “Despite the difficulties in the region, we still plan to grow our business,” said CEO Roman Raspopov. Stanislav Berezkin’s Creative Company also expects an increase in the number of pigs. “Last year the capacity of the pig complex was 60,000 heads. This year we predict there will be 100,000 heads,” the company’s CEO Yuriy Davydov said. He said there is a fairly stable margin in this market segment at the rate of 28% in pre-tax profit.

Foreign businessmen are not giving up their plans to profit from Ukrainian salo. With this aim they are opening or buying production facilities in the country. As Capital reported earlier, this summer Dan Farm Ukraine, a subsidiary of the Danish Berry Farm ApS, bought the Agrolux pig farm in Zhytomyr. “The deal was completed without application of reduction factors to the value of assets. This suggests that the niche is very promising and has a high growth potential,” said Associate Director of M&A at EY in Ukraine Oleksandr Romanyshyn, who managed the deal.

Chinese business owners also invested in Ukrainian pig breeding. The Chinese-Ukrainian agricultural company Fanda has invested US $12.5 mn in the development of a pig farm with a capacity of 50,000 heads a year in the Chernihiv oblast.

Export ambitions

Along with the reduction in imports and an increase in production, Ukrainian pig farmers are seeking to increase their exports. Over nine months of this year pork exports have increased 1.6 times compared with the same period in 2013 – up to 4,670 t amounting to US $13.742 mn, according to the SFS. This was encouraged by the reorientation of Ukrainian pig farmers from the Russian market, which has been closed to Ukrainian supplies until yesterday (on October 9 Rosselkhoznadzor allowed the import of pork produced by four Ukrainian enterprises, specifically VMP, Tavr-Plus, Svizhenka and Salkom Plus), to the alternative markets in Moldova, Belarus and Kazakhstan.

European consumers have not had a chance to taste Ukrainian salo. Trade preferences provided by the EU for Ukraine, according to which pig breeders were allowed to supply 20,000 t of pork exempt from import duties, were effective until October. However, in order to supply pork Ukraine had to adopt laws on fodder and animal identification. The laws were passed only in mid-August and supplies never started because pig farmers could not certify their products.

Despite this, Head of the Analytical Department at AAA Consulting Maria Kolesnyk assumes that the presence of foreign investors in the Ukrainian pig farming industry will give impetus to rapid export of Ukrainian pork to European and Asian markets once the domestic market gets closer to being saturated.

The Ministry of Agrarian Policy and Food predicts a 2.7% growth in pork production in 2014 compared to last year up to 780 mn t and an increase in its exports by 1.7 times to 12,000 t.






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