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Ukraine Agribusiness Report Q2 2010
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
Ukraine |
Published |
17 February 2010 |
Number of Pages |
60 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
While the 2008/09 harvest year saw almost unprecedented levels of production of Ukraine's three principle crops of wheat, corn and barley, we forecast a much weaker performance in 2009/10. 2009's bumper crop amounted to 53mn tonnes of grain, made possible by ideal growing conditions and a significant uptick in investment. This year promises to be tougher. The Ukrainian government itself predicts production of between 42-43mn tonnes of grain, down by around one-fifth year-on-year. Nevertheless, the effects of 2009's robust crop are still playing out, notably in terms of grain stocks and feed prices. We explore developments in the Ukrainian grain, livestock and dairy markets and provides updated forecasts to 2014 of both supply and demand in our new Ukraine Agribusiness Report. For Q210 we are keeping our 2009/10 wheat production forecast steady at 19.4mn tonnes, 25% down on 2008/09's bumper crop of 25.9mn tonnes. Although our 2009/10 forecast exceeds annual wheat output 2004-2008, the excellent growing conditions which made 2008/09's massive harvest possible have not been repeated. In addition, area planted to wheat has fallen in response to low prices, while lower inputs due to the financial crisis have also played their part. With global wheat inventories at a multi-year high and showing no signs of falling, we expect wheat prices to remain subdued over the medium term. Over our five-year forecast period from 2009, we expect to see a fall in wheat production of 27%.
New USDA figures suggest pork production plummeted significantly in 2009. In 2008, pork output stood at 590,000 tonnes. In 2009, that figure dropped to just 490,000 tonnes, a fall of almost 17%. The new data indicates that reduced consumer demand and higher feed prices had a much greater effect on production than expected. We have now revised our forecasts for the 2009-2014 period to take into account this more-bearish-than-anticipated reality. In 2010, we are forecasting a 9% expansion in production to 535,000 tonnes in response to the much cheaper feed prices currently prevalent (down 61,000 tonnes on our Q1 report). Over our forecast period, we expect to see output expand 48.6%, reaching 728,000 tonnes in 2014. The trade balance should be reduced, though we expect demand to continue to outstrip supply in the medium term.
Meanwhile, the dairy industry remains for the most part fragmented and outdated. Nevertheless, we see signs of progress. Although small household producers still account for about four-fifths of Ukrainian milk production, milk processors are increasingly sourcing milk from larger enterprises. The State Department of Statistics reported that in 2008 individual producers accounted for 63% of deliveries to processors. In 2009 this share was reduced to 54%. This shift in capital flow towards larger, more efficient enterprises is a positive sign for Ukrainian dairy production. The extra investment this will permit should allow these larger producers to move closer to their goal of meeting EU safety standards, opening up the bloc's lucrative markets for exports. Since production costs at Ukrainian enterprises are significantly lower than the average across the EU, there is potential for competition with more established producers within the bloc. We nevertheless caution that the likelihood of the EU giving the green light to Ukrainian producers in the short term remains low.
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