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Ukraine Agribusiness Report Q2 2011


Ukraine Agribusiness Report Q2 2011

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Additional Information
Price $530.00
Meta Description No
Publisher Business Monitor International
Date of Report Feb 17, 2011
Quick Overview
BMI View: Ukraine's new Tax Code, in place since January 1 2011, is likely to have profound effects on the country's agricultural industries. In a move likely to spur foreign investment, corporate income tax has been reduced from 25% to 16%. And in the long term, changes to meat and milk subsidies are likely to result in a more streamlined and consolidated production landscape. But in the short term, there will be pain, as small, less efficient producers are forced out of business and we have factored this into our forecasts this quarter.
Key Views ?? Wheat production to bounce back in 2011/12 to 19.9mn tonnes, though we have reduced our forecasts from last quarter due to the continuing imposition of export quotas, which we expect to hit plantings.
?? Barley to come in at 11.2m tonnes in 2011/12, up 12.3% year-on-year but down 105,000 tonnes on our last report.
?? 2010's summer drought slashed dairy yields and accelerated the ongoing decline in milk production, with output coming in at 11.2mn tonnes in 2010, down 3.6% y-o-y. In 2011, we are forecasting a y-o-y decline in production of 7.7% to 10.3mn tonnes.
?? We have revised our view of the cheese industry and are now significantly more pessimistic about its prospects. Production is declining faster than previously thought and in 2011, we are forecasting production of 203,000 tonnes, down 7.8% y-o-y.
?? Out to 2015, we see poultry production as the most modern and dynamic sector of Ukraine's livestock industry, leading the way with growth of 35.7% to reach 883,000 tonnes.
Industry developments Export quotas, introduced after poor weather hit production heavily in 2010, were expected to expire at the end of the year, but in December the government extended them until March 2011. Nevertheless, the quotas were raised. Corn exports were allowed to rise by 1mn tonnes, wheat by 500,000 tonnes. While Ukrainian consumers are benefiting from a market awash with cheap homegrown grain and pig farmers and poultry producers enjoy cheap feed, producers are growing increasingly frustrated. Quotas have left them unable to take full advantage of soaring global grain prices at a time when credit is difficult to obtain and subsidies have dried up.
There are signs that liberalisation of the land ownership laws may come soon. In January 2011, Prime Minister Mykola Azarov proposed opening the door to foreign investment in Ukrainian land, blaming the country's low productivity on barriers to land ownership. There would, he cautioned, need to be restrictions on foreign ownership in order to protect the interests of Ukrainian farmers. The reforms could be completed by 2012, he said.
In December, the head of a European Commission (EC) inspection team said the EC was 'likely' to permit Ukrainian poultry exports by May 2011. The team would conduct additional inspections on poultry and egg producers in the second week of December. The results of those inspections are yet to be released, though we believe the remarks are a very encouraging sign. We expect imports to receive the green light from the EC before long, enabling producers with expansion plans, such as MHP, to ramp up production. The subsidy system for milk and meat has changed following implementation of Ukraine's new Tax Code. Previously, milk and meat producers received subsidies on the basis of the amount of milk and meat they produced. Instead of paying VAT to the government, processors paid VAT back to producers who could then invest it in their own production facilities. Now, under new arrangements applicable until at least January 1 2015, processing companies will pay the VAT to the state budget. Subsidies should then - in theory - be paid back to producers by the government on a per head basis.
Table of Contents
Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 7
Ukraine Agriculture SWOT ................................................................................................................................................................................... 7
Ukraine Political SWOT ....................................................................................................................................................................................... 8
Ukraine Economic SWOT ..................................................................................................................................................................................... 8
Ukraine Business Environment SWOT .................................................................................................................................................................. 9
Industry Forecast Scenario ........................................................................................................................... 10
Ukraine Dairy Outlook ............................................................................................................................................................................................ 10
Table: Ukraine – Milk Production & Consumption ............................................................................................................................................ 11
Table: Ukraine – Butter Production, Consumption & Trade ............................................................................................................................... 11
Table: Ukraine – Cheese Production, Consumption & Trade .............................................................................................................................. 12
Table: Ukraine – Milk Production & Consumption ............................................................................................................................................ 15
Table: Ukraine – Butter Production, Consumption & Trade ............................................................................................................................... 15
Table: Ukraine – Cheese Production, Consumption & Trade ............................................................................................................................. 15
Ukraine Livestock Outlook ....................................................................................................................................................................................... 17
Table: Ukraine – Poultry Production, Consumption & Trade ............................................................................................................................ 18
Table: Ukraine – Pork Production, Consumption & Trade ................................................................................................................................ 19
Table: Ukraine – Beef & Veal Production, Consumption & Trade ..................................................................................................................... 19
Table: Ukraine – Poultry Production, Consumption & Trade ............................................................................................................................. 22
Table: Ukraine – Pork Production, Consumption & Trade ................................................................................................................................ 22
Table: Ukraine – Beef & Veal Production, Consumption & Trade ...................................................................................................................... 23
Ukraine Grain Outlook ............................................................................................................................................................................................ 24
Table: Ukraine – Wheat Production, Consumption & Trade ............................................................................................................................... 25
Table: Ukraine – Corn Production, Consumption & Trade ................................................................................................................................ 25
Table: Ukraine – Barley Production, Consumption & Trade .............................................................................................................................. 26
Table: Ukraine – Wheat Production, Consumption & Trade ............................................................................................................................... 29
Table: Ukraine – Corn Production, Consumption & Trade ................................................................................................................................ 30
Table: Ukraine – Barley Production, Consumption & Trade .............................................................................................................................. 30
Competitive Landscape ................................................................................................................................ 32
Table: Agricultural Commodity Producers & Traders ....................................................................................................................................... 32
Table: Agribusiness Suppliers ............................................................................................................................................................................ 33
Table: Integrated Agricultural Producers........................................................................................................................................................... 34
Commodity Price Analysis ............................................................................................................................ 35
Monthly Softs Update ............................................................................................................................................................................................... 35
Cocoa.................................................................................................................................................................................................................. 35
Table: Cocoa ...................................................................................................................................................................................................... 35
Coffee.................................................................................................................................................................................................................. 36
Table: Coffee ...................................................................................................................................................................................................... 36
Milk ..................................................................................................................................................................................................................... 37
Table: Milk ......................................................................................................................................................................................................... 37
Sugar .................................................................................................................................................................................................................. 38
Table: Sugar ....................................................................................................................................................................................................... 38
Grains Update ......................................................................................................................................................................................................... 39
Corn .................................................................................................................................................................................................................... 39
Table: Corn ........................................................................................................................................................................................................ 39
Rice ..................................................................................................................................................................................................................... 40
Table: Rice .......................................................................................................................................................................................................... 40
Soybean .............................................................................................................................................................................................................. 41
Table: Soybean ................................................................................................................................................................................................... 41
Wheat .................................................................................................................................................................................................................. 42
Table: Wheat....................................................................................................................................................................................................... 42
Downstream Supply Chain Analysis ............................................................................................................ 43
Industry Forecast Scenario ...................................................................................................................................................................................... 43
Ukraine's Consumer Outlook .............................................................................................................................................................................. 43
Food Consumption ................................................................................................................................................................................................... 45
Table: Food Consumption Indicators -- Historical Data & Forecasts ................................................................................................................ 46
Confectionery...................................................................................................................................................................................................... 46
Table: Confectionery Value/Volume Sales -- Historical Data & Forecasts ......................................................................................................... 47
Trade .................................................................................................................................................................................................................. 48
Table: Ukraine Food, Drink & Tobacco Trade Indicators (US$mn) -- Historical Data & Forecasts ................................................................. 49
Mass Grocery Retail ................................................................................................................................................................................................ 50
Table: Mass Grocery Retail Value Sales By Format -- Historical Data & Forecasts .......................................................................................... 51
Table: Grocery Retail Sales By Format (%) -- Historical Data & Forecasts ...................................................................................................... 52
Macroeconomic Forecast ........................................................................................................................................................................................ 53
Table: Ukraine – Economic Activity, 2006-2015 ................................................................................................................................................ 55
Industry Trend Analysis ............................................................................................................................... 56
Ukraine Wheat Rebounding - So Far .................................................................................................................................................................. 56
Table: Ukraine Wheat Production, Consumption & Trade ................................................................................................................................. 57
BMI Forecast Modelling ................................................................................................................................ 58
How We Generate Our Industry Forecasts .............................................................................................................................................................. 58




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