Meat industry in Ukraine - Flanders Investment & Trade€¦ · The segment of meat processing occupies quite an important niche in the Ukrainian food industry, as only the milk sector

Meat industry in Ukraine

AWEX/Flanders Investment & Trade - Kiev I September 2011

1 _____________________________________________________________________

MEAT INDUSTRY

IN UKRAINE

Awex / Flanders Investment & Trade Kiev Tatiana Korotitch, Economic and commercial attaché

Trade office for Walloon & Flanders Regions Leontovicha Str. 4th floor

01030 Kiev - Ukraine [email protected]

Tel: +380 44 239 18 46 | Fax: +380 44 239 18 51

SEPTEMBER 2011

mailto:[email protected]

Meat Industry | Ukraine | September 2011 _______________________________________________________________ 2

TABLE OF CONTENTS

1 Overview of the Ukrainian meat industry ...................................................................................................... 3

1.1. Livestock of cattle and poultry .............................................................................................................. 3

Cattle livestock ...................................................................................................................................... 3

Pigs livestock ......................................................................................................................................... 4

Poultry livestock .................................................................................................................................... 5

1.2. Breeding and sales of cattle and poultry ............................................................................................... 5

1.3. Dynamics and structure of meat production in slaughter weight ......................................................... 6

2. Meat processing: dynamics of sector development and demand for raw materials ..................................... 6

2.1. Meat processing – dynamics of development ....................................................................................... 6

2.2. Segmentation and capacity of the market - structure of meat consumption ....................................... 6

3. Trade: import-export ...................................................................................................................................... 8

3.1. Export of meat and meat products from Ukraine ................................................................................. 8

3.2. Import to Ukraine of meat and meat products ..................................................................................... 8

4. Factors of development of the meat market ................................................................................................. 8

4.1. Influence of WTO and creation of free trade zones .............................................................................. 8

4.2. Population income ................................................................................................................................. 9

4.3. State support ......................................................................................................................................... 9

5. Attachments ................................................................................................................................................. 11

3 _____________________________________________________________________

1 OVERVIEW OF THE UKRAINIAN MEAT INDUSTRY

In 2010 the animal breeding sector continued its upward trend. The volumes of production of cattle-breeding

grew by 6,7 %. This figure was achieved mainly by the increase in volume of pigs and poultry as well as by the

increase in the production of eggs.

During the first quarter of 2011 this trend was starting to change. As of Q1 2011, pigs livestock in all categories

of households went down by 1,3 % compared to the same dates of the previous year, while the previous years

showed nothing but growth. Chicken livestock continued to grow by 6,4 % during January-April 2011, while the

production of eggs grew by 21,8 %. Negative tendencies however remained in the milk and cattle breeding

sectors. By the end of April, cattle livestock went down by 5,9 % and the production of milk went down by

0,3 %, notwithstanding the beginning of the season.

In general, according to the results of Q1 2011, smaller growth of the volume of the gross product of cattle

breeding in Ukraine can be expected, approximately around the level of 3 to 4 %.

Different reasons can be mentioned for the changes in volume of livestock of cattle and poultry in Ukraine.

During the last five to six years poultry farming has been systematically developed and its production capacities

in Ukraine extended. Changes of pig livestock have a cyclic character and in many cases depend on price

conjuncture on the market, the price of pigs, and of course, of the purchasing power of the population. Thus,

during the last ten years pig livestock grew in the periods: 2001–2002, 2005–2006 and also during the last year

and a half. But already in 2011 a reduction of the livestock is again to be expected.

1.1. LIVESTOCK OF CATTLE AND POULTRY

CATTLE LIVESTOCK

As far as cattle breeding is concerned, the trend remains clearly negative, despite the many support

programmes. That these programmes had little effect is hardly a surprise, as in many cases these schemes

remained idle words or were only partially implemented.

Source: State Committee of Statistics of Ukraine


Another reason for the gradual reduction of the quantity of cattle in Ukraine is the decreasing demand for veal

and beef from meat-processing enterprises.

PIGS LIVESTOCK

Beginning from the second half of 2008 the volume of pig livestock showed a positive trend. Furthermore, it

should be mentioned that the biggest increase in pigs livestock was noted in agribusiness-economic

enterprises. But in the first quarter of 2011 this growth significantly slowed down and by the end of Q1 there

was a noticeable decrease of livestock in all household categories.


In general, based on the yearly dynamics of pig livestock we can discern a 3 to 4 year-cycle, during which the

livestock fluctuates between 6,5 to 8 or 9 million animals. After having almost reached 8 million animals in the

first quarter of 2010, livestock growth slowed down. This could point at a correction of the general trend.

Although in our opinion, at this stage we rather predict a relative stabilization of the pig livestock within the

limits of 7,5 to 8,0 million animals for the second half of the year 2011.


5 _____________________________________________________________________

POULTRY LIVESTOCK

From 2000 till 2011 general livestock of poultry grew by more than 55 %. In agricultural enterprises the

quantity of poultry grew more than fourfold. Population households, that also in the past were unable to

compete with big enterprises, started to gradually decrease their poultry livestock as a consequence. During

this period livestock in population households went down 8 %. For the common man it became cheaper to buy

ready poultry meat rather than to grow it themselves. It is impossible to deny the fact that 97 % of poultry

livestock is concentrated in big enterprises (poultry farms) with an average poultry livestock exceeding 50

thousand animals.

SUMMARY TABLE OF CATTLE AND POULTRY LIVESTOCK IN 2010-2011

All categories of households Agricultural enterprises Population households

2010 2011 2011% to 2010

2010 2011 2011 % to 2010

2010 2011 2011 % to 2010

Livestock for the 1st

of January of the corresponding year, million animals

Cattle 4826,7 4494,4 93,1 1627,1 1526,4 93,8 3199,6 2968,0 92,8

Which includes cows

142,3 137,4 96,6 65,5 66,0 100,8 76,8 71,4 93,00

Pigs 7576,6 7960,4 105,1 3307,9 3625,2 109,6 4268,7 4335,2 101,6

Sheep and goats

1832,5 1731,7 94,5 315,9 298,4 94,5 1516,6 1433,3 94,5

All kinds of poultry

191446,4 2033277,0 106,2 100354,2 110561,3 110,2 91092,2 92715,7 101,8

Livestock for the 1st

of May of the corresponding year, million animals

Cattle 5506,1 5179,2 94,1 1696,8 1580,0 93,1 3809,3 3599,2 94,5

Which includes cows

2765,1 2659,6 96,2 607,9 590,9 97,2 2157,2 2068,7 95,9

Pigs 7931,6 7832,1 98,7 3490,4 3538,6 101,4 4441,2 4293,5 96,7

Sheep and goats

2274,1 2232,9 98,2 380,3 370,2 97,2 1893,3 1862,7 98,4

All kinds of poultry

184327,4 196170,8 106,4 97513,1 109458,5 112,3 86814,3 86712,3 99,9


1.2. BREEDING AND SALES OF CATTLE AND POULTRY

Volumes of breeding and sales of cattle and poultry as industrial indicators are directly connected to the

numbers of livestock.

According to data of 2010, volumes of breeding of all kinds of cattle and poultry practically correspond to sales

for slaughter and made up 2920,9 thousand tones. In previous years, except for the year 2009, volumes of

breeding were lower than volumes of sales.


It is also necessary to mention the gradual development and concentration of production by big producers. In

agricultural enterprises there is an excess of breeding of cattle and poultry over sales for slaughter by over 100

thousand tones, while in population households this balance is negative. In 2010 this downward trend

continued only in cattle breeding. According to the results of Q1 2011 this tendency can be seen in the pig

industry as well, because of a quick decrease of profitability.

1.3. DYNAMICS AND STRUCTURE OF MEAT PRODUCTION IN SLAUGHTER WEIGHT

Quantitative and structural changes of the volumes of meat production are directly connected to changes of

the volumes of sales of slaughter meat. From the moment the poultry industry in Ukraine began to be actively

developed, the share of poultry meat in the general meat production increased. From 2001 till 2009 the

volumes of meat production grew by 26,4 % to 1917,4 thousand tones. Taking into account that the main

production of poultry meat is concentrated in agricultural enterprises, a gradual growth of the share of this

category in the general production of meat is quite logical, going from 23,2 % in 2001 to 54 % in 2010.

2. MEAT PROCESSING: DYNAMICS OF SECTOR DEVELOPMENT AND DEMAND FOR

RAW MATERIALS

2.1. MEAT PROCESSING – DYNAMICS OF DEVELOPMENT

The segment of meat processing occupies quite an important niche in the Ukrainian food industry, as only the

milk sector and beverages production offer a higher volume of realized production. On average, during the last

five years the share of the meat processing sector in the food industry made up 15,4 %.

2010 turned out to be a difficult year for the meat industry. Summarizing the results of the year, there was a

slight recovery in the meat industry after the substantial recession in 2009, that hit all sectors of the food

industry. Among the different kinds of processed meat products, positive growth was noticed as far as pork and

poultry are concerned.

2.2. SEGMENTATION AND CAPACITY OF THE MARKET - STRUCTURE OF MEAT

CONSUMPTION

The capacity of the domestic market for meat and meat products has increased lately, mainly because of the

growing consumption fund and is currently estimated at about 2300 to 2400 thousand tones (according to the

State Committee of Statistics of Ukraine). It should also be mentioned that the growth of the economy in

general and the standard of living in the period 2001–2008 brought about some considerable changes in the

consumer goods basket. Given that in 2001 meat consumption per person made up 31,1 kg per year, this index

grew up by 41 % up to 44 kg per year. The general fund of meat consumption grew from 1513 thousand tones

to 2010 thousand tones, meaning an increase with 32 %.

7 _____________________________________________________________________

Decrease of population income in the years 2009-2010 obviously had a negative influence on the volumes of

meat consumption. However, the total market capacity almost did not change. This can be explained by the

redistribution of the structure of meat consumption towards cheaper poultry. In general, this tendency has

been noticeable already for several years, but in 2009-2010 the rigid conditions of the economy as a whole

accelerated this process considerably.

Goods segmentation of products manufactured by the meat processing industry is quite standard and includes

the following items: meat, sausage products, semi-finished meat products, meat canned goods.

Production rates according to the main group can be found in the table below.

Industrial production of meat and meat products

2006 2007 2008 2009 2010

Thousand tones

Total 1 265 1 536 1 467 1 271 1373

Meat, including by-products of category I 784 997 1 011 931 999,5

Sausage products 301 330 332 260 270

Finished products and canned goods 31 30 30 16 14,8

Semi-finished meat products, including semi-finished poultry products

149 178 94 64 89,4

%

Total 100 100 100 100 100

Meat, including by-products of category I 62 65 69 73 73

Sausage products 24 22 23 20 19,5

Finished products and canned goods 2 2 2 1 1

Semi-finished meat products, including semi-finished poultry products

12 12 6 5 6,5



As for other structural changes in products consumption, during the last five years stable growth of the

consumption of poultry as well as of the total share of poultry in the consumption fund in general could be

observed.

3. TRADE: IMPORT-EXPORT

3.1. EXPORT OF MEAT AND MEAT PRODUCTS FROM UKRAINE

Recently, export of meat and meat products from Ukraine showed a steady tendency towards a reduction of

volumes both in natural and in monetary terms. This is however less relevant as far as the export of poultry is

concerned. From 2007 till 2010 the following changes could be seen in the export structure of meat products:

the share of poultry export is growing, while the export share of beef and pork is decreasing.

During the last four years, volumes of poultry export in monetary terms almost doubled annually. It should be

noticed that in 2010 export supplies of poultry in monetary terms were just about equal to those of beef, i.e.

46 % in the general export structure, while in 2009 the relative weight of beef was still at a level of 75 %.

Thanks to a massive increase of external supplies of poultry, the general export of meat products in 2010 grew

by 13 % (in monetary terms) compared to the previous year and practically reached the level of the year 2007.

The main export markets of meat and meat products are traditionally the former Soviet Union countries. Thus,

in 2010 the relative weight of these countries in the general export of meat products made up 89 %, as

practically all export of beef went to the Russian Federation and 59 % of poultry was exported to Kazakhstan.

3.2. IMPORT TO UKRAINE OF MEAT AND MEAT PRODUCTS

Starting in 2009, a reduction of the supply volumes became noticeable and the same tendency continued in

2010. Another trend continued as well, namely the dominance of pork meat products and poultry in the import

structure. Also the growth of the relative weight of fat and by-products should be noticed, the total share of

which grew from 14 % to 16 %.

Notwithstanding the decrease of supplies, the import volume of meat still remained prominent in 2010 with

348,8 thousand tones (19 % less than the index of the previous year), with a general cost of 458,0 million USD

(19 % less than the index of the previous year).

The decreasing numbers can be attributed to the growing domestic production of pork and poultry, as well as

to the lower purchasing power of the population because of the financial crisis of 2008-2009.

4. FACTORS OF DEVELOPMENT OF THE MEAT MARKET

4.1. INFLUENCE OF WTO AND CREATION OF FREE TRADE ZONES

On the one hand the European Union is one of the biggest suppliers of animal breeding products to Ukraine

and on the other hand it is quite a vast market. Therefore, trade agreements with the EU can quite significantly

influence conditions of development of the sector in Ukraine. In this context the efforts made by the Ukrainian

authorities in order to sign an Association Agreement with the EU should be noticed. One of the basic

constituents of this agreement should be a free trade agreement.

The most likely variant would include the establishment by Ukraine of zero rate customs duties for the majority

of commodity items (or at least after a certain transition period), and the establishment by the EU of a certain

special customs mode, which might have the following configurations depending on the commodity type:

9 _____________________________________________________________________

- Zero rate import duties (as a variant – with establishment of entry price);

- Zero rate duty in the framework of quota;

- Reduced duty rate (reduction of ad valorem and/or specific constituent);

- Reduced duty rate in the framework of quota;

- Reduced rate of entry price.

4.2. POPULATION INCOME

While nominal income of the population in 2008–2009 continued to grow, real income went down, which is

reflected by the decrease of real wages. This partial drop in income is also associated with a decrease in the

unofficial part of wages. The bad situation on the labor market leads to a shift of consumer demand from

expensive products to goods of medium and lower quality.

4.3. STATE SUPPORT

Programs and perspectives of state support for animal breeding in 2010–2011.

Budget financing of agro-industrial complex in Ukraine is conducted in two directions:

- Financing of expenses by the Ministry of Agrarian Policy and Food

- Crediting of expenses to the Ministry of Agrarian Policy and Food.

Main criteria of state budget support in 2011, thousand UAH

General fund Special fund

Partial compensation to the subjects of economic management of the cost of building and reconstruction of animal farms and complexes and feed producers

500.000

Budget cattle-breeding subsidy and state support of plant cultivation

100.000

Implementation of financial support of agricultural enterprises through the mechanism of credits cheapening

531.416,5

State support of cattle-breeding sector

2.030.000

Source: Law of Ukraine “State Budget of Ukraine for 2011”

When we compare the levels of support for cattle-breeding in the period 2009-2011, we can see increased

support for the pig breeding sector in 2011, which will make up about 8 % of the expected sales price. In 2009-

2011 support was provided only by means of VAT exemption, which reached 3,5 % of the sales price. At the

same time, the relative increase of support in this case is partially connected with the price of pork on the

domestic market and the fixed subsidies rate.

As to the other sectors, a new mechanism will reduce the level of support.

Meat Industry | Ukraine | September 2011 ______________________________________________________________ 10

Levels of state support of animal-breeding, 2009–2011

Cattle

2009 2010 2011

UAH/t % to the price



Support by means of VAT

953,9 9,5 1277,6 11,2 - -

Budget subsidy

1000,0 9,9 - - 1500,0 9,4

Total 1953,9 19,4 1277,6 11,2 1500,0 9,4

Pigs

2009 2010 2011





507,5 3,0 529,8 3,5 - -

Budget subsidy

- - - - 1000,0 8,0

Total 507,5 3,0 529,8 3,5 1000,0 8,0

Poultry

2009 2010 2011





28,9 0,3 10,5 0,1 - -

Budget subsidy

- - - - - -

Total 28,9 0,3 10,5 0,1 - -

Milk

2009 2010 2011





217,6 12,7 382,2 14,3 - -

Budget subsidy

- - - - 350 10,0

Total 217,6 12,7 382,2 14,3 350 10,0

11 ____________________________________________________________________

5. ATTACHMENTS

TOP-20 PRODUCERS OF PORK 2010

# Name of the company %

1 APK-INVEST 9,37

2 GLOBINSKIY MEAT PROCESSING PLANT 7,59

3 MELITOPOLSKIY MEAT-PROCESSING PLANT 6,51

4 GORLIVSKYI MEAT PROCESSING PLANT 4,12

5 ANTONIVSKYI MEAT PROCESSING PLANT 3,58

6 MAGROK 3,51

7 MYASNYI DVIR YUVILEYNYI 3,44

8 LUGANSKIY MEAT PROCESSING PLANT 3,28

9 MEAT PROCESSING COMPLEX ROSAN-AGRO ROSANA 3,24

10 AGRO-OVEN 2,79

11 UKRDONMYASO 2,36

12 CHERKASSY FOOD COMPANY 2,27

13 KREMENCHUKMYASO 2,12

14 KOLOS 2,11

15 STRUCTURAL SUBDIVISION DIL STOV DRUZHBA NARODIV 1,89

16 VMP 1,78

17 VK I K 1,66

18 POLIS 1,66

19 KHODORIVSKYI MEAT PROCESSING PLANT 1,61

20 MK RIAL 1,61

TOP-2 EXPORTERS OF PORK 2010


1 FENIX 80,13%

2 APK-INVEST 16,50

TOP-15 IMPORTERS OF PORK 2010


1 ZAKHIDNOUKRAINSKA AGRARNA KOMPANIYA 8,88

2 LOGISTIC LTD 7,49

3 GLATPROM 7,08

4 KHARKIVSKYI MEAT PROCESSING PLANT 6,47

5 UKRPRODIMPORT 5,81

6 VES SVIT LIMITED 5,27

7 UKRAINIAN MEAT COMPANY 3,88

8 GLOBALTORG 3,70

9 MEAT PROCESSING PLANT YATRAN 3,39

10 GALEVPRODUCT 3,28

11 AGRO-INVEST 2,45

12 NALINA 2,19

13 OPOS-TORG 2,03

14 LEOGRADSERVICE 1,63

15 BOGEMA 1,60

Meat Industry | Ukraine | September 2011 ______________________________________________________________ 12

TOP-20 PRODUCERS OF BEEF 2010


1 COMPANY ZEVS LTD 5,48

2 MEAT PROCESSING PLANT YATRAN 5,43

3 SHEPETIVSKYI MEAT PROCESSING PLANT 4,48

4 PIDVOLOCHYSK ZAGOTSERVICE 4,47

5 KOZYATYNSKYI MEAT PROCESSING PLANT 3,90

6 TROSTYANETSKYI MEAT PROCESSING PLANT 3,50

7 ZOLOTONOSHA-AGROCHERNIGIVSKE JSC RYTM 3,10

8 CHERNIGIVSKYI JSC RYTM 3,02

9 ERMIY 2,80

10 GLOBYNSKYI MEAT PROCESSING PLANT 2,57

11 ZHYTOMYRSKYI MEAT PROCESSING PLANT 2,49

12 KREMENCHUKMYASO 2,38

13 STRUCTURAL SUBDIVISION DIL STOV DRUZHBA NARODIV 2,38

14 IVANO-FRANKIVSKYI MEAT-PROCESSING PLANT 1,97

15 NADIYA-I 1,93

16 TULCHYNMYASO 1,92


18 EKOPRODUCT 1,53

19 KONOTOPMYASO 1,46

20 LITYNSKYI MEAT PROCESSING PLANT 1,42

TOP-10 EXPORTERS OF BEEF 2010


1 PRODKONTRACT 31,40

2 AVTEK-STOYTECH 19,30

3 ETALONMOLPRODUCT 15,04

4 AGRI-TRADE 7,95

5 KONOTOPMYASO 4,97

6 NESTER 3,41

7 KERUUCHA KOMPANIYA AVTEK RENT SERVICE 3,26

8 TRADYTSIYNI PRODUCTY KHARCHUVANNYA 3,23

9 AGROPRODOPT 3,12

10 COMMERCIAL FIRM AGROEKSIM 2,83

TOP-10 IMPORTERS OF BEEF 2010


1 ASKOP-UKARINE 61,72

2 VES SVIT LIMITED 7,39


4 UKRAINIAN MEAT COMPANY 3,53

5 GLATPROM 2,71

6 TRADEEUROINVEST 2,71

7 AGRO-INVEST 2,35

8 MIRATEX TELECOM 1,97

9 LOGISTIC LTD 1,41

10 GLOBALTORG 1,36

13 ____________________________________________________________________

TOP–15 PRODUCERS OF POULTRY 2010


1 MYRONIVSKA PTAHOFABRYKA 30,1

2 COMPLEX AGROMARS 12,6

3 DRUZHBA NARODIV NOVA 9,4

4 ORIL-LIDER 7,4

5 PEREMOGA NOVA CJSC MYRONIVSKYI KHLIBOPRODUCT 4,8

6 AGRO-OVEN 3,8

7 POULTRY PLANT DNIPROVSKYI 3,6

8 MEAT PROCESSING COMPLEX 3,1

9 VOLODYMYR VOLYNSKA POULTRY FACTORY 3,1

10 KURGANSKYI BROYLER 2,4

11 LANDGUT BROYLER 1,9

12 POULTRY COMPLEX GUBIN 1,8

13 ZOLOTONOSHAMYASO 1,7

14 FARM ENTERPRISE ULAR 1,6

15 POULTRY PROCESSING PLANT BERSHADSKYI 1,3

TOP-10 EXPORTERS OF POULTRY 2010


1 MYRONOVSKIY KHLEBOPRODUCT 64,5

2 AGROMARS EXIM 11,25

3 POULTRY PROCESSING PLANT DNIPROVSKYI 6,13

4 GAVRYLIVSKYI TORGOVYI KOMPLEX 5,14

5 AGRO-OVEN 3,16

6 MEAT PROCESSING COMPLEX 2,92

7 TRADE HOUSE ANNUSHKA 1,81

8 MALDS GROUP 1,72

9 AFE-INVEST 1,66

10 AGROTECHNIKA 0,46

TOP-10 IMPORTERS OF POULTRY 2010


1 UKRPRODIMPORT 36,21

2 BROKTRANSLOGISTIC 9,79

3 UKRAINIAN MEAT UNION 7,61

4 BOGEMA 6,63

5 AGRO SOYUZ 4,84

6 GALYEVPRODUCT 3,57

7 AGROPOBUTSERVICE 3,09

8 AGRO ZAHID COMPANY 3,08

9 VMP 2,36

10 TUTTO-OL MIT 1,64

Documents

Meat industry in Ukraine - Flanders Investment & Trade€¦ · The segment of meat processing occupies quite an important niche in the Ukrainian food industry, as only the milk sector