Sometime in November, MHP, Ukraine’s largest poultry producer, may begin selling chicken to countries in the European Union. This marks the first time the EU has allowed any meat exports from Ukraine. This is an important milestone for Ukrainian agricultural companies, opening a potentially large new market for their products. It also provides an alternative market to the Customs Union led by Russia, which opposes Ukraine’s association with the EU and has restricted some Ukrainian exports.
Chicken exports have been rising and experts see a huge potential for Ukrainian agricultural exports. “Today we feed about 90 million people,” Ukrainian Agrarian Confederation president Leonid Kozachenko said. “We have the potential to feed 500 million.”
MHP chief executive officer Yuriy Kosiuk agrees. Ukraine, known as the breadbasket of Europe, could become the continent’s “meat basket,” he told the Financial Times in December 2012. That year his company accounted for 58,000 tons of Ukraine’s total chicken exports of 80,000 tons. MHP plans to export 120,000-125,000 tons in 2013, and the company’s total could rise to 180,000 tons in 2014. MHP plans to sell from 10 to 15 percent of that total in Europe, according to the company’s investor relations officer Anastasiya Sobotiuk. At the same time, the company has been moving to diversify its export destinations, which include markets in Africa, Central Asia, the Middle East and the CIS countries. Among promising markets are China – and of course the EU.
Along with Agromars, another Ukrainian producer, MHP earned the right to export chicken to the EU in July. The approval came after more than three years of preparation, as Ukrainian poultry producers worked to meet EU requirements, according to Volodymyr Lapa, director of Ukrainian Agribusiness Club. The number and quality of tests required exceed those that had existed in Ukraine for decades, and Ukrainians had to meet new production and testing standards. For instance, Lapa notes, EU rules require that poultry producers test the water that their chickens drink more stringently than water is tested for human consumption in Ukraine.
One disadvantage that MHP and Agromars face is that they have to pay import duties – €170-800 per one ton of meat, according to Oleksandr Bakumenko, chairman of the Union of Poultry Breeders in Ukraine. That regulation could change, however, if Ukraine signs the association agreement with European Union that will be discussed at the end of November in Vilnius. Under the agreement’s provisions, Ukrainian chicken producers would be able to export 40,000 tons of chicken meat to EU per year, duty free.
Smaller producers plan to export to the EU as well. Gubyn Poultry Farm, which sells its production under the brand Pan Kurchak (Mister Chicken), has a market share of about 2 percent, but is building a new plant to get an EU export certificate. “On June 1, 2014 we will launch the new manufacture, where we will invite inspectors to get the accreditation for supplies to the EU,” says Tetyana Topolska, head of the company’s sales department.
The opening of the European market is important for Ukrainian poultry producers for another reason: by diversifying their export markets, they will also protect themselves from possible trade disputes with the Kremlin-led Customs Union.
In addition, Russia is increasing its production and exports of chicken. Alto Consulting Group recently reported that chicken is the only kind of meat that Russian producers hope to export. Russia imports only 12.8 percent of the chicken it consumes. It is thus reasonable to assume that the Russian Federation could fully supply itself in the near future. The Russian Association of Retailers reports that the retail price for chicken in Russia has fallen 5 to 10 percent this year as local poultry farms increased production. “The market of Customs Union countries is substantial for us – about 40 percent of our export goes there,” Bakumenko said. “The Ukrainian share in Russian chicken import is not very essential, because most of the chicken will be imported from the U.S. and Brazil. So Russia can easily refuse our chickens. ”
MHB appears to be preparing for the market reduction: last year, 90 percent of its exports went to Russia. This year it’s about 40 percent.
More than dozen major poultry farms produce chicken in Ukraine today, according to market experts. The biggest exporters other than MHP and Agromars, are Dnipro poultry complex, Gubin Poultry, and Volodymyr-Volynsky Poultry.
While chicken producers will get into the European market very soon, pork and beef producers are not even close to that goal. Chicken producers started the process to get the right to export to EU about three years ago while pork producers starting only now. And they have less opportunity to sell in the EU as pork there is cheaper.
Although beef is cheaper in Ukraine than in Europe, its production in Ukraine is relatively low. Ukrainians don’t consume much beef – the share of beef in Ukrainian meat consumption is only 19 percent – and production of this kind of meat requires a much higher investment than chicken or pork. In Soviet Union times Ukraine was one of the biggest exporters of beef, but now its beef imports are growing.
