New market study, "Ukraine Agribusiness Report Q4 2013", has been published

From: Fast Market Research, Inc.
Published: Fri Sep 13 2013

We continue to favour Ukraine's grain sector and expect growth opportunities for production and more diversity in export demand. While the EU has recently authorised imports of the country's poultry, which will support export growth over the medium term, we do not see a similar opening for dairy exports in the near term and therefore see weaker growth coming strictly from domestic demand. We have revised down our outlook for real GDP growth for the country in the near term and believe this will particularly impact demand for meat and dairy products, as they tend to be considered less of a staple food than grains. We highlight MHP's strong growth potential as the main beneficiary of our positive outlook for the local poultry industry.

Key Forecasts

* Corn production growth to 2016/17: 2.2% to 23.0mn tonnes. We believe production growth will stall in the coming years, as output has already reached record levels. The country is therefore likely to see production remain around current levels or slightly higher. Output will be stimulated by increased import demand from China.
* Poultry consumption growth to 2017: 12.4% to 958,000 tonnes. Poultry demand will benefit from improving domestic income conditions as well as its preferred status as a cheaper and healthier alternative to red meat.
* Milk production growth to 2016/17: 14.5% to 12.8mn tonnes. Over the medium term, consolidation and increased investment are expected to start to compensate for industry exits, with production rising steadily over the forecast period to 2016/17.
* 2013 real GDP growth: -1.4%, down from 0.2% in 2012. Predicted to average 1.2% from 2012 to 2017.
* 2013 consumer price inflation: 2.0% average, up from 0.5% in 2012.
* BMI universe agribusiness market value: 12.2% year-on-year (y-o-y) decrease to US$19.3bn in 2012/13, forecast to grow on average 0.2% annually between 2011/12 and 2016/17.

Full Report Details at

Industry Outlook

Ukraine is set to record a bumper harvest in 2013/14 after inclement weather damaged the crops in 2012/13. We expect Ukraine's wheat production to rebound strongly in 2013/14 season, for which the winter crop harvest is now under way. That said, we revised down our wheat output forecast for the year to 19.5mn tonnes, compared with 20.5mn tonnes previously, due to lower-than-expected area harvested and yields. This still represents a 23.7% pickup from the 2012/13 level. Official estimates are for production to reach 20.0mn tonnes.

Vertically integrated Ukraine-based poultry company MHP looks well positioned to take advantage of the growing consumption of white meat in the country and is likely to further benefit from relaxed export restrictions. MHP has announced that poultry production in the first-half period to June increased 18% y-oy to 190,180 tonnes. Export sales were up by about 200% y-o-y, which is a strong sign given the December 2012 opening up of EU markets to the company.

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