Ukraine Agribusiness Report Q3 2013 - New Study Released

From: Fast Market Research, Inc.
Published: Wed Jun 12 2013

We continue to favour the grain sector in the country as we see more growth opportunities for production and more diversity in export demand. While the country's poultry exports have just been authorised by the EU, 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. In fact, we have revised down our outlook for 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 staple than grain. We highlight MHP's strong growth potential as the main beneficiary in 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 it has reached record in recent years. As a result, we believe that the country will only manage to leave production around current levels or slightly higher. Production will be stimulated by increased import demand from China.
* Poultry consumption growth to 2016/17: 14.0% to 955,000 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: 3.1% to 11.2mn tonnes. Over the medium term, consolidation and increased investment are expected to start to compensate for industry exits, with production projected to start rising again from 2014/15 and to reach 11.2mn tonnes in 2016/17.
* 2013 real GDP growth: -1.4%, down from 0.2% in 2012. Predicted to average 1.1% from 2012 to 2017.
* 2013 consumer price inflation: 2.0% average, up from 0.5% in 2012.
* BMI universe agribusiness market value: 15.8% year-on-year (y-o-y) decrease to US$18.5bn in 2012/13, forecast to grow on average 0.4% annually between 2011/12 and 2016/17.

Full Report Details at

Industry Outlook

The recent expansion of Kernel's land bank confirms our positive outlook for the company over the medium term. Kernel indicated that it expanded its land holdings to more than 422,000 hectares and its grain storage capacity to about 2.8mn tonnes. The grain producer and trader acquired an 80% stake in a farm operator managing 108,000 hectares and handling more than 100,000 tonnes of grain storage. We believe this will boost the company's production and trading capacity in the coming years.

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