Report Highlights:

At 310,000 metric tons (MT), Ukraine's beef production in 2016 is projected to be the lowest level since USDA started publishing official beef production estimates for Ukraine in 1988. Pork production in 2016 is projected to decrease slightly to 730,000 MT. African Swine Fever outbreaks in 2015 at sites including an industrial farm will continue to be a cause for concern in 2016. Exports of beef and pork in 2016 are projected to decrease to 12,000 MT and 8,000 MT, respectively. Imports of beef and pork in 2016 are projected to be minimal. Ukrainian exports of cattle for slaughter are projected to increase to 55,000 head in 2016; the highest level since 1996.

Executive Summary

Red meat production in Ukraine is projected to decrease again in 2016 following a sharp decrease in 2015. At 310,000 metric tons (MT) Carcass Weight Equivalent (CWE), beef production in 2016 would be the lowest level since USDA started publishing official beef production estimates for Ukraine in 1988. Pork production in 2016 is projected to decrease slightly to 730,000 MT CWE (slightly higher than average annual production since 2010).

Production decreases reflect reduced demand in the wake of a 9 percent decrease in 2015 GDP and a projected recovery of 2 percent in 2016 GDP (IMF projections). Continued substitution of less expensive protein sources (particularly poultry meat) is expected to hamper recovery of red meat consumption (particularly beef) in 2016.

Facing significantly reduced domestic consumption, beef producers increased exports of beef to 45,000 MT CWE; the highest level since 2008. Pork producers increased exports of pork to 35,000 MT CWE; a record level. Russia remained the major buyer of Ukrainian red meat in 2015 but the Russian market is expected to close completely on January 1, 2016 upon implementation of the Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU. Exports of beef and pork in 2016 are expected to decrease to 12,000 MT and 8,000 MT, respectively.

African swine Fever (ASF) cases reported in 2015 rendered some regions ineligible for pork exports but had a limited impact on trade. Of the 35 cases of ASF reported among swine in Ukraine, only one case affected a large swine production facility. Altogether over 62,000 animals were culled at the Kalyta facility near Kyiv under control of the Veterinary and Phytosanitary Service.

Low milk prices since Russia banned Ukrainian cheese exports in August 2014 contributed to herd reductions in 2015 and are projected to remain a factor in 2016. Red meat imports are expected to remain insignificant in 2016. Ukrainian exports of cattle for slaughter are projected to increase to 55,000 head in 2016; the highest level since 1996. Central Asia and the Middle East are projected to remain the main markets for Ukrainian slaughter cattle.

Macroeconomic Factors

The IMF projects Ukraine's GDP will grow 2 percent in 2016 after a 9 percent decrease in 2015. The IMF also projects that inflation as measured by the Consumer Price Index (CPI) for Ukraine will slow to 20 percent in 2016 after reaching 46 percent in 2015.

Production, Consumption and Trade in Non-government Controlled Areas

Nearly 1.3 million Ukrainians have been registered as temporally displaced persons since separatists in two of Ukraine's eastern provinces entered into an armed conflict with the Ukrainian Government. Russia's occupation and attempted annexation of Crimea has affected Crimea's nearly 2 million inhabitants. These actions have directly impacted consumption in affected areas of many products including red meat.

Trade with Non-government Controlled Areas remains limited and prospects in 2016 are unclear. The controls in place at the administrative border between mainland Ukraine and Crimea now mirror the controls Russia applies at its undisputed borders. Trade with Crimea continued in 2015 from all Russia-approved facilities. In this report trade with Non-government Controlled Areas including Crimea is reflected as internal trade. Production indicators of Crimea are included in “Total Ukraine" numbers. Rosstat's (Russian Statistic Agency's) data and FAS/Kyiv estimates will be used.

Production

Swine/Pork

Swine inventories are projected to decrease to 9 million head in 2016 from 9.3 million head in 2015. Pork production is projected to decrease to 730,000 MT in 2016 from 750,000 MT in 2015. Estimates for 2014 were revised to reflect changes to official statistics.

Large-scale pork production in Ukraine is conducted by private companies with limited exposure to international markets. In general, pork producers tend to rely on internal inputs and have not been subject to massive financial losses when debt is revalued. The vast majority of large pork producers are vertically integrated enterprises involved in the production of their own breeding stock, feed, slaughter and product manufacturing. Some have also developed their own distribution networks and supply major retail chains.

Industry concentration is not very high with over 35 large specialized producers who each have herds of at least 1000 sows. There are many mid-size and small farms that fatten pigs. The largest producer, APK-Invest, accounts for only 9 percent of industrial pork production. Despite being in the conflict zone, both APK-Invest and Bahmutsky Agrarnyj Sojuz managed to increase production in 2014. Prospects for these facilities in 2015 and 2016 are particularly uncertain as the effects of the conflict hamper movement of inputs and distribution of production.

Many Ukrainian farms import piglets from Germany or Poland for finishing. Imports of young pigs for fattening is a good indicator of production prospects. Piglet imports in 2015 are relatively low with some months of zero imports.

Swine Disease Situation

There are two diseases that significantly impact pork production in Ukraine: Porcine Epidemic Diarrhea (PED) and African Swine Fever (ASF). A number of industrial enterprises experienced PED outbreaks with negative results for their production and financial performance. At this point producers are familiar with PED and the actions needed to curtail outbreaks and prevent the secondary occurrences. At present, PED has a negative but not critical impact.

ASF cases have been reported on Ukrainian territory since 2012. Out of 35 cases, 19 were registered in the first half of 2015. Most cases occurred in feral hogs although several cases were reported at household farms. The early cases were reported in regions close to the Russian border. Later cases were reported in the Northern and Central regions. Large industrial producers took actions to prevent introduction of ASF in their herds.

The first major outbreak was registered at Kalita Agrocombinat (ninth largest pork producer) on July 28, 2015. In the course of controlling the outbreak at Kalita Agrocombinat over 62,000 animals were culled. Industry sources estimate that direct financial losses from the culling may have reached $8 million with additional expenses incurred by the Veterinary Service. The company is not likely to renew pork production within the next 3-6 months. Major importing countries are expected to require regionalization of suppliers to mitigate risk of ASF transmission. Concerns over spread of ASF within Ukraine have disrupted movement of hogs, feed and other factors of production since August 2015.

Cattle/Beef

Beef production is expected to decrease again in 2016 to 310,000 metric tons (MT); the lowest level of beef production in 2016 since USDA started publishing official beef production estimates for Ukraine in 1988. Beef production is largely a function of dairy production in Ukraine which has been in decline since August 2014 when Russia banned imports of Ukrainian dairy products. The ensuing low milk prices resulted in dairy herd reductions of 7 percent in 2015.

EU processors facing Russia's ban aggressively competed with Ukrainian products. Despite attractive prices, Ukrainian dairy exporters have very limited success in accessing new markets for processed dairy products in 2015. Low milk prices and difficult export prospects are expected to continue in 2016 resulting in a continued reduction in the dairy cattle herd.

Consumption

Consumption of red meat is expected to decrease in again in 2016 after decreasing in 2015. Continued substitution of less expensive protein sources (particularly poultry meat) during the difficult economic conditions is expected to hamper recovery of red meat consumption (particularly beef) in 2016.

Trade

Exports

Exports of beef and pork in 2016 are projected to decrease to 12,000 MT and 8,000 MT, respectively. Reduced export prospects are, in part, a result of Resolution No.842 adopted by Russia on August 13, 2015. Under the Resolution, Ukraine will not be able to export red meat to Russia after January 1, 2016 if Ukraine implements its obligations under the Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU.

Ukrainian exports of cattle for slaughter are projected to increase to 55,000 head in 2016; the highest level since 1996. Ukraine has become a significant exporter of cattle to Central Asia and the Middle East. Azerbaijan, Syria and Egypt are the major markets.

Ukraine Cattle PSD Table (1,000 Head*)

AnimalNumbers, Cattle

2014

2015

2016

Market Year Begin: Jan 2014

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

USDA Official

New Post

USDA Official

New Post

New Post

Total Cattle Beg. Stocks

4,534

4,534

4,408

4,020

3,550

Dairy Cows Beg. Stocks

2,509

2,509

2,432

2,323

2,200

Beef Cows Beg. Stocks

33

33

28

28

23

Production (Calf Crop)

2,460

2,460

2,350

2,200

2,050

Total Imports

1

1

1

0

0

Total Supply

6,995

6,995

6,759

6,220

5,600

Total Exports

27

30

20

42

55

Cow Slaughter

0

0

0

0

0

Calf Slaughter

0

0

0

0

0

Other Slaughter

2,515

2,899

2,496

2,585

2,104

Total Slaughter

2,515

2,899

2,496

2,585

2,104

Loss

45

46

43

43

41

Ending Inventories

4,408

4,020

4,200

3,550

3,400

Total Distribution

6,995

6,995

6,759

6,220

5,600

CY Imp. from U.S.

0

0

0

0

0

CY. Exp. to U.S.

0

0

0

0

0

Ukraine Beef and Veal PSD Table, 1,000 CWE (1,000 Head)*

Meat, Beef and Veal

2014

2015

2016

Market Year Begin: Jan 2014

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

USDA Official

New Post

USDA Official

New Post

New Post

Slaughter (Reference)

2,515

2,899

2,496

2,585

2,104

Beginning Stocks

15

15

15

15

15

Production

422

428

410

380

310

Total Imports

3

3

4

1

1

Total Supply

440

446

429

396

326

Total Exports

30

30

25

45

12

Human Dom. Consumption

395

401

389

336

299

Other Use, Losses

0

0

0

0

0

Total Dom. Consumption

395

401

389

336

299

Ending Stocks

15

15

15

15

15

Total Distribution

440

446

429

396

326

CY Imp. from U.S.

0

0

0

0

0

CY. Exp. to U.S.

0

0

0

0

0

Ukraine Swine PSD Table (1,000 Head*)

Animal Numbers, Swine

2014

2015

2016

Market Year Begin: Jan 2013

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

USDA Official

New Post

USDA Official

USDA Official

New Post

Total Beginning Stocks

7,922

7,922

7,777

7,513

7,300

Sow Beginning Stocks

502

502

490

490

480

Production (Pig Crop)

9,650

9,527

9,400

9,300

9,000

Total Imports

22

22

20

26

30

Total Supply

17,594

17,471

17,197

16,839

16,330

Total Exports

1

1

1

0

0

Sow Slaughter

0

0

0

0

0

Other Slaughter

9,167

9,154

9,000

8,789

8,530

Total Slaughter

9,167

9,154

9,000

8,789

8,530

Loss

649

803

646

750

700

Ending Inventories

7,777

7,513

7,550

7,300

7,100

Total Distribution

17,594

17,471

17,197

16,839

16,330

CY Imp. from U.S.

0

0

0

0

0

CY. Exp. to U.S.

0

0

0

0

0

Ukraine Pork PSD Table, 1,000 CWE (1,000 Head)*

Meat, Swine

2014

2015

2016

Market Year Begin: Jan 2014

Market Year Begin: Jan 2015

Market Year Begin: Jan 2016

USDA Official

New Post

USDA Official

USDA Official

New Post

Slaughter (Reference)

9,167

9,154

9,000

8,789

8,530

Beginning Stocks

22

22

22

22

22

Production

810

780

750

750

730

Total Imports

41

41

15

4

5

Total Supply

873

843

787

776

757

Total Exports

13

13

20

35

8

Human Dom. Consumption

838

808

745

719

727

Other Use, Losses

0

0

0

0

0

Total Dom. Consumption

838

808

745

719

727

Ending Stocks

22

22

22

22

22

Total Distribution

873

843

787

776

757

CY Imp. from U.S.

0

0

0

0

0

CY. Exp. to U.S.

0

0

0

0

0