2013-12-14 12:23:24 - New Food research report from Business Monitor International is now available from Fast Market Research
We continue to favour Ukraine's grain sector and expect production growth and more diversity in export demand. While the EU has recently authorised imports of Ukrainian poultry, which will support export growth over the medium term, we do not see a similar opening for dairy exports in the near term. We therefore expect weaker dairy consumption growth, with growth coming strictly from domestic demand. We maintain our subdued outlook for Ukraine's real GDP growth in the near term and believe this will impact in particular 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.
Full Report Details at
- www.fastmr.com/prod/723630_ukraine_agribusiness_report_q1_2014.a ..
* Corn production growth to 2016/17: 11.5% to 25.5mn tonnes. We are turning more optimistic on potential production growth on the back of increased investment in the country.
* Poultry consumption growth to 2017: 20.0% 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: 16.4% year-on-year decrease to US$18.4bn in 2012/13, forecast to grow on average 0.02% annually between 2011/12 and 2016/17.
We see downside risks to our 2013/14 wheat production forecast for Ukraine, as heavy rains across most of the country substantially delayed the harvest. We forecast wheat production to rise to 19.5mn tonnes in 2013/14, from 15.8mn tonnes in 2012/13. However, local industry sources have expressed concerns that production will fail to reach the 15mn-16mn tonnes level unless the harvest gathers pace, and provided damage to the crop is only minimal. A recent shift in the weather towards warm and drier spells in October has provided optimism that an acceleration in the harvest could limit losses for 2013/14, but uncertainty remains over the actual production growth potential for the wheat crop this season.
MHP's latest results reflect the delayed effects of the 2012 drought, as the company's production costs soared on the back of higher domestic feed prices (especially for corn), pushing margins lower in H113. Operating margins in H113 decreased to 22.9%, compared with 27.0% in FY2012, while net income margins decreased to 12.9%, compared with 21.1% in FY2012. Even if the country's 2012/13 corn crop was strong, global prices pushed up local prices. Also, because of extreme tightness on the global corn market, Ukraine played a significant role in the corn export market, depleting domestic stocks in order to supply global demand. Local industry sources indicate that the cost of corn used in fodder production was almost 40% higher in year-on-year terms in H113.
The past few years have been challenging for most consumer companies that rely heavily on Ukraine. Dairy firm Ukrproduct is one of these companies. Up until the economic crash in 2009 (Ukraine's GDP contracted by 15.1% that year), Ukrproduct was growing fantastically, but such was the scale of the recession, things changed dramatically thereafter. From its peak in mid-December 2007, the company's London-listed share price has fallen by more than 85%. This is not surprising given its reliance on Ukraine and the sheer impact of the downturn on consumer spending.
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