“Since the end of 2015, purchasing prices for liveweight pork have fallen by more than 10% or by UAH3 (US$0.11) per kg to an average of UAH25-UAH26 (US$0.96–$1.00) per kg,” stated Artur Loza, head of Ukraine’s Association of Pork Producers. “The rapid fall in the price of pork is causing increasing concern among the country’s bigger manufacturers.”
The main reason for this, he explained, was the decline in domestic demand, as well as the closure of the Russian market since 1 January 2016. In recent years, Russia, together with Crimea, accounted for 96% of all Ukraine pork exports. According to Loza, last year the cultivation rate for pigs in Ukraine farms rose 3.5% to 582,200 tonnes (t) liveweight, while 547,800t were sent for slaughter, 6% more than in 2014.
Brink of disaster
Pork producers said the fall in purchasing prices along with a simultaneous rise in production costs meant that, this year, most pig farms were operating on the edge of profitability.
“The pig industry in Ukraine is on the brink of disaster, because market prices are very low – only about UAH24.60 (US$0.95) per kg,” commented Alexander Vahnovan, chief manager of PE Agricultural Companies 2004. He added that the current problems were not just associated with the ban on pork deliveries to Russia, but also with a stoppage in supplies of sausages and by-products made from pork.
“The main reason for the decline is the fall in the price offered by meat processors,” he explained. “Previously, they were focused on exports to Russia, but they have had to retrench in Ukraine with their products, so they are dictating the prices.”
Alternative export destinations
The Association of Pork Producers believes the situation could be improved by developing supplies to alternative export markets. According to Loza, this could be Asian and African countries initially. Last year Ukraine exported 27,700t of pork, which is nearly three times more than in 2014.
Despite its free trade zone agreement with the EU, Ukraine is still unable to export to the EU, as veterinary certificates are still not agreed.
“The biggest problem hindering exports is the imperfect approach to technology in many pig-breeding businesses and, in particular, the absence of accounting and feed monitoring systems, as well as a lack of necessary equipment in production facilities,” claimed Nikolay Babenko, CEO of the Ukraine Center for Efficiency in Animal Husbandry.
“Many domestic farms are not even able to objectively calculate their production costs for pork, as they simply do not have cost accounting systems, which would help to collect and analyse all the information,” he added. “There are many examples that show a farm… could obtain a high return via effective organisation of the business, cheaper and more effective feeding and an appropriate staff wage system.”