Agriculture of Ukraine - characteristics of market

Ukraine joined the WTO in May 2008. Accession to the Organization will unify the conditions for competition, both for Ukrainian and foreign companies. It will inevitably create more competition for local farmers. In the longer term however, the membership will help Ukrainian businesses to restructure and become more competitive. Overall, Ukrainian market concentration and the number of small farms is gradually decreasing. Lack of state financing and expansion of large capital make it difficult for small farmers and private landowners to compete. According to statistics, there are some 50,000 farms in Ukraine.

Despite the abundance of versatile land, Ukrainian agricultural land plots cannot be freely traded. The Parliament prolongs the land sale moratorium each year but the land market exists taking semi-legal forms. This situation raises a lot of concern and needs to be resolved in the nearest future.

Export regulations

The Ukrainian Government placed restrictions on grain exports, which virtually stopped exports and caused surplus in the domestic market. Officially prolonged until July 2008, export quotas were however lifted in May this year. According to estimates of the Ukrainian Grain Association, due to the rich harvest next marketing year (July 2008 — June 2009) grain exports could total 13.5mn tonnes, including wheat 7mn, barley 4mn and maze 2.5mn.

Animal feed production

Most of the feed produced is for poultry (2.2mn tones in 2006). Pig and cattle feeds account for 850 and 650 thousand tones respectively. The number of producers is decreasing — 30 companies producing half of all feeds — even though more feed is produced each year. This tendency is further accelerated by the desire of animal breeding farms to save costs — they start producing feeds for own needs. The largest producers manufacture all major types of
feeds.

Animal breeding

Poultry numbers rose 9% over 2004-2006 and the numbers of pigs by 25%. Among the top pig breeding Ukrainian regions are Kyiv, Vinnytsya, Dnipropetrovsk, Cherkassy and Odessa. The numbers of cattle decreased by 11% over the same period. The aggregate situation in 2007-2008 is expected to be positive, with increasing numbers of pigs and poultry and improving numbers of cattle. This should help to increase the feeds market by some 10%. Main factors of the changes in cattle numbers are expensive feeds, sector restructuring, lack of labour, unstable livestock purchase prices. Ukrainian animal breeding sector is underfinanced because budget funds are not properly allocated to support relevant sector development programs. Most of the financial support is provided through VAT reimbursement. Procurement prices for meat change regularly and often decline abruptly, making animal breeding quite risky. Small and middle privately owned farms cannot afford such price hikes and since they have the biggest share of livestock in Ukraine, the sector performance is decreasing. However, despite the current decline, the pig sector is one of the most promising due to rising demand, few strong competitors and state support.

Machinery

The situation with agricultural machinery is slightly improving however still only about 80% of machinery used by farms is functional. By some estimates, agricultural machinery in Ukraine is 80 to 90% deteriorated. There is considerable local machine building potential in Ukraine but the sector is mostly privatized and the government does not have a clear policy to support local manufacturing. Moreover, about one third of all local produce remains short of domestic demand due to low solvency of potential clients. However, demand for machinery is only partly 1 Means the 12-month period from 1 July 2008 till 30 June 2009