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07/04/2014

The meat sector in Ukraine: potential for growth

Meat is one of the fastest growing agricultural commodities in the world: in the last 50 years, production has grown by 300 percent. Meat demand is mainly driven by increasing incomes and changes in consumer preferences; and these effects can be clearly seen in Ukraine, where meat production increased by 39 percent in terms of volume from 2005 to 2010. While the Ukrainian meat market has good potential for growth, however, it also faces various sector constraints.

Under the cooperation between FAO and the European Bank for Reconstruction and Development (EBRD), the FAO Investment Centre has published a review of the meat sector in Ukraine. The review provides an in-depth analysis of the country’s meat sector from 2005 to 2010 and gives recommendations for future national policies.

The publication explains the growth and structural changes, which can be attributed to increasing incomes and urbanization, in the Ukrainian meat market during the analyzed time period. The sector rapidly consolidated and integrated, and commercially-produced meat rose from 63 to 75 percent of the market. The three subsectors under scrutiny —  beef, pork and poultry — varied significantly, both in terms of profitability and market share, with the poultry subsector being the most developed.

“Thanks to a good supply of feed components, a low tax burden and a high potential for increased domestic market consumption, Ukraine’s meat industry has a good development potential,” remarked the study’s main author and FAO Economist, Andriy Yarmak, “The country could become a net exporter of meat in ten years’ time if the economic growth allows it.” This optimistic forecast also depends on some necessary improvements along the value chain.

The publication underlines the various constraints that the Ukrainian meat sector faces. For example, the commercial meat sector has lost up to an estimated 10 to 15 percent of its margins because of a huge deficit of educated professionals at the primary production level. In addition to this, the study analyzes government policies, looking at their efficiency, transparency and overall strategic dimension.

The publication is intended for policymakers and potential investors to understand the constraints and growth potential of Ukraine’s meat sector. It concludes with a number of recommendations to the Ukrainian government, including a refocus on education and training, a better integration of the meat supply chain, a better enforcement of environmental and food safety regulations, and fewer administrative barriers. This is one in a series of two meat sector reviews conducted by the Investment Centre; the second one is on the Russian Federation and will be published in late spring 2014.