Ukraine Agribusiness Report Q3 2016 - New Report Available

We maintain a negative outlook for Ukraine's agricultural sector in 2016 owing to a range of concerns. All agricultural markets will be negatively affected by the poor macroec onomic fundamentals in Ukraine. There will be limited investment into the country over the coming quarters given the unstable political and economic situation, which will affect agricultural production over our forecast period. Russia's ban on imports from Ukraine will weigh on production for the dairy and livestock industries, as Russia represents one of Ukraine's largest agricultural export markets. Furthermore, significant currency depreciation will limit imports, hitting input use and domestic investment. However, Ukrainian farmers will fail to benefit from the export opportunities linked to this weaker currency due to export restrictions and lack of resources to scale up production in the medium term.

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Key Forecasts

Corn production will decline by 17.4% in 2016 to reach a total value of 23.5mn tonnes.

We are estimating the wheat crop in 2016/17 to decline by 22.2% to reach 21.0mn tonnes.

The livestock and dairy sectors will perform poorly in 2015/16 due to macroeconomic unsoundness.

Industry Outlook

Corn and wheat production will record severe declines in 2015/16 and 2016/17 respectively due to continued dryness over 2015. Grains consumption will remain subdued due to spiking inflation over the past year. Grains export restrictions will remain in place in 2016 and will prevent farmers benefiting from export opportunities driven by rising global grains prices and a weaker hryvnia. Out to 2020, production will recover and the country will reduce export controls as the economic outlook improves and inflation declines.

Dairy production in Ukraine will continue to decline in 2015/16 as economic growth remains negative. Cheese will suffer the largest decline due to its industrial share of production being the largest among the dairy complex. Liquid milk and butter consumption will remain stable due to their staple food status. Regarding exports, the weaker hryvnia will fail to make up for the loss of the Russian market. Out to 2020, we expect cheese to outperform due to renewed export opportunities.

Beef production will record a severe decline in 2015/16 due to a decrease in animal numbers caused by lower dairy production. Pork production will decrease due to an outbreak of African swine fever that decreased animal numbers and significantly hampered pork production. Poultry consumption will outperform the livestock complex as consumers reduce their intake of red meat due to the poor economic environment. Out to 2020, the poultry sector will continue to outperform as the pork and beef sectors recover moderately.

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