Five key challenges to Ukrainian livestock in 2017

Five key challenges to Ukrainian livestock in 2017
Ask a question
Our Experts will answer your every question about services

By the end of the third year of the crisis, despite military actions and the loss of part of the country's territory, many sectors of the Ukrainian economy began to recover. However, it is impossible to say such things about animal husbandry, especially pig production and dairy cattle breeding.

Unfortunately, today we are much closer to losing the industry than we were at the end of 2013, before the expected signing of the Association Agreement with the EU at the time. What is the reason and what will happen next year?

1. Decrease in the number of livestock and increase in losses of agro-enterprises

According to our estimation, medium and small farms over the past few years have reduced the number of pigs to 20% of pigs and also to 20% of cattle. In official statistics, the reduction in the number of livestock looks smaller due to several dozen market leaders who, by inertia, implemented their plans to increase the number of livestock.

The same farms that form the basis for the production of meat and dairy products are gradually leaving the market, and this trend continues. And large manufacturers have already suspended plans to expand their business.

There are several reasons. If before the 2014 devaluation the profitability of investments in pig production by the year reached more than 100% (the level of 2010-2013, when they began to invest massively in this sector), today - no more than 20-30%. And this is "with a rigid dictatorship of technology." Those who do not follow the elementary rules of feeding and vaccination have long been at a loss. As for milk, the situation is similar.

Taking into account all risks and specifics of business, for example, exchange rate fluctuations and, accordingly, feed prices, veterinary drugs, energy carriers (gas, electricity, oil products), pork market prices (dependence on poultry prices) and milk (seasonality), unpredictable State regulation - the profitability is low.

A kind of insurance against losses is only integrated with the crop business of livestock complexes, or those who have a large margin of safety at the expense of other, non-agricultural enterprises.

They are already suffering business losses because of new methods of fraud of the middle level, which, through collusion with suppliers of feed and veterinary drugs, purchases falsified feed materials and medicines, or write off the quantities that are not supplied, or buy "dummies" that do not work, but only wash money out of business .

Unearned weight gain and milk yield, with equal costs, increase the prime cost and often lead to direct losses, which many owners notice too late when it is easier to close the business. If in 2017, with other risks, at least half of the small and medium-sized enterprises now operating will remain - this will be a great achievement.

2. Decline in meat consumption and increased use of offal

In 2014 - 2016, due to a decrease in the level of purchasing power of the population, the average Ukrainian's diet changed somewhat: it worsened. Simply put, the first place in consumption came out cheaper products than natural meat and processed products. This, by the way, confirms the sharp drop in pork imports, which did not become and the loss of this volume (up to 1/3 of consumption - 300 thousand tons per year) did not affect the domestic market.

To compensate for the loss of sales, the meat-packing plants were forced to substitute pork with chicken, as well as poultry waste (mechanical deboning meat), hide, etc. In relation to meat producers - farms - "interests coincided": inefficient producers closed, pork production decreased.

To date, according to our estimation, a resident of Ukraine consumes about 12 kg of pork a year, while the figure in the EU is 40 kg. The question is not the satisfaction of taste preferences. The question is, we are offered to eat foods that do not have the necessary amino acids, vitamins, and trace elements - what it takes to live, work, develop. And this is risks not only for business but for the health of the nation.

3. ASF and nodular dermatitis of cows

Unfortunately, in 2017, we expect a worsening of the situation with diseases of pigs and cattle only. The measures are taken to prevent the spread of dangerous, in fact for the country's economy, diseases in livestock are not sufficient. Prevention in the country at a low level, we admit that we do not know all cases of ASF.

Biosecurity on industrial pig complexes does not meet the necessary requirements. Quantitatively the centers of ASF are more often fixed in a farmstead in private farms, but real industrial losses are borne by millions of industrial farms.

With regard to nodular dermatitis, the economic losses from the spread of this disease are comparable to ASF in pig production. In Ukraine, cases of cattle disease with nodular dermatitis have not been reported, nor is there a specific vaccine. The producers have the possibility of cross-vaccination of this disease, which reduces the risks.

However, the general unhealthy situation can lead to an additional impetus for the curtailment of business for those companies that are not sure of its prospects.

4. Export restrictions

The dangerous epizootic situation in Ukraine due to the uncontrolled spread of ASF, the appearance of avian influenza and possibly nodular dermatitis of cattle threatens not only domestic production in Ukraine, but also countries with which trade relations have been established for the export of poultry, pigs, cattle, eggs, milk and their products Processing.

Ukraine is also threatened with the closure of exports of feed and cereals. This will mean not only lower prices within the country due to increased supply volumes but also the more aggressive behavior of large players who will be interested in crowding out medium and small enterprises from the market. This will mean an increase in social tension.

In addition, in the medium term, we will face a shortage of milk and meat as raw materials for processing, when the situation stabilizes, there will be an opportunity for exports, and domestic demand will recover on pre-crisis levels. Restore the epizootic situation, as well as livestock and business confidence - will not be easy.

5. New taxation rules

The transition of livestock production to the common system from January 1, 2017, and the payment of a fully value-added tax will also contribute to the reduction of livestock. And it's not even so much in the number of funds that will go out of business to the state but in the mechanisms of accounting and control. After all, the VAT, the profit tax is both the control of expenses and incomes, the tax credit, so tax checks and pressure on business.

It will not encourage people to get engaged in such a risky business, first, through additional taxes, and secondly, many keep a record of "clean" is simply not accustomed. However, it is likely that livestock keepers will actively lobby the status quo.

Nikolay Babenko, general director of the Center for raising efficiency in livestock production