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Expensive corn leads to losses in Ukrainian poultry industry

As corn prices soar on the domestic market, Ukraine broiler meat and egg production are expected to become unprofitable in the 4th quarter of 2020.

This is stated in a joint appeal the Ukraine Union of Poultry Farmers as well as some other local business associations made to the Ukrainian Prime Minister Denis Shmuhal.

“As long as retail prices for poultry products are interconnected with the Ukrainian population’s purchasing power – which has been low – the rise in production costs drives broiler meat and egg producers into losses,” the farmers warned in their statement. Currently, the broiler meat sector’s average marginality is -12%, while average marginality in the egg sector stands at -17%, the farmers estimated. Without a substantial price hike, margins are expected to remain below the breakeven point.

With corn prices at record levels, the feed ingredient is exported instead of used to feed Ukraine’s birds. Photo: Koos van de Spek
With corn prices at record levels, the feed ingredient is exported instead of used to feed Ukraine’s birds. Photo: Koos van de Spek

Falling prices and rising production costs

Ukrainian poultry farmers are caught in the middle of falling prices and rising production costs. In September of this year, the average retail price for broiler meat in Ukraine dropped by 15% compared to the previous year, the Ukraine State Statistical Committee reported. On the domestic egg market, prices fell for the 3rd year in a row, falling by 13% in the first 9 months of 2020, by 15% in 2019, and by 12% in 2018. Both broiler meat and egg production were unprofitable in 2019, but this year’s situation seems to be much worse. “The production was already unprofitable last year, and with production costs rising substantially, we also experience a slump in prices both on the domestic and export markets,” the farmers warned.

Most farmers are in trouble

Against this backdrop, only the biggest vertically integrated companies have positive margins, ranging between 3% and 7%, the farmers said. The rest of the Ukrainian poultry industry is in a bad shape. “The consequences of the worsening business conditions can already be seen – the turnover funds are shrinking, competitiveness on the export markets is failing, and some companies have shut down their production altogether,” the farmers said, adding that this problem could hamper the production performance of the Ukrainian poultry industry.

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Expensive corn is culprit

Rising prices of feed corn (65>%), feed wheat (57%), sunflower (39%) and soybean meal (42%) contributed to a 40-45% increase in feed cost since the beginning of the year, the farmers estimated. In this light, the government is called upon to include corn in the memorandum that the government and traders sign every year to prevent further price increases of raw materials and prevent a shortage of feedstuff on the domestic market. This year’s memorandum limits only wheat exports, setting the maximum volume for export at 17.5 million tonnes. Farmers are concerned that without export restrictions, prices may rise even higher.