Largest Ukraine egg producer may close some farms

12-08-2020 | | |
If the conflict does not change by autumn, some problems with egg supply could be seen on the Ukrainian market. Photo: Henk Riswick
If the conflict does not change by autumn, some problems with egg supply could be seen on the Ukrainian market. Photo: Henk Riswick

Agricultural holding Avangard may close 6 out of its 27 farms and cut production by 20% in the coming 2 months.

This decision was made due to continuing administrative pressure of Ukrainian authorities, Avangard owner Oleg Bakhmatyuk told local press. According to Bakhmatyuk, he would have to lay off 2500 employees to save the company, which has found itself in harsh financial conditions. On 28 July, approximately 3000 employees of Avangard’s parent company, UkrLandFarming, gathered for a rally demanding the end to what is described as “illegal pressure on the company.“

On 5 June, Pechersky District Court (Kyiv) issued a ruling recognising the case against Bakhmatyuk illegal. The case was opened on charges of alleged misuse of refinancing funds provided by the National Bank of Ukraine to VAB Bank during the 2014 banking crisis. Ukraine law enforcement agencies, however, refuse to close the case, effectively cutting off Avangard from any sources of funding, Bakhmatyuk explained.

Ukrainian government demands domestic stability
The Ukrainian Anti-monopoly Committee has issued a fervent plea to poultry producer MHP, stressing that the agricultural holding should not jeopardise stability of the domestic broiler meat market amidst the continuing Covid-19 pandemic.

“We are in a time crunch – on a financial, economic, and personal level. Every war has its beginning and its end,” Bakhmatyuk said, adding that “the only means to survive the fluctuating demand are bank loans or capital inflow. Both options have been taken from me. As a businessman, I must make a decision and go in the only possible direction, which is cutting costs.”

Bakhmatyuk explained that demand had been hampered by several problems, including logistical disruptions and the coronavirus crisis. According to Bakhmatyuk, he has repeatedly appealed to the Ukrainian president and government agencies to sort out the issue, but there has been no progress.

A never-ending story

Avangard has been in conflict with government agencies in the past. In February 2020, Avis (located in the Khmelnytsky region) and Chernobayivska (located in the Kherson region) responded to allegations that the two facilities did not exist. According to Avangard, Avis and Chernobayivska, the factories the government agencies failed to locate, were fully launched in 2013, with a total capacity of 11.2 million layers and a production capacity of 3.5 billion eggs a year.

Dark clouds hang over Ukrainian egg industry
The Ukrainian egg industry has been on a dream run but there are major problems looming on the horizon.

The total debt of UkrLandFarming, Avangard’s parent company, is estimated to be close to US$ 2 billion as of the beginning of 2020. Bakhmatyuk has been speaking openly about the possible bankruptcy, saying this is a very real possibility in case the conflict with government agencies is not sorted out.

Before the conflict, Avangard hoped to regain its position as the world’s second largest egg producer, a position they lost due to military aggression in Donbas in 2015, according to Bakhmatyuk.

Vladislav Vorotnikov Eastern European correspondent