Having achieved by 1990 the peak of its development, after the USSR collapse, the compound feed industry in Ukraine began to give up its positions and in 2000 found itself nearly on the eve of depression. Among the reasons that caused negative dynamics in this segment in late XX century one can name the following:
- Decreased demand for compound feed from the animal husbandry industry as a result of reduction of cattle population;
- Low profitability of production;
- Low purchasing capacity of population caused by the economic crisis of the last decade and growth of prices for animal husbandry products that changed the structure of consumers’ demand pushing it toward cheaper food products whereas meat and dairy products manufactured with the use of compound feed were consumed in much smaller quantities;
- Lack of consumers’ trust in quality of manufactured products.
Second, liberalization of prices and destruction of the system of governmental procurement of feedstock and sales of its by-products led to a formation of numerous intermediate agencies and disparity of prices. As a result, animal husbandry enterprises had to cut the volumes of procured feed for profits they received from selling their products failed to cover the costs of compound feed. Consequently, large animal husbandry complexes and poultry plants cardinally reduced the volume of production or altogether seized to exist. At the same time, agricultural production became unprofitable and caused a sharp decrease of cattle and poultry population.
A stimulus for development of compound feed industry was coming of considerable investment in poultry farming in 2000 and following years, which led to a qualitative breakthrough in its development and growing demand for full-value feed.
Dynamics of production of compound feed in the recent years has demonstrated sustainable growth trend although production volumes remain insignificant when compared to 1990 (3.2 mln t in 2005 and 16.5 mln t in 1990). The segment of compound feed for cattle and swine is not in the best situation; as before, production of vitamin and protein containing feed supplements is very low: whereas in 1990 for production of 16.5 mln t compound feed 827, 000 vitamin and protein containing feed supplements were manufactured, in 2005 this figure, according to some estimations, decreased to about 18-20 thousand t (1995 – 2, 000 t).
Despite difficulties, compound feed industry is increasing its production volumes. Ready animal feed is manufactured in all Ukrainian regions in larger or smaller volumes.
The most important factor of efficient feed production is reliable supply of feedstock, including forage grain and oilseed mill, especially soybean mill. Sustainable yield of grains and oilseeds in recent years created favorable conditions for compound feed production. Simultaneously, one has to admit that such dependence on forage grain to a large extent determines trends not only in the animal husbandry sector but also has an adequate impact on selling prices of animal husbandry products. For instance, high prices for forage grain in 2003/04 MY because of an extremely low harvest in 2003, first of all – of fall-planted crops, was one of the main important factors that determined the growth of prices for meat and reduction of cattle population.
Except for the main factors that directly influence the situation on compound feed market, it also experience impact of indirect factors, one of which still remains the population’s buying capacity that led to a decrease of an actual consumption of animal husbandry products. In 2005, according to the GfK information, an average Ukrainian annually consumed 39 kg meat. This figure is significantly lower than meat consumption in European states and in the USA (Poland – 63.5 kg, Germany – 83.2 kg, USA – 119.7 kg, Hungary – 120 kg, Germany – 86 kg, Netherlands – 180 kg, Poland – 78 kg, etc. According to the forecasts of UN Food and Agriculture Organization (FAO), average annual consumption of meat in the world will increase to 41.7 kg per capita. The growth of consumption of meat in Ukraine directly depends on the growth of population’s incomes; at the same time, growing inflation prevents people from eating the recommended amount of meat, fish and other food products. The main growth of meat consumption over the recent years occurred due to the growth of consumption of poultry meat.
Compound feed products occupy a unique position in the market of agricultural feedstock resources that can be characterized as dubious. On the one hand, the main component of compound feed is grain, one the other – it is itself used for production of animal husbandry products. Unlike other grain products, compound feed is characterized by elastic demand that depends on the capacity and elasticity of demand for animal husbandry products and changes depending on a number of macro- and micro- economic conditions. The prospects for development of compound feed industry are directly dependent on development of animal husbandry and poultry farming. Rhythmical stable sales of products are characteristics of those compound feed plants that manufacture compound feed with necessary range and quality that ensure maximum weight gain and productivity, which makes it possible for poultry plants and animal husbandry complexes to manufacture competitive high-quality products.
As to the dynamics of production of animal husbandry sectors, one has to say it is not unanimous. Cattle livestock in Ukraine recently has been constantly decreasing. In the first place, this is true of the public sector farms. For the first nine months of 2006, cattle livestock in these farms decreased by 5.8% when compared to the same period in 2005. Such rate of decrease of cattle livestock has been observed already for several years. Situation in the private sector is somehow better. The rate of cattle livestock decrease is insignificant and is mainly season-dependent. For the nearest future, it is hard to forecast any stabilization and growth of cattle population. First of all, this can be explained by a low level of profitability of production and relatively low purchase prices for cattle and milk. If the current rate of decrease of cattle livestock is preserved by the end of year the total number can be lower than 6.5 mln beasts, including public sector – 2.2 mln. As of early 2006, it was 6.7 and 2.5 mln beasts, respectively. One also has to mention that in this sector, according to the world practice, there is observed decrease of cattle livestock due to the growth of the number of highly productive beasts which consequently requires higher quality of compound feed to ensure high milk and meat yield.
As to swine population, the situation considerably improved over the last year. Over 9 months of the current year, the rate of livestock growth in all categories of farms was 11%, and in the public sector – 27.1%. Respectively, swine livestock is 8.1 and 3.2 mln beasts. This segment is more profitable and herd replacement requires significantly shorter time. Another important factor is a considerable inflow of investments into this branch during the last year, into construction and reconstruction of swine farms using alternative methods of swine growing.
In poultry farming, there is also registered a constant growth of livestock and profitability of production of poultry meat and eggs especially in the public sector. Decrease of livestock is mainly season-dependent and is observed predominantly in private households. When compared to September 2005, increase of livestock in the public sector in 2006 was 13.1% and the livestock amounted to 73 mln birds.
Thus, the trends observed in the animal husbandry segment at present (increase of livestock of cattle, swine and poultry in general and strengthening of demand for high-quality feed) give grounds to expect the growth of demand for feed in 2006 equal to about 20%. …
