Under conditions of transition to market economy relations, Ukrainian animal husbandry branch and meat processing industry witnessed a period of depression. It was demonstrated by the sharp reduction of cattle and poultry livestock, decrease of production of meat and meat products, ageing of related equipment, distortion of infrastructure and meat markets, increased competition from the side of foreign producers of meat and meat products etc.
Growth of production of domestic poultry meat and its imports to Ukraine as well as active introduction of intensive technologies into pig breeding facilitated increase of average annual indicators not only among the commercial manufacturers of pork but among the consumers in terms of overall consumption of meat and meat products in 2005-2006. By early 2007, this figure according to the State Statistics Committee of Ukraine was 42 kg, including 12.8 kg pork per capita a year. This brought a Ukrainian consumer closer to average world indicators, although Ukraine is still behind other European state – Hungary (120 kg), Germany (86 kg), Holland (180 kg), Poland (78 kg), etc.
At the same time, despite a certain increase of meat consumption in Ukraine, its annual consumption fund is still not sufficient to satisfy the needs of Ukrainian consumers although it has all the grounds for a completely independent provision of meat to Ukrainian population using domestic resources. Certain misbalance is created due to the absence of adequate governmental support, restriction on foreign markets (especially Russian markets), constant growth pf prices for grain forage, electric resources, high loan rates, investment risks, low purchase prices for meat, limited purchase capacity of population, import of meat and meat products (especially poultry meat) and many other reasons.
Under such conditions, the meat processors find it more profitable to use imported feedstock (including smuggled sold at dumping prices) in order to reduce the cost of feedstock processing and increase profitability of production. Furthermore, using the low purchasing capacity of Ukrainian population many meat-processing enterprises (especially those located in free economic zones and priority development territories) consciously use cheap imported feedstock (mainly mechanically deboned meat or MDM) to manufacture cheap cooked sausages. When chemical composition of these products is examined one can see that sausage is present only in the name.
This fact, as well as a number of other facts prevents the manufacturers from using the complete potential of Ukrainian leveling the positive achievements of Ukrainian pig breeders in 2005-2006.
During the years of economic crisis in Ukraine, the number of breeding plants and farms had considerably reduced, as well as a valuable gene pool of animals. The same had happened with production quality of cattle raising industry as a whole. The genetic potential of cattle raising industry of Ukraine was weakened by destruction of the former system of animals’ selection concerning, first of all, producers as well as predominant use of non-assessed homebred breeders (so called own-stock breeders).
Alongside with other reasons, deficiency of forage and rise in prices for it have led to growth of the cost price of the cattle raising industry products, decrease in profitability of cattle and a poultry raising and, accordingly, to sharp reduction of livestock. Losses as a whole for Ukraine in 2000 amounted to about minus 44-42% for cattle and pigs breeding, and minus 33.2% for poultry farming (in 1990 +20.6 %; +20.7 % and +17 %, respectively). In 2005 the situation slightly changed and, according to estimations of State Statistics Committee of Ukraine, not only poultry farming sector has positive profitability parameters (11% in 2003; 4.1% in 2004, +12% in 2005), but also profitability of pigs growing on the average for Ukraine in 2005 were estimated by State Statistics Committee of Ukraine at a level of +25% (2004 г. – minus 14.4%). However, already in 2006 this figure demonstrated negative dynamics again (except for poultry meat) coming back to minus 9.3% in the pig breeding sector thus reflecting in the first place the problems in the market of fodders and energy resources, rocketing of meat imports at dumping prices, Russian embargo on Ukrainian animal husbandry products, untimely payment of subsidies and shortcoming of agrarian policy in the animal husbandry complex is general. At the same time, private operators of the market estimate the realistic profitability of pig farming (breeding and meat production), excluding unprofitable farms, and especially in vertically integrated holding companies, on average at 20% to 70% and more.
Since 1990, pigs, cattle and poultry livestock, in terms of the quantity of meat, decreased by two-three times and as of early 2007, all categories of Ukrainian farms had 6.2 mln heads of cattle, 8.06 mln pig and 166.5 poultry. Production of all kinds of meat in a slaughter weight equivalent in 2006 was about 1.72 mln tons (as of January 1, 1991 – 24.6 mln, 19.4 mln and 246.1 mln heads and 4.36 t meat, respectively). The share of pork at present amounts to about 30% (or 526, 100 t) of total production of all kinds of meat (in slaughter weight equivalent) for all categories of farms.
Since 1990, the structure of cattle, pigs and poultry breeding has changed. Whereas before the collapse of the Soviet Union the major part of livestock has been concentrated in public sector, at present about 2/3 of the overall livestock and poultry population are kept in private households. As of early 2007, the share of agricultural enterprises in the public sector in the pig breeding sector achieved 40% (cf. 2003-2004 – approx. 30%). At the same time, the crisis that became obvious in the pig breeding complex during the first six month of the current year had an immediate impact on the division of pig population between various categories of farms – the share of agricultural enterprises began to decrease once again and as of July 1, 2007 it was already 39%.
It should also be mentioned at this point that during the last 2-3 years there were observed positive trends in poultry and pig breeding sectors accompanied by negative trends occurring in the cattle breeding segment. At the same time, given unpredictability of the market of animal husbandry products (avian flu, unstable prices for energy resources and compound feed, meat price policies, problems related to the sales of domestic animal husbandry products in foreign markets, illegal imports of meat and meat products, instability of foreign trade relations with Russia, etc) it is still too early to talk about any significant achievements in this segment. According to the results of 2006 and preliminary results of 2007, foreign trade meat turnover demonstrate a negative balance caused by decreased exports of meat and certain types of meat-processing products as well as increased imports of meat, minced meat, ready-to-cook and ready-to-use meat products at dumping prices.
Despite the step taken by the state to strengthen the domestic animal husbandry complex, inducing adopting of various programs and partial subsidizing for agricultural manufacturers, this market is still in crisis as well as the pig husbandry market. Only large pig breeding farms belonging to corporate groups and having a closed production cycle can afford to introduce modern technologies of pig growing and meat processing. Profitability of pig breeding at such farms achieves +20% and more. However, these figures have little impact on overall indicators of the pig breeding branch. This sector requires considerable governmental and financial support, including low loan rates, timely payment of subsidies, extension of governmental support in the pig breeding segment, regulation of foreign trade in animal husbandry products, stability in the market of energy resources and compound feed and in the long run – improved competitive power of Ukrainian meat both in the domestic and in the foreign markets.
