Boston, MA -- (ReleaseWire) -- 06/09/2014 -- Despite ongoing tensions with Russia, Ukraine has seen record grains output and exports in 2013/14. In our view, the main consequence of the Russia-Ukraine conflict will be in terms of overall grain production in 2014/15, which we forecast to fall as a result of reduced credit available to Ukrainian farmers, which will in turn reduce input use. Indeed, we do not believe wheat or corn output will match the bumper 2013/14 crop over the remainder of our forecast period to 2018.
While the EU has recently authorised imports of Ukrainian poultry, which will support export growth over the medium term, we do not see a similar opening for dairy exports in the near term. We therefore expect weaker dairy consumption growth, with growth coming strictly from domestic demand. Dairy consumption will also decline owing to the deteriorating outlook for the Ukrainian economy and private consumption growth. We highlight MHP's strong growth potential as the main beneficiary of our positive outlook for the local poultry industry.
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- Corn production growth 2012/13 to 2017/18: 39.0% to 29.1mn tonnes. We are turning more optimistic on the potential for output growth on the back of increased investment in the country.
- Poultry consumption growth 2013 to 2018: 13.9% to 936,100 tonnes. Poultry demand will benefit from lower corn prices and its preferred status as a cheaper and healthier alternative to red meat.
- Milk production growth 2012/13 to 2017/18: 12.2% to 12.9mn tonnes. Over the medium term, consolidation and increased investment are expected to start to compensate for industry exits, with production rising steadily over the forecast period to 2017/18.
- 2014 real GDP growth: -4.1%, down from 0.0% in 2013. Predicted to average 0.5% from 2013 to 2018.
- 2014 consumer price inflation: 16.0% average, up from -0.3% in 2013.
- BMI universe agribusiness market value: 7.5% year-on-year (y-o-y) increase to USD19.0bn in 2013/14, forecast to grow on average 0.2% annually between 2012/13 and 2017/18.
We expect above-average wheat and barley output for the 2014/15 season, as planting has finished for winter cereals and is likely to proceed without difficulty for spring crops. Generally favourable weather over the beginning of 2014 suggests that early prospects are good. That said, we maintain our forecast for wheat production in 2014/15 to decline to 22.0mn tonnes, as the winter wheat planted area was 6.3mn hectares, down from 6.7mn in 2013/14. Over the forecast period, we forecast production to stagnate around current levels, as we believe area planted and yields have already reached their highs.
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