Where is it more profitable to invest in Ukraine: land or pig breeding?

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Published: 14 November 2021

Why In the near future in Ukraine will be profitable to invest in pig breeding?

Mykola Babenko, CEO of the Meat Industry Association of Ukraine and Centre for Improvement in Animal Breeding Ltd.

Translated from:

https://www.epravda.com.ua/columns/2021/11/4/679429/

The basic demand of people - in food was and remains unchanged. Didn’t affect the food industry sector even COVID-19.

Moreover, Ukrainian agrarians have been working with double profits in crop production for the second year, due to the growth of grain prices and demand in the global market.

The profitability of investment in crop production reaches 100-200% per year. For example, the production cost of wheat, barley, corn in Ukraine was at a level 3 000 UAH / t without VAT (€100), while the average market prices were 7 000 UAH / t without VAT (€233), the cost of soybeans and sunflowers - 6 000 UAH / t without VAT (€200), and the market price reached 17 500 UAH / t without VAT (€583)

From 100 million tons of grain harvest exported from Ukraine, almost half - 50 million tons (from €25 billion - €12.5 billion).

Domestic prices for all food in Ukraine, including meat, eggs, milk, oil - dependent on export prices for grain. Therefore, even in the agrarian country, food prices can become one of the highest in the world.

But does this mean that investing in agrarian business now is profitable?

As everyone knows, the land market for individuals has opened in Ukraine. These are colossal changes for our state. However, according to many Ukrainian and foreign experts, the return on investment in crop production of 100-200% per year is more the exception to the rule.

The "rise in prices" for grain occurred mainly due to excess funds. Businesses that are dependent on grain have begun to buy it "for the future" as free funds have emerged. As a result, demand increased significantly, which led to higher prices.

The same experts say that in 2022-2023, grain prices will fall to the last €150 per ton.

Instead, the investment attractiveness pig breeding, in particular for Ukraine, is currently underestimated.

Why will the meat industry in Ukraine show the greatest growth?

World trade in pork is 11 million tons per year, of which the EU's share of 45% - 4.9 million tons. The consumption of pork in the world grows annually and by 2030 will increase by 16.5 million tons (OECD-FAO forecast). In the EU, the concentration of pig farms has reached a critical level.

Belgium in its territory as one region of Ukraine, holds 6 million pigs, the Netherlands in its territory as two regions of Ukraine hold 12 million hogs, as well as Denmark.

In Ukraine, there are 3 million pigs on the pig complexes on the territory of 24 regions. The country with the most favorable conditions for business in pig breeding - became an outsider in the global market.

Meat industry Association  together with Centre for Improvement of Animal Breeding, realizes the 5th annual development program of two branches - meat and pig breeding - a New Pig Production 2025: an increase in the annual production of pork from 0.6 million tons to 3 million tons (from €1 billion to €6 billion with a level of investment profitability from 100%).  

In the implementation of the program, except for the enterprises of meat industry and pig breeding of Ukraine, involved business and scientific institutions of Ukraine and other countries.

For Ukraine, it is more than 100 thousand new jobs, first in rural areas, taxes from €3 billion added value, wage fund, etc. and export revenue in the currency.

In addition, meat prices for the population will become more affordable.

The most favourable moment for Ukraine on the global market

EU countries have environmental problems due to the high concentration of pig farms. Because of this, there is a high risk of the rapid spread of swine diseases.

Rising feed prices and labour shortages are reducing pork production in some countries to a level of self-sufficiency, with their governments allocating hundreds of millions of euros to close pig farms.

In Ukraine, on the contrary, record crops of cereals and half of the grain are exported instead of creating value added.

Undeveloped and very cheap food waste, suitable for feeding pigs. Their volumes will only grow (privatization and modernization of the alcohol industry, etc.).

World prices for pork from the 2nd quarter of 2022 are likely to increase by 50-100%, respectively, the profitability of pigs will grow up to 100-200%.

There are no difficulties with employees in rural areas and there is a need to develop regions.

Given that the EU countries go to self-sufficiency, reduce exports, and prices for pork will grow, Ukraine could enter the global meat market strongly, and Ukrainian enterprises could create added value in Ukraine and export meat and meat products.

It must be acknowledged that there are few industries in Ukraine that create added value from raw materials obtained on land.

However, there are already successful industries, including poultry, oil and fat and tomato paste production. All three industries, except the domestic market, are export-oriented.

In global competition in pig breeding and meat industry, there are still chances to win.

The opening of business in pigs now "from scratch" or with capital reconstruction of pig complex gives you the opportunity to take advantage of all the most innovative instruments that are already available in Ukraine: from drafting and planning, construction to the purchase of innovative genetics of pigs, feeding, management and control

Correct, rational investment in pig breeding opens up great advantages in obtaining the lowest cost of growing pigs in the world and practically guaranteed profitability of investments from 100% per year.

Even with current prices to feed pigs works with profitability in a year more than 50% at the cost of pigs 35 UAH / kg (€1,16) and a market price on pigs 45 UAH / kg (€1,5) with two turnovers per year.

Even when in pig breeding, the number of investors will grow, this advantage will not be smaller, because of the consumption of meat will continue to grow.