The EU’s decision to lift tariffs and quotas on Ukrainian poultry was well-intentioned, but has caused nervousness among producers across the continent. Michael Barker analyses the latest situation
Russia’s devastating invasion of Ukraine in February last year brought an outpouring of sympathy for the latter from across the continent, with governments in both the UK and EU moving to support the country in a variety of ways.
One of the more contentious support mechanisms from the poultry industry’s point of view was the EU’s decision to abolish import quotas and zero out import tariffs on agricultural products to help the beleaguered country and its farmers. As the months have gone by, unease has grown at the destabilising effect that is having on the European supply-demand balance, and the potential for knock-on effects in the UK.
In the immediate aftermath of the outbreak of war last year, the Ukrainian poultry industry experienced decreased domestic consumption due to the refugee crisis and population overflow. That meant more product available for export, and exports subsequently soared following the EU’s decision to abolish quotas and tariffs.
Oleksandr Tarassevych, agriculture specialist at the United States Department of Agriculture (USDA), explains that prior to the war, Ukraine was an exporter of high-value chicken parts and whole birds to the world market and an importer of low-priced poultry offal for further processing. In the early months of the war, Ukraine almost entirely stopped chicken meat exports, with significant volumes of poultry destined for export redistributed among the population as humanitarian aid. However, as production recovered and new supply routes were established, trade recovered to pre-war levels by May 2022.
By the end of last year, total poultrymeat imports into the EU had reached 163,675t for 2022, an 80% increase on the year before. Total EU egg imports hit 22,233t, a rise of 300%. Much of those sharp increases were put down to the additional volumes of Ukrainian product on the market.
The situation has brought angst in Europe, with concern that an influx of Ukrainian poultrymeat is destabilising the European market. MEPs Jarosław Kalinowski, Adam Jarubas and Krzysztof Hetman raised the subject in the European Parliament in March, stating that while they understood the need to support Ukraine, “It is not fair that certain sectors in some member states, in particular Poland, have to pay a very high price for this aid. If measures are not taken soon, the survival of our poultry industry will be at risk.”
The three MEPs argued that the commission must take steps to ensure European producers are able to compete with Ukrainian products that they said do not meet the same quality and food safety standards, and that there should not be an extension to the suspension of customs duties and quotas for Ukrainian poultry meat and eggs for another year. That call appears to have fallen on deaf ears, however, with the EC’s International Trade Committee giving the green light in late April for a further one-year suspension of EU import duties. The decision is also seen as helping advance Ukraine’s gradual integration into the EU internal market.
Poland’s Poultry Meat Promotion Fund has been reported as playing down fears, intimating that fears of uncontrolled imports of Ukrainian poultry and eggs may be exaggerated, though the group did add its voice to concerns over quality and animal welfare standards.
The UK is watching the situation closely. According to UK government figures, imports of meat and poultrymeat products hit a historic high of 193,300t in March, a huge rise on the 132,800t a year ago and almost double the average level seen over the past 15 years. Further analysis by the Observatory of Economic Complexity shows that as of January 2023, the UK’s poultrymeat imports amounted to £134m, up 17% on a year earlier. As more poultry became available on the EU market, it is notable that there were big increases in imports to the UK from the Netherlands (up 188%), Poland (up 187%), and France (up 121%).
While those increases can be put down to shortages in UK output, which has been an issue across most sectors of agriculture, there’s no doubt that any weakening of prices as a result of an oversupplied European market would be unwelcome at a time of extreme margin pressure.
Farmers across Britain and Europe undoubtedly feel a sense of kinship and empathy for their compatriots in Ukraine, leaving many feeling conflicted about their wish to support them against the need to protect the balance of their own market.
Ukraine’s chicken meat sector
According to the USDA, industrial chicken meat production in Ukraine is concentrated in large, vertically integrated facilities. The six largest of these are responsible for almost 90% of all production, while the country’s largest producer, MHP, has an over 70% market share. Large Ukrainian production facilities are primarily located in central and central-western Ukraine, so they were not directly impacted by warfare, allowing the industry to overcome the initial shock of the invasion and resume production relatively fast. USDA notes that the only direct loss was suffered by MHP, which lost a large batch of product in a bombed cold-storage facility.
The view from Ukraine
Andriy Yarmak worked until March 2022 as an economist at the United Nations Food & Agriculture Organisation’s Investment Centre in Rome. The Ukrainian is an expert in agribusiness and international supply and demand trends and spoke exclusively to Poultry Business about the current situation and the pressure on farmers in his homeland.
“The poultry industry is developing and will continue to develop and change. The planet added 1.6 billion more people in the last 20 years, who all want access to food. If farmers think that protecting what they have and doing business as usual is sufficient, then they are very wrong.
“Opening the market for Ukraine’s produce is the best thing that could happen to any farmer in Europe as it stimulates progress in all aspects of the value chain and helps them become more competitive. Ukraine’s agribusiness is commercially very viable as it developed in an environment where competition was high and subsidies were close to zero, compared to what farmers in Europe received. It is also worth noting that Ukraine opened up its market for the EU’s products completely, while agreeing on very unfavourable market access for its own products. Add to this the huge disadvantage in direct and indirect support and you can see why Ukraine is so successful in agribusiness. Farmers in the EU, by contrast, simply get too much support and are not motivated to improve, as subsidies and market protection are only helping those farmers who are not really good at what they do. It is not rocket science to understand that market protection means that the population of your country is paying for inefficiency. Governments that impose limitations on imports are making their countries less competitive and their people poorer in both the short and long term.
“I really appreciate all of the help Europe is providing to Ukraine and so do Ukrainian farmers. I also hope that farmers in Europe realise that Ukrainians are paying with their lives every day to allow their counterparts in the EU and UK to continue farming and not have to send their kids to war.”