USA, Washington. The New Year brings a new wave of Russian/Ukraine trade tensions. The FTA, with the EU and bans between Russia and Ukraine, put poultry and agricultural trade, in the midst of a trade whirlwind. The Deep and Comprehensive Free Trade Arra (DCFTA), Ukraine’s much anticipated trade agreement with Europe was set to start on January 1, 2016. This gives Ukrainian traders access to a duty-free TRQ of 17,600MT for poultry cuts and offal, and 20,000 MT of whole birds in the coming year.
Ukraine is expected to completely fulfill these TRQs. Even before the official start of the DCFTA, Ukraine expanded European poultry trade with exports to the Netherlands increasing 169% and Germany assuming 4.2% of Ukraine’s export market share. In the first half of 2015, EU exports surpassed those to Ukraine’s biggest export market, Iraq. In reaction to DCFTA, Russia terminated its free trade agreement with Ukraine and enacted a full embargo also as of Jan 1.
Similar to the DCFTA, Russia’strade agreement started well before 2016 with exports to Russia plummeting. When compared to 2012 and 2013, 2014 poultry exports to Russia decreased 80%, as shown in a graph below. This shifting of dependence made Iraq the country’s biggest poultry export destination and increased pressure to expand in the EU.
Pushing back against Russia’s embargo, Ukraine’s Prime Minister announced that the country has stopped importing good from Russia as of January 1. Russia’s ban, along with Ukraine’s sharp GDP decrease, have impacted the country’s economy, but the poultry sector remains relatively untouched. Rebounding from the political unrest in 2013-2014, Ukraine’s poultry distribution increased from 1,020,000 MT to 1,035,000 MT, an estimated 1.4% with a 2% expected growth in 2016. Continuing support from international financial institutions and vertical integration will enable further growthin the year to come.
In addition to growth, trade shifts will force Ukrainian exporters to continue seeking international expansion, mainly to the EU, Middle East and Far East.