In 2010 production of pork grew in both industrial and backyard farms despite growing input prices. Consumers clearly signaled they wanted more pork but the lack of production efficiency in households held back any significant production growth in this segment. The industrial segment is expected to continue to grow in 2011, driven by a substantial amount of investments. There are a lot of rumors about substantial amounts of money planned to be invested into industrial production by local investors. Backyard production in 2011 will be highly dependent on the market price for pork. At this moment the market size allows for coexistence of industrial and household production, but long run perspectives of the later segment are murky.
The long-term trend for household production is expected to be downward despite possible production increases over the years. Household farms cannot compete with modern industrial farms using modern technologies and benefiting from the economy of scale. In 2011, overall industry production is forecasted to remain steady or show a slight upward trend. Import technical barriers spotted in 2010 will keep pork price at relatively high level and facilitate further production growth.
The 2010 extremely hot summer had a limited impact on production of corn and other fodder crops in Ukraine. The livestock sector is not expected to experience any shortage, but the cost of feed will move up yet another step on the ladder. Despite significant indirect grain export restrictions imposed by Ukrainian government in the middle of August, Ukrainian producers sensed the high world market price and are not going to sell grains cheaply. Nevertheless, this action gave Ukrainian swine breeders some competitive advantage over their western competitors.
Availability of cheaper electricity and gas (compared to US and Western Europe), and cheaper labor costs in rural Ukraine gave the Ukrainian industry an additional competitive advantage. Limited state direct support programs completely dried up after the 2008 financial crisis. Some limited support continues from foregone budget revenue programs (zero percent Value Added Tax or VAT), but these supports were never a decisive factor in a swine production economy.