The Breadbasket Of Europe
7 February 2010 |
Tim Steinle, co-manager of the Eastern European Fund (EUROX), was in Kiev, Ukraine this week doing some field research on growing investment opportunities in the former breadbasket of the Soviet Union.
With a territory larger than France and a population more than half of Germany’s, Ukraine has the potential for becoming a major European economy.
Ukraine was one of the worst-hit economies in Europe during the economic downturn, as the country’s GDP fell 15 percent in 2009 on a year-over-year basis. However, the economy has rebounded and VTB Capital is estimating 4.2 percent year-over-year GDP growth for 2010 and another 4.4 percent in 2011.
While certain sectors of the country’s economy, such as industrials, have shrunk since Ukraine’s liberation from communism, its agribusiness is booming. Roughly 16 million Ukrainians (one in three people) subsist on working the land.
And this is special land. Ukraine is home to one-third of the world’s black soil, a special type of earth that is known for its large quantities of nutrients and superior capacity to hold water. This soil helped the country generate more than one-fourth of the Soviet Union’s grain, vegetables, milk and meat, according to the CIA World Factbook.
Meat production, specifically poultry, is one of the most promising sectors of the country’s economy. The CNN show, the “i-list,” recently did a special report on poultry production in Ukraine.
Ukraine’s agricultural sector is both an international and domestic story. Meat is very difficult to ship long distances but Ukraine’s geographic proximity to both Russia and Europe allow meat to be exported out of the country.
In 2009, Ukraine consumed 2.2 million tons of meat, which is roughly 105 pounds per person, according to data from Renaissance Capital (RenCap). That is 39 percent above the world average.
RenCap estimates that Ukraine’s share of poultry consumption will grow over the next five years to reach the same level as South Africa, Venezuela and Mexico.
This is an important development for companies like MHP (featured in the CNN video) with industrialized production of poultry. These companies and the Ukrainian economy could substantially benefit if the RenCap forecast materializes.
Overall, look for the developing agricultural sector to play a bigger role in Europe’s food chain.
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