This report covers developments in the food sector in Ukraine through October 2013. It also discusses corporate news for firms including UkrLandFarming, Astarta, Nestle, Milkiland, and Alcohol Traditions, among many others.

Ukraine is emerging as one of the world’s largest suppliers of grain and oilseeds. Vast amounts of high-quality agricultural land, a reasonably moderate climate, and a favorable geographic location create a unique opportunity for agricultural growth today, and the potential for huge growth in the future. In H1, the highest number of profitable enterprises in Ukraine worked in agriculture and trade. The largest share (89.7%) of profitable enterprises was in agriculture in H1.

Some of the factors expected to help Ukraine boost its agricultural productivity are: a strategic import/export location between the European Union, Russia, and central Asia, with access to deep sea ports, railroads, and highway networks; uniquely fertile soil, the productivity of which can be strongly improved by the use of better machinery and higher-quality seeds; relatively low production costs; continuous introduction of new technologies; employee training; and an intense level of investment in expansion, primarily in capital expenditures.

In H1, agricultural production rose by 15.4% y/y, helped by a 27.5% y/y growth in the output volume of agricultural enterprises and a 6.4% y/y hike in households. In the first quarter of 2013, the country’s agricultural production expanded by 5.8% y/y, well above the 0.5% y/y hike recorded in Q1 2012. In particular, the output volume of agricultural enterprises grew by 10.5% y/y versus 1.9% y/y in Q1 2012. The output volumes in households rose by 1.6% y/y in Q1 2013 compared to a decline of 0.7% y/y in the same period of the previous year.

Key Points:

• In corporate news, UkrLandFarming agricultural holding plans to invest USD 70mn in the construction of a feed plant in Krasnohorivka (Donetsk region) by 2015.

• Sugar major Astarta posted a EUR 40.9mn net profit in Q2, with revenue growing by 3.43% y/y to EUR 80.92mn in the same quarter.

• Swiss-based Nestle, one of the world's largest food producers, plans in 2013 to invest UAH 36mn in its Lviv-based Svitoch confectionery factory.

• One of the largest cheese producers in Ukraine, Milkiland (MLK PW) reported a 13% y/y increase in net revenue to EUR 151.1mn in H1. Milkiland earned a net profit of EUR 5.5mn in H1.

• Alcohol Traditions, one of the largest alcohol companies in Ukraine, has started producing a new type of vodka called Perepelka. The new vodka is being promoted as a natural product produced through the processing of quail eggs.

• Ukraine’s agricultural production increased by 13.3% y/y in the first eight months of 2013, data from the State Statistics Service showed. In particular, the volume of production at agricultural enterprises rose by 23% and at households by 6.2%. In August alone, the volume of agricultural production grew by 9.7% y/y.