Ukraine Market Report — Q3 2016
A strong harvest, a recovery consolidating, and the first Ukrainian food producers receiving EU establishment approvals — the point at which the trade agreement started producing measurable results.
Overview
A strong harvest, a modest but broadening recovery, and — for a small number of producers — the first evidence that the certification work begun after 2014 was producing market access.
The certification process becoming visible
EU market access for animal products works establishment by establishment. A dairy, a poultry plant, a honey producer must each be individually inspected and listed before it can export.
The first Ukrainian facilities to complete that process began appearing on the approved lists during this period. Each one represented a specific plant that had invested in upgrading to EU standards, been inspected by the Ukrainian competent authority, and been accepted by the European Commission.
The commercial pattern this created is worth stating: the trade agreement did not open a market to a country. It opened a market to individual facilities, one at a time, in the order in which they had invested.
That is why the export gains from the agreement appeared gradually over several years rather than at entry into force, and why the producers who benefited most were the ones who had committed capital before there was any certainty about the agreement at all.
Macro position
Recovery continuing. Inflation moderating. Currency stable. The IMF programme disbursing.
Sectors
Agriculture — a strong year, with grain and vegetable oil the principal export earners.
Food processing — the sector where the certification story was playing out.
IT services — growing.
Automotive components — expanding in the west.
Banking — the largest institution's position deteriorating visibly.
What the quarter settled
That the payoff from the EU agreement would be distributed by preparation rather than by sector.
Two dairies of similar size in the same region could have entirely different outcomes depending on whether one had started certification in 2014 and the other had waited. That is a commercial distinction created by a decision taken years earlier under uncertainty, and it is the clearest illustration in this archive of why regulatory preparation has option value.
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