Summary
Despite the setback to its efforts to take over the failing French poultry processor Doux, the Ukrainian poultry producer MHP remains committed to further acquisitions in the EU. This is seen as an important vehicle for sustaining the expansion of Ukrainian poultry meat exports, which increased almost 67% to the EU in 2017. The processing of Ukrainian produced poultry in the EU potentially raises important SPS control and rules of origin issues under EU preferential trade agreements with Africa (notably South Africa), where export from the Netherlands have traditionally played an important role in EU poultry meat exports.
Efforts by the Ukrainian poultry producer MHP to take over the ailing French poultry company Doux have been rebuffed, with a consortium led by France’s largest poultry processor LDC and including the Saudi food group Al-Munajem, being selected to takeover Doux. This followed assurances that nearly 1,200 jobs at the insolvent French firm would be safeguarded.
Under the takeover arrangements Al-Munajem, a former customer and ‘minority shareholder of Doux, will take over a site supplying Doux’s traditional frozen chicken exports’, while ‘LDC will take over a facility that makes processed food products, and plans to develop a new site to supply poultry to food industry and restaurant sectors in France’ (1).
This contrasted with the MHP bid which would have seen one factory closed and workers made redundant. In considering the competing proposals fears were expressed that following the closure of Doux’s Chantonnay abattoir MHP would use its purchase of the Doux Group to ‘produce cheap chicken in Ukraine, taking advantage of the French brand’ in its marketing and distribution of poultry meat and poultry products.
Currently MHP is ‘running two production facilities in the European Union, in the Netherlands and Slovakia’, with the company ‘using these assets to release some semi-finished products for local markets, made from chicken imported from facilities in Ukraine’ (3).
MHP has earlier pulled out of negotiations to acquire the Polish poultry processor Exdrob (4) to focus on the Doux take over. MHPs interest in Doux stemmed from its broader global strategy to ‘step outside Ukraine and further increase export sales of broilers’. The EU, Middle East and North African markets are major target markets for MHP overseas sales. MHP was quite open about its interest in acquiring a third EU company so as to further process ‘semi-finished Ukraine chicken products for the European market’. Press reports indicated the growth in MHP’s overall export volumes continued into the first quarter of 2018, increasing 28% compared to the corresponding period in 2017, with exports now accounting for 47% of the MHP’s poultry sales volumes (5). Exploratory talks for MHP to acquire a poultry plant in Germany or the UK are reportedly ongoing (2).
The latest EC figures show a dramatic 66.6% increase in Ukrainian poultry meat exports to the EU in 2017 (up from 48,083 tonnes to 80,083 tonnes). This represents a quadrupling of Ukrainian poultry meats exports to the EU since 2014.
This growth in Ukrainian poultry meat exports to the EU continued into 2018, with a 258% increase in January-February 2018 compared to the corresponding period in 2017. Whereas in January-February 2017 imports from Ukraine accounted for only 3.4% of total EU poultry meat imports in January-February 2018 Ukraine accounted for 13.7% of total EU poultry meat imports (6, 7).
While in the first 9 months of 2017 Ukrainian poultry meat exports of boneless cuts (CN 02071370) to the EU went exclusively to the Netherlands and Slovakia. In the 6 months from October 2017 to March 2018 exports were also initiated to Poland with some small volumes going to Germany (5).
A review of EC Market Access Data Base Figures on EU Imports of poultry met from Ukraine show the export trade was dominated by exports of exports of fresh and chilled cuts and offal (64%) followed by frozen cuts and offal (27%) and frozen whole chickens (8%).
Exports of fresh and chilled cuts and offal were largely exported to the Netherlands (61%) and Slovakia (19%), where MHP has acquired processing plants, with some 12% being exported to Germany and 6% to Poland. The Netherlands also dominated Ukrainian exports of frozen uncut chicken (57%) and frozen cuts and offal (72%).
The Basis and Volume of for Ukraine’s poultry exports to the EU 2016-2017 (tonnes)
|
2016 |
2017 |
|
| Total Imports |
48,083 |
80,083 |
| Trade Basis of Imports | ||
| – Imports under 0207 13 70 |
3,657 |
27,127 |
| – Imports under UA TRQ for poultry fresh and frozen cuts |
16,000 |
16,800 |
| – Imports under UA TRQ for poultry frozen carcasses |
8,553 |
5,139 |
| – Other imports (under erga omnes TRQs and out of TRQ) |
19,873 |
31,017 |
Source: EC, ‘EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets’, 19 April 2018
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
Given the structure of Ukrainian poultry meat exports further processing activities in EU member states generate residual poultry parts for which there is only a limited market in the EU. This gives rise to exports of poultry parts from birds raised in the Ukraine but with an EU member states label of origin attached. This enables these exports to enter third country markets duty free, despite not be eligible for such preferences under the rules of origin of EU trade agreements.
Over the last 10 years EU exports of poultry parts have increasingly targeted sub-Saharan African markets. It is against this background that the growing volume of EU imports of poultry meat from the Ukraine is a potential source of concern (see companion epamonitoring.net article, ‘Africa continues to grow as export destination EU poultry meat despite AI outbreaks’, 24 April 2017).
| Comment and Analysis
MHP has a clear strategy for making use of the EU’s national brands for the distribution of Ukrainian raised chicken meat on European markets. However it also takes advantage of EU preferential trade agreements to export poultry parts derived from Ukrainian raised poultry, with these exports benefitting from the tariff preferences agreed under EU trade agreements. This onward trade of Ukrainian produced poultry cuts under EU trade agreements is a technical violation of the rules of origin applicable under these trade agreements. Such chicken parts do not originate in the EU and hence should not be eligible for tariff preferences under these EU trade agreements. In an ACP context this is primarily an issue under the SADC-EU EPA, where tariffs on poultry meat imports from the EU have been eliminated, in a context where tariffs on imports from other poultry meat exporters have been increased within South Africa’s WTO bound ceilings. This suggests a need for stricter traceability in the trade in poultry meat in order to prevent rules of origin abuses under EU preferential trade agreements. This Ukrainian raised poultry meat has largely been entering the South African market under a ‘Netherlands’ origin label, in a context where prior to the introduction of Avian Influenza related SPS restrictions on imports of poultry meat from the Netherlands (December 2016), Dutch exporters accounted for 41% of total EU poultry meat exports to South Africa (for more details on the increasingly pan-European nature of EU poultry companies and the flexibility this gives EU exporters see companion epamonitoring.net article, ‘Footloose nature of EU poultry meat exports to Africa highlighted by AI restrictions’, 5 June 2017). This raises not only rules of origin issues but also potentially significant SPS issues. In trade with the EU, the application of trade restrictions in the face of outbreaks of Avian Influenza is country specific (i.e. SPS measures are applied to national production where Avian Influenza outbreaks occur and not to the EU as a whole). In this context any poultry meat produced in the Ukraine entering South Africa as ‘Netherlands’ poultry meat, could undermine the effectiveness of SPS control measures in the face of outbreaks of Avian Influenza in particular regions of the EU at particular times. This suggests a need for the application of much stricter traceability requirements to imports of poultry meat from the EU, not only in South Africa but any ACP country which seeks to use trade measures to maintain the health of national poultry flocks in the context of Avian Influenza outbreaks in different regions of the EU (for more details of issues raised for ACP countries by this Ukraine/EU/ACP poultry trade se companion article, ‘Growing Role of Ukraine in EU Poultry Meat Imports Raises Rules of Origin and SPS issues in EU Poultry Meat Export Trade’, 22 January 2018). Sources of EU Poultry Imports into South Africa 2010-2017
Source: EC Market Access Data Base
|
Source
(1) Reuters, ‘Poultry firm LDC and Saudi Al-Munajem to acquire Doux assets’, 18 May 2018
https://af.reuters.com/article/africaTech/idAFL5N1SP5BH
(2) Globalmeatnews.com, ‘MHP seeks to acquire French poultry processor’, 14 March 2018
https://www.globalmeatnews.com/Article/2018/03/14/Poultry-processor-to-buy-French-business
(3) Globalmeatnews.com, ‘MHP and LDC in battle to take over of Doux, 4 April 2018
https://www.globalmeatnews.com/Article/2018/04/04/MHP-to-invest-in-Doux-Group
(4) Latifundist.com, ‘MHP reconsidered the purchase of a poultry farm in Poland’, 30 January 2018
https://latifundist.com/en/novosti/38696-mhp-peredumal-pokupat-ptitsefabriku-v-polshe
(5) Globalmeatnews.com, ‘MHP begins year with export boost’, 23rd April 2018
https://www.globalmeatnews.com/Article/2018/04/20/Export-boost-for-MHP
(6) EC, ‘EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets’, 19 April 2018
https://circabc.europa.eu/sd/a/cdd4ea97-73c6-4dce-9b01-ec4fdf4027f9/24.08.2017-Poultry.pptfinal.pdf
(7) EC, ‘EU Market Situation for Poultry Committee for the Common Organisation of the Agricultural Markets’, 20 April 2017
http://www.dmia.nl/images/pluimveevlees_april_2017.pdf