Friday, March 29, 2024

Ukrainian vegetable market: the worst is ahead

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Pavel Kuliuk, ARR.News
Pavel Kuliuk, ARR.News
My name is Kulyuk Pavel Valerievich. Born in 1977 in the Russian Urals, but have lived all my life in European Ukraine. I graduated from secondary school No. 30 in the city of Lisichansk, Luhansk region. Then I studied at the International Institute of Business Management and Law in the city of Slavyansk, Donetsk region. I started my career as a grocery wholesaler. Then I started working as a marketer in a publishing house. I have been a journalist since 2007. The globalisation of the economy is the driver of my career growth. Being a journalist has become a way of life. Each reportage is a kind of journey to some topic and country. Heterosexual, in a civil marriage, no children. I love gardening and sports. I prefer a cosy home to beautiful travels. With respect and sincerity, Pavel.

In the summer, Ukrainian farmers adapted to work in wartime. However, Ukrainians will have to forget about fruits and vegetables in winter.

The vegetable market is 20 km away from fights

September has begun. For Ukrainians, this is the time when they stock up on vegetables for the winter. The harvest has just been harvested.  Prices are minimal. Buying vegetables in early autumn can save you a lot of money in winter. Then the summer harvest is especially expensive.

Farmers sell a lot of potatoes, onions, carrots, cabbage. These are the main vegetables that are bought for food in the winter. These vegetables as well as meat are the main ingredients of the popular Ukrainian food “Ukrainian borsch”. For a family of two for 7-8 months it is necessary:

  • 100 kg. potatoes;
  • 50 kg. onion;
  • 30 kg. cabbage;
  • 20 kg. carrots.

On September 6, there was such a situation at the vegetable market in Kramatorsk.

Potatoes

Small wholesale from 25 kg. 1 kg. potatoes – $0.29-0.35  (11-13 hryvnias). Retail sale $0.37-0.45  (14-17 hryvnias). In winter, potatoes will cost $0.54-0.67 per kg.* Buying potatoes in September, citizens can save up to half of the money compared to winter. So farmers can earn more if they sell goods in winter.

However, the sale of potatoes now also brings a lot of profit. In the Donetsk region, farmers do not grow many potatoes. A lot of potatoes are grown in the Sumy and Poltava regions. These regions are the main suppliers of potatoes for Eastern Ukraine. Ukrainians grow potatoes.

The distance from Sumy to Kramatorsk is 380 km or 6 hours drive. The distance from Poltava to Kramatorsk is 330 km. or 5 hours drive. Farmers from the Sumy and Poltava regions do not carry potatoes around Ukraine. This is done by intermediaries. They overcome this distance and get their benefit.

A good deal is when the potatoes are bought 40% cheaper than they are sold in bulk. Transportation costs are 10-15% of the total value of the transaction. As a result, the intermediary earns 25% -30% of the transaction value.**

Onions

Оnion. Small wholesale from 25 kg. 1 kg. $0.56-0.62  (21-23 hryvnia). Retail sale $0.67  (25 hryvnia) per kg. In winter, onions will cost about $0.80 (30 UAH) per kg.* Buying onions now, citizens can save from 30% to 50% of the cost. By the same amount, farmers can earn more in winter.

Onions are grown in the Donetsk region. Usually this is done by visitors from Central Asia or Vietnamese and Koreans. These people are legally on the territory  of Ukraine. These people rent small plots of land with an area of ​​several tens of hectares. Usually these are fields next to a river or lake, since watering is very important for onions. There should be a major road next to such fields. Tenant farmers like to sell goods right on the side of the road. The harvest of these people is not very large. Therefore, they prefer to sell the harvest to local residents and not to intermediaries. There has been such a market between the cities of Slavyansk and Kramatorsk for a long time. There are rented fields on both sides of the road. Tenant farmers sell their crops of onions, markings and cabbages right on the side of the road. Many locals come to buy cheap vegetables in this place.

Land rent is paid in cash. Sometimes payment is made as part of the harvest. Therefore, the owner of the land takes into account the harvest of the tenant. This is a very important nuance. If an intermediary wants to buy a crop for resale, then it is better for him to buy a crop that is not accounted for by the owner of the land. A tenant farmer can sell such a crop cheaper. Since it is not necessary to pay the owner of the land. Such a harvest can be a third cheaper than the one that is taken into account by the owner of the land.**

Cabbage and carrots

Cabbage and carrots are not sold in bulk. Not many of these vegetables are required for the winter. But buyers can take advantage of low seasonal prices. The price of cabbage and carrots is $0.67 (25 hryvnia) per kg. In winter, the price of these vegetables can reach $0.90-1 per kg. Savings for buyers is about a third of the level of winter prices.

Apples, pears, grapes

Cabbage and carrots are also grown in the Donetsk region. The details of this business are the same as growing onions.In addition to the main vegetables, fruits are now actively sold. September is the season when apples, pears and grapes are harvested. These are the prices for fruit right now. Price 1 kg. apples $ 0.4-0.54 (15-20 hryvnias). Price 1 kg. pears $ 0.45-0.60 (18-23 hryvnias) Price 1 kg. grapes $1-1.35 (40-50 hryvnia).

These fruits are grown by local villagers. There are no large gardens in the Donetsk region anymore. Farmers do not engage in this type of business. Fruit is not sold in bulk. It is not stored for the winter. Apples, pears and grapes are not bought in reserve for the winter because it is easier to buy imported ones. In winter, large retail chains sell cheap imported apples, pears and grapes. These fruits are no more expensive than local ones in autumn. But because of the war, this rule will be violated. Why will become clear in the next section.

How the war changed the market

Local farmers and villagers adapted to the war. These people were not afraid and worked under fire. Therefore, they have earned. Intermediaries working with local vegetables such as potatoes have also maintained their positions. Roads are open. There is gasoline. People are ready to buy vegetables. Therefore, intermediaries also earn.

But there are two categories of businessmen who have practically lost their source of income. The first category is exotic fruit and vegetables sellers. Bananas, oranges, kiwis, pineapples, coconuts, lemons and other exotic fruits are almost never sold in Donbass. The transportation of these fruits has become very expensive. After all, sea routes in the Black Sea are blocked. Before the war, exotic fruits were brought by ships that moved along the Black Sea.

According to the State Customs Service of Ukraine, in 2021, the volume of imports of fruits and nuts amounted to $835 million. This is 5% higher than the 2020 figure of $795 million.1

Now only Ukrainian grain can be exported by ships. A small amount of exotic fruits and vegetables are imported by trucks from Europe. However, the cost of such transportation is very high. Most Ukrainians cannot buy such fruits. For example, 1 kg. lemons in Kramatorsk costs $2.3-2.7 (85-100 hryvnias). 1 kg. bananas costs $1.2 (45 hryvnia).

There are no other exotic fruits at all. Before the war, lemons cost 2 times cheaper. Bananas cost 2.5 times cheaper. For comparison, potatoes are only 20-30% more expensive than before the war. On average, other vegetables have risen in price by only 60%.6 That is, the inability to use sea transport has destroyed the export of exotic fruits.2

The second category of losers are businessmen who remained in the territory controlled by the Russians. These Ukrainian farmers have lost their traditional markets. Since it is forbidden to supply vegetables through the battle line. The Russians took control of the Kherson region and the south of the Zaporozhye region. These regions provided 70% of early fruits and vegetables in Ukraine. 3 We are talking about cherries, cucumbers, tomatoes, radishes. Although the Russian authorities made attempts to divert supplies to Russia, this was not entirely successful.4 A significant part of the crop was lost.5

Due to the war in Ukraine, difficulties arose with the import of exotic fruits and vegetables. There are also problems with the supply of early vegetables and fruits.

Market prospects

The worst is ahead. With the onset of winter, many Ukrainians will stop buying vegetables. Farmers won’t be able to grow it. The reason is the lack of gas or the high cost of gas. In winter, many vegetables are grown in greenhouses. Greenhouses are heated by gas. However, now this fuel is very expensive.

On September 6, the price of gas on the New York Mercantile Exchange (NYMEX) was 8.425 USD / MMBtu.7 A year earlier, the price was 4635 USD / MMBtu. A twofold increase in the price calls into question the feasibility of heating greenhouses. In addition, there is information about the shortage of gas in Ukraine. The country needs to double its available stocks for the winter. However, this is virtually impossible to do.8 This makes the exploitation of greenhouses unlikely.

It will also not be possible to import vegetables and fruits at an affordable price. After all, the Black Sea is still blocked. Importing food by road from Europe is very expensive. As a result, Ukrainians will have to forget about cucumbers, lettuces, tomatoes and other vegetables in winter.9

The situation in winter can improve only if the war stops and gas prices become cheaper. The vegetable market needs peace. However, this is practically impossible in Ukraine. The war became the mistress of Ukraine.

* Based on seasonal price increases in previous years
** Based on personal experience. Resold onions and potatoes.

References

1. https://delo.ua/agro/osnovnym-postavshhikom-ekzoticeskix-fruktov-v-ukrainu-stala-turciya-393155/
2. https://forbes.ua/ru/inside/morski-vorota-na-zamku-yak-pratsyuyut-zablokovani-cherez-viynu-porti-21042022-5552
3. https://zn.ua/ECONOMICS/cheho-zhdat-po-postavkam-svezhikh-ovoshchej-i-fruktov-v-tekushchem-hodu.html
4. https://www.interfax.ru/world/854785
5. https://news.obozrevatel.com/economics/economy/hersonskie-ovoschi-gniyut-na-svalkah-fermeryi-pokazali-kak-iz-za-okkupantov-vyibrasyivayut-kapustu-video.htm
6. https://news.obozrevatel.com/economics/fea/ovoschi-v-ukraine-vzleteli-v-tsene-bolee-chem-na-50-iz-za-vojnyi-ozhidaetsya-defitsit.htm
7. https://index.minfin.com.ua/markets/gas/
8. https://focus.ua/economics/517427-dlya-obespecheniya-teplom-ukraincev-nuzhno-zakachat-v-hranilishcha-eshche-4-6-mlrd-kubometrov-gaza
9. https://news.obozrevatel.com/economics/fea/budet-li-v-ukraine-defitsit-ovoschej-i-fruktov-zimoj-prognoz-eksperta.htm

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