Saturday, February 4, 2023

What is happening in the Australian-Ukrainian agricultural market

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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.

Trade between Ukraine and Australia is actively developing. The total sales of Australian goods and services are growing faster than Ukrainian ones. Australian farmers are also increasing sales faster than Ukrainian farmers. However, this was not always the case. 2023 may strengthen the position of Ukrainian farmers.

Australian and Ukrainian farmers compete for the export of products

According to the latest known data for January-April 2022, the trade turnover between Australia and Ukraine amounted to US$95.7 million. This is 2.2 times more than in the same period a year earlier. Basically, the indicator increased due to the growth of exports of Australian goods and services to Ukraine. These were mainly Australian oil products, gas and other fuels.1

In 2021, trade also increased and amounted to US$215.2 million. Ukrainian exports to Australia increased by 43 per cent and reached US$60.9 million. Australian exports to Ukraine increased almost 3 times and amounted to US$154.3 million.2 Agricultural products were the main commodity exported by Ukrainian businessmen to Australia. The most popular item was “Animal, vegetable fats and oils, cleavage products”. This amounted to more than a third of all Ukrainian exports to Australia. Ukrainians sold “Animal, vegetable fats and oils, cleavage products” for US$24.94 million.3

The products of Australian farmers were also among the top products that were exported from Australia to Ukraine. “Seeds and fruits of oil plants” took the second place in the total volume of Australian exports to Ukraine. These goods were sold in the amount of US$39.912 million in 2021. This is almost a quarter of the total Australian exports to Ukraine. In 2021, Australian farmers exported more goods than Ukrainian farmers did. However, the share of agricultural products in total Australian exports was less than the share of agricultural products in total Ukrainian exports. In more detail, the structure of agricultural exports of Ukraine and Australia is presented in the study “States by commodity structure in foreign trade in 2021” (Країни за товарною структурою зовнiшньої торгiвлi у 2021 році) made by the “State Statistical Service of Ukraine”. This file in Microsoft Excel format in Ukrainian can be downloaded here.4

In 2020, the situation was different. During this period, Ukrainian farmers exported more goods than Australian farmers did. Then from Ukraine to Australia exported agricultural products worth US$19.93 million. This was half of the total Ukrainian exports to Australia. From Australia to Ukraine exported agricultural products worth US$4.57 million. This is almost a fifth of all Australian exports to Ukraine. In 2020, Ukrainians most actively exported to Australia all the same “Animal, vegetable fats and oils, cleavage products”. Then these goods were sold in the amount of US$17.09 million. Australian farmers most actively exported “Alcoholic and non-alcoholic beverages.” These items have been sold in the amount of US$2.73 million. In 2020, the export of Ukrainian agricultural products to Australia increased by 10.4 per cent. During the same period, Australian agricultural exports to Ukraine increased by 47.6 per cent.5

As we can see, in 2021, Australian farmers not only beat Ukrainian farmers in terms of export value. Australian farmers have changed the structure of exports. The emphasis was shifted to “Seeds and fruits of oil plants”. Previously, “Alcoholic and non-alcoholic drinks” were most actively exported. The change in the main exported product made it possible for the Australians to win. Ukrainians, as before, continue to focus on the export of “Animal, vegetable fats and oils, cleavage products”. At the same time, agricultural products dominate in the total volume of Ukrainian exports. Australian agricultural products are not the main export of Australia to Ukraine.

The Australian Government has supported Ukrainian farmers

2023 may strengthen the position of Ukrainian farmers in the Australian market. To support Ukraine, the Australian government has abolished duties on imports from Ukraine. The 5 per cent duty is abolished for 12 months. This will be valid from July 4, 2022 to July 4, 2023. The exceptions are alcohol, fuel and tobacco products. Excises will apply to these Ukrainian goods.6

The Ukrainian government wants to expand support for agricultural producers. Ukrainian officials are asking their Australian colleagues about this. On September 14, 2022, an online meeting was held between the Minister of Agrarian Policy and Food of Ukraine, Mykola Solskyi, and the Minister for Agriculture, Fisheries and Forestry of Australia, Murray Watt.

During the meeting, the Ukrainian official spoke about the need to remove restrictions on the export of Ukrainian products with a high degree of processing.

“Currently, customs restrictions on Ukrainian grain export have been canceled. But they were not canceled for the processed products. Each country has its own restrictions on different markets. If we are all in favor of free markets, then it would be right to give Ukraine the opportunity to supply processed products, such as meat and other processed products,” Mykola Solskyi said.7

If this happens, the range of Ukrainian agricultural products that are exported will increase. Much will also depend on the unblocking of ports in the Black Sea. Sea transport is the main way to export goods to Australia. Now ports can only be used to implement the so-called “Grain Deal”. On November 19, 2022, this agreement was extended by 120 days.8 That is, there will be good opportunities for the export of Ukrainian agricultural products until April 2023.

Six months later, it will be known how Ukrainian farmers will be able to use the Australian government’s cancellation of import duties. Now we can talk about how an ordinary Ukrainian buyer sees the results of the export activities of Australian farmers.

Australian products in Ukraine – few and very expensive

Retail sales of Australian farmers’ products are done in Ukraine by large supermarket chains or online stores. Finding Australian products in agricultural markets or small shops is almost impossible.

ATG store
An ATB store in Kramatorsk. ATB stores sell products from Australia. This store was closed near the beginning of the war (April 2022) because trading near the fighting is dangerous. Photo: Pavel Kuliuk.

Large retail chains prefer to import food and drinks from Australia without intermediaries. An example of this is the retail network “ATB”. This is enterprise was the leader in terms of revenue in Ukraine in 2021.9 The company is registered in the Dnipropetrovsk region. According to regional statistics, the company “ATB” is on the 5th place in terms of imports of goods from Australia among all companies in the Dnepropetrovsk region.10 Importing goods from Australia without intermediaries helps ATB supermarkets maintain low prices. Affordable price is the basis of the marketing strategy of this company.

But not all businessmen do this. Australian food and drink is sold by many small companies whose capacity is too small to import goods from Australia without intermediaries.

Such businesses buy Australian food from middlemen. Because of this, costs increase. But firms save money by using online stores to sell. The largest online store in Ukraine is “Rozetka”.10  Many companies can sell goods in this online store. To do this, businessmen only need to conclude an agreement. The “Rozetka” sells goods from Australian farmers. There are not many of these items. These are nuts, spices, coffee, shrimp, drinks and meat.

Most often, Ukrainian businessmen sell macadamia nuts in Rozetka. These nuts are grown in Australia. But these nuts are sold under the brand of companies registered in Turkey or South Africa. Macadamia is one of the most expensive nuts sold in Ukraine. The price of 1.1 lbs (0.5 kg.) Unpeeled  nuts is UAH 399  or US$10.8 at the official exchange rate.11 The price of 1.1 lbs (0.5 kg) of shelled macadamia nuts is US$23.6 (UAH 869).12 This is the highest price for fruits in Ukraine.*

It also sells a seasoning made from Australian kelp. This item is made and packaged in Australia. The price of a pack weighing 0.11 lbs  (50 gr.) is US$8.4 (UAH 310).13 This is a very high price. Usually seasonings in Ukraine do not cost more than US$1.3 (UAH 50) per pack.*

The online store sells Arabica coffee beans. Coffee is grown in Kenya and Ethiopia. This coffee is packaged in Australia. The price of a pack weighing 0.55 lbs (250 gr.) is US$10.6 (UAH389).14 This is a high price. However, this is not unique. Other brands of coffee are also sold at this price or even more.*

Businessmen also sell headless langoustine shrimp. The price of a package weighing 4.4 pounds (2 kg) is US$45.7 (UAH 1680). These shrimp are made in Australia.15 This is a high price. However, this is not unique. Other brands of shrimp are also sold at this price or even more.*

Marvelous. But the online store sells a carbonated drink made in Australia. The price of a bottle with a capacity of 0.375 litres is $1.6 (UAH 60).16 This is one of the most expensive carbonated drinks in Ukraine.*

Meat from Australia is also sold in Ukraine. For example, this food can be bought on the well-known site of commercial ads prom.ua. This is super expensive meat. Perhaps the most expensive in Ukraine. Tenderloin Fillet Steak Wagyu MB 8-9 sells for US$262 (UAH 9 630 ) for 2.2 lbs (1kg).17 To understand how expensive it is, people need to know the average salary or pension in Ukraine. In 2022, the average monthly salary in Ukraine is US$380 (UAH 14 025).18 In the same period, the average monthly pension in Ukraine is US$128 (UAH 4 759).19 That is, the average salary in Ukraine can buy only about 3.3 pounds of this meat. An average pension is enough to buy only about 1.1  lbs of Tenderloin Fillet Steak Wagyu MB 8-9.

Let’s be frank. Cheaper meat from Australia is also sold in Ukraine. The price of steaks depends on the marbling of the meat. The cost varies from US$67.7 (UAH 2 491) for 2.2 lbs (1kg) of meat marbling MV 1+ (20) to US$82.3 (UAH 3 026) for 2.2 pounds (1kg) of meat marbling MV 4+. (21) Even so cheap meat from Australia is destined for high-end restaurants or very rich people. Beef produced in Ukraine is sold on local markets for US$4.7-6.8 (UAH 175-250) per 2.2 lbs (1kg).*

Australian wine, like meat, has a wide variety of prices. But unlike meat, the price of wine made in Australia is affordable for Ukrainians.

Inexpensive wine from Australia is sold in sets. For example, six types of inexpensive wine cost only US$52.7 (UAH 1 938). This set includes 6 bottles with a capacity of 0.75 litres each. That is, one bottle of wine costs US$8.7.22 Even for Ukraine, this is an affordable price. Expensive Australian wine sells for US$75.9 (UAH 2 790) for 1 bottle of 0.75 litres.23

Food from Australia isn’t just for people. In Ukraine, businessmen sell dog food made from kangaroo meat. Food positioned as a treat for dogs is made by a company registered in Germany. Kangaroo sausages are sold at US$6.1 (UAH 226) for 0.22  lbs (100 gr).24  That is 2.2 lbs kangaroo meat costs US$61. This is comparable to the cost of a marbled steak from Australia. It is also more than 10 times more expensive than the price of beef at Ukraine! As we can see, the cost of most products from Australia is very high. Of course, if it is not sold in ATB. The high price level is explained by long supply chains and intermediaries. I would like to hope that the increase in the export of Australian food to Ukraine will reduce prices and increase the range of goods.

References

* Information based on the author’s buying experience

1. https://www.kmu.gov.ua/en/news/uriad-avstralii-na-rik-skasuvav-myta-na-import-z-ukrainy
2. https://australia.mfa.gov.ua/spivrobitnictvo/315-torgovelyno-jekonomichne-spivrobitnictvo-mizh-ukrajinoju-ta-avstralijeju
3. https://tradingeconomics.com/ukraine/exports/australia
4. Downloaded from address: https://www.ukrstat.gov.ua/Noviny/new2022/new2022_u/new_u_02.html “21.02.2022/Країни за товарною структурою зовнiшньої торгiвлi у 2021 році”
5. https://agravery.com/uk/posts/show/ukraina-na-104-zbilsila-eksport-silgospprodukcii-do-avstralii
6. https://www.epravda.com.ua/rus/news/2022/07/5/688878/
7. https://minagro.gov.ua/en/news/australia-interested-expanding-ukrainian-exports
8. https://www.dw.com/en/ukraine-russia-extend-black-sea-grain-deal-for-120-days/a-63785447
9. https://forbes.ua/ru/company/15-naybilshikh-riteyleriv-ukraini-khto-naybilsh-pributkoviy-i-zbitkoviy-sered-atb-fozzy-epitsentru-rozetka-ta-inshikh-19102021-2610
10. https://dia.dp.gov.ua/ru/sotrudnichestvo-dnepropetrovskoj-oblasti-i-avstralii/
11. https://rozetka.com.ua/342025225/p342025225/
12. https://rozetka.com.ua/342357271/p342357271/
13. https://rozetka.com.ua/218848879/p218848879/
14. https://rozetka.com.ua/288721708/p288721708/
15. https://rozetka.com.ua/360983382/p360983382/
16. https://rozetka.com.ua/bundaberg_93492171/p307356188/ 17. https://prom.ua/p1699349671-stejk-file-minon.html
18. https://fakty.ua/ru/407352-zarplaty-ukraincev-nachnut-rasti-v-kabmine-obyasnili-kogda-eto-proizojdet
19. https://www.rbc.ua/ukr/news/pensiyi-ukrayini-zrosli-pfu-nazvav-seredniy-1665728309.html
20. https://prom.ua/p406573586-stejk-ribaj-bez.html
21. https://prom.ua/p1501659364-stejk-ribaj-bez.html
22. https://vino.ua/ua/degustatsionnyy-set-avstraliya-vinnyy-kaleydoskop_153/
23. https://vino.ua/ua/yangarra-murvedr-maklaren-veyl-2016-krasnoe-sukhoe-avstraliya/
24. https://a-zoo.com.ua/ru/kovbaska-premium-mini-z-miasa-kenhuru-100-g/

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