'Borscht set' no longer profitable for Ukrainian producers
Decreased domestic demand, along with the Russian ban, has made it difficult for 'borscht set' producers to earn a living. After decreased consumption, 90% of deals made for growers are for cash in the spot market, taking place on the field or in the warehouse.
"After trading conditions changed, the format of trade itself did not change, and trade went on as before, with more than 80% of all sales of the "borscht set" being purchased by cash on the spot market, directly on the field or from warehouses. The absence of planning sales one season in advance is limiting development opportunities for Ukrainian growers, and due to the absence contracts or market knowledge about how consumption has changed. While growers are waiting for higher prices, they are often staying the same, with no increases once the vegetable are in storage. Sometimes, on the contrary, at the end of winter, vegetables from the warehouses are cheaper than at the beginning of storing season in autumn," explains Tatiana Getman from Info-Shuvar.
"We are seeing the highest prices in Autumn, when Ukrainian growers suspend sales after hearing forecasts about decreased production, however, nothing changes and the situation just gets pushed forward to other months. This is why there are often unpredictable price fluctuations in Ukraine, with traders losing money. Producers also remain in a rather unprofitable position because of increasing production costs in the spring, often with lesser quality. The poor financial results from last season are the reason why we see a significant reduction in "borscht set" vegetable production in Ukraine and higher prices for these products."
"The growers know that consumption has decreased, but they don't really have any good insight into the current situation because they primarily deal in the spot market.
It is quite difficult for them to understand how the demand has changed, so they adapt to the new conditions in the only way they know how, by reducing the cultivation area. This season, in addition to beets, carrot production has also significantly decreased. The reduction was less sharp with onions and cabbage. Commercial potato areas were reduced, but potato production for the population, which accounts for more than 90% of the total production, has not changed in the past three years."
Potatoes and white cabbage is still the leader in Ukraine in terms of consumption, annually producing more than 20 mln tons and 1.5-2 million tons correspondently and almost all the volumes of potatoes and cabbage are consumed in the domestic market. Times are changing however, with consumption of other cabbage varieties seeing a significant decrease in the last 5 years. For example, among all the types of cabbages red and Chinese cabbage occupy the second and third places after white cabbage in terms of production volumes.
The introduction of the Russian embargo, along with the reduction of domestic consumption (the annexation of Crimea and the ATO zone), it has become increasingly difficult for producers to make any profit for ‘borscht set’ producers. In the past, Ukraine had the advantage of being able to enter the market earlier than competitors, which gave them an edge on competitors for the Russian market.
The production season starts its early production in April (for cabbage) and in June for the other vegetables and runs through the autumn for late production. The late production is what is put into storage for the coming winter through spring. Onions for storage are collected in the second half of August - beginning of September, potatoes in September, and cabbage, carrots and beets in the second half of October - beginning of November.
For more information:
Tatiana GetmanInfo Shuvar
Tel: +38 (099) 763-02-32
Publication date: 3/8/2018
Author: Heather Wicks
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