Fedir Rybalko: Ukraine is absolutely competitive in the global fruit and vegetable market
Fedir Rybalko: Ukraine is absolutely competitive in the global fruit and vegetable market
Problems with re-export to Russia and the abolition of VAT subsidy to producers contribute to the development of professional exports of fruits and vegetables. The head of the Ukrainian Horticultural Association (UHA) Fedir Rybalko told us about these and other factors impacting the fresh produce industry. He also shared his insights about prices of apples in Ukraine and abroad, in an interview with the portal profihort.com.
– UHA is in the state of formation. The initiative group is working on creating a cooperative export platform with the support of FAO and EBRD projects. Tell us about these processes in more details.
– We are planning to create a cooperative that will be exporting fruits and vegetables.
– What exactly will such a co-operation consist of? Will co-operatives include processors/logistics/ certification/marketing experts, etc.? Who is participating in the cooperative if it is not a secret?
– At the first stage the cooperation will be based on the growers-members of UHA. Processors and traders will only be able to join the cooperative if they produce their own fruits and/or vegetables. We are talking about the exports of fresh and processed products and we are going to open a representative office in Asia.
– What are the most important trends in the development of Ukrainian exports of fruits and vegetables?
– The abolition of VAT subsidies for producers in the fruit and vegetable sector and problems with re-exports to Russia will contribute to the development of systematic professional exports.
– What do you mean by systematic professional exports?
– We mean exports every week of the year and not occasionally, when domestic prices drop too much. We would like to supply certain markets systematically and not sporadically.
– One of the important issues for Ukrainian fruit growers is the issue of state subsidies to partially compensate them for the costs of establishing new orchards. Does UHA also plan to contribute to solving these issues?
– UHA believes that it would be more efficient to stimulate the development of the industry through export subsidies for each ton of products than to provide direct production subsidies.
– How could this be implemented practically? Has anything been done so far?
– All people involved in the process of subsidy distribution are having lots of discussions about what kind of seedlings should be compensated – certified, not certified, Ukrainian, non-Ukrainian, but this will not increase our competitiveness, because it competitiveness does not depend on the number of these seedlings. An approach that works in export-oriented countries is a bit different. In order to sell products for export, it is necessary to achieve a certain level of quality, experience, knowledge and knowledge and this requires investments.
If we can sell on a permanent basis to foreign countries, we will move forward, we will expand our production. The most effective way to achieve this is to create conditions where, after confirmation of an export contract, an exporter or producer receives a subsidy. He will decide where to spend it – for marketing, transportation, or packaging. And to grow the seedlings, it is not clear at all whether they grow up and whether they will produce a crop, and whether this crop will be needed by someone.
Why do we need to create all these commissions on the district and oblast levels, then to bring it all to the level of the Ministry of Agrarian Policy and Food, then the National Commission, then the Controlling Unit to check it and then the economic units of the Ministry of Internal Affairs and the Security Service of Ukraine will check those who checked…
This creates opportunities for corruption at all levels, while the solution of top priority issue such as exports is delayed indefinitely. Not to mention that this financial resource is limited, and its distribution is opaque. This system may work differently and much more efficiently: there is a customs declaration. Show it to the Treasury and get a certain amount per ton of products transferred to you. In such case everything will be transparent, everything will be controlled, everything will be clear and costs of administrating it will be close to zero.
– What varieties and clones of apples can be successfully exported to the EU and other world markets?
– Maximally coloured clones of Gala, if we are talking of popular varieties already produced in Ukraine in large volumes.
-Why not Fuji, Granny Smith, Cripps Pink? Why colour has so much value?
– Importers make more money on colour varieties. You can sell any apple, which satisfies consumers with its tasteful qualities. But how do you brand it will depend on the marketing strategy and approach. Asia has a population of three billion people: someone of them love red apples, some yellow, some like their apples sour and others prefer them sweet, some consumers like smaller sizes and others prefer larger and some simply buy it to make fresh squeezed juices. We are accustomed to have a certain vision, a certain cliché, while the market is very diversified and flexible.
– Why does UHA focuses specifically on the markets of Southeast Asia?
– Because these are the largest and the fastest growing markets for our products.
– How about complexity of logistic to access these markets? Wouldn’t it be easier to start with countries, which are closer to Ukraine? Perhaps from the UK, since the island is overpopulated and most of the local fruits are grown in the greenhouses?
– USA is one of the global leaders in apple exports and it mostly exports apples to Asia although getting there from the US is not easier than from Ukraine. UK is much closer to the US and there is no linguistic barrier there. However, Americans do not export much to Britain, as prices in the UK are significantly lower than in Asia.
in Taiwan along where 30 million people who spend US $200-300 million dollars per year on apples. They do not buy from China and they buy from the US. UK buys about 1-2 thousand tons of American apples for an assortment and it is not very significant. There are three billion people in Asia but there only one significant producer, China, which can sell 1 million tons of fresh apples only.
Apple production in the EU is 10 million tons. We have 10,000 tons, which can be sold either in the bazaars or in Ukrainian networks, but you can sell them in those markets that could offer higher prices. To achieve this, we need to open an office and we are doing it as we speak: collecting money to form a budget and send our representatives there. It is important that such representatives understand the Ukrainian specifics but deal with local matters efficiently.
- Do you consider South America as a potential market?
– South America imports very little fruits, perhaps some pears from Belgium, Holland and Spain. After the Second World War Germans arrived to South-America and 30-40 years later brought fruit production there. Thus, now Brazil produces a million tons of apples plus Argentina half a million tons, plus Chile also produces significant amounts of these fruits. This region is oversupplied with apples and is a major exporter.
– Will the cooperative sales to Southeast Asia assure higher prices for apples than the price at the domestic market?
– We do count on it, because for exports get a VAT refund and because countries of South-East Asia do not grow their own apples.
– Poland is the largest producer of apples in Europe. Since 2010, when the program subsidies for growers was put in place, apple production increased, and Poland outplaced Italy, France and Belgium – historic players of the fruit market, because it began to grow inexpensive apples. Do you agree that price dumping could be a winning market strategy?
– The strategy of dumping, unfortunately, will always be relevant. This is a market tool. We are not yet known on the market and thus, we have to build relationships, to communicate, to invest money in order to sell at higher prices. We do not have such an experience of long-term marketing investments in the fresh market. This market has always been chaotic enough with prices going up and down.
I personally have been involved in analysing fruit and vegetable business since 2004, professionally since 2011. In Ukraine there is an issue of quality of data and analyse as well as understanding and interpretation of the data. Most people are currently talking about production figures and volumes, which is not as important as quality and logistics. We ned to use a value chain approach – an analysis for a specific quarter or six months, which would give us a more realistic picture. Although Poland produces 4 million tons of apples, it also imports some varieties, because they do not grow them. Three months later we can sell apples to Poland, but only during about two weeks of marketing window.
– Do you not consider Poland as a potential permanent market for Ukrainian apples?
– Poland exported apples to Ukraine for many years paying customs duties in Ukraine and 20% of VAT, while Ukrainian farmers only started paying VAT only this year, starting from January 1. We could sell apples to the Polish market only if it is an early apple or a variety not grown in Poland, such as Granny Smith, e.g. But the price should be lower than the price of Italian Granny. Nonetheless, why selling on the Polish market, when there are such attractive markets as Scandinavian countries and Spain, who can pay higher prices?
– Ukrainian producers often complain about low apple prices in Ukraine. Is it a good motivation for them to try exporting?
– For the last 5-6 years our apples were not cheap at all. If we had imports it means that our apples were not cheap and much higher than in Poland. We could not compete with Polish apples in the market of Transcaucasia, Belarus, Kazakhstan, even taking into account preferences of the CIS countries in import duties. This is going to be our first season of cheap apples if the hail does not affect the production.
– And yet Poland, Spain, Serbia, Belarus, Czech Republic are Ukraine are all competitors on the berry market. What are the prospects for the growth of Ukrainian share in the global berry market and the conquest of the world berry market? Should Ukrainian berry growers expect a rigid competition on the global market?
– We are absolutely competitive both: in terms of volumes and in terms of requirements that exist for products in this market. There is no threat from other countries because we are competitive everywhere, where there is manual labour involved. Our land is cheaper, water is cheap, human labour is cheaper and we pay no taxes. There is only a question of the cost of capital, which is somewhat cheaper abroad but the margin is so good that it more than compensates for the difference.
– This was the case for many years, but Ukrainian growers got active on this market only recently. Why is that?
– Some people took a risk and invested into this business after learning about growing global demand for berries and processed products and successful examples are usually followed.
– Are you planning to export any other products through the cooperative export platform?
– Yes, in addition to apples we are planning to export fresh and frozen berries and onions initially.