Where should a vegetable storage facility be built to prevent logistics from eating into profits?

Growing a high-quality crop is only half the battle. Once harvesting is complete, farmers face an equally difficult challenge: preserving the marketable quality of their vegetables, minimising losses and preventing transport, electricity and labour costs from consuming the entire potential profit.

Choosing the wrong location for a vegetable storage facility can turn a promising investment into a permanent source of additional costs. At the same time, installing conventional refrigeration equipment instead of a specialised storage system can result in product deterioration, excessive energy consumption and the loss of customers.

So, where should a vegetable storage facility be built: directly next to the fields or closer to a major city and the principal market? When does it make sense for a farmer to invest in a private facility, and when is it more profitable to lease capacity at a professional logistics centre?

EastFruit discussed these questions with Andriy Marushchak, Commercial Director at Van Dijk Technics, a company specialising in professional solutions for storing vegetables, berries and fruit, as well as equipment for sorting and packaging fresh produce.

Vegetables can travel farther than berries and fruit

For berries, fruit and apples, locating storage facilities close to the harvesting area is critically important. In hot weather, transporting delicate produce for 100 kilometres or more can lead to a deterioration in quality before cooling has even begun.

Vegetables are a different matter.

Potatoes, onions, carrots, beetroot and cabbage are generally more tolerant of transportation. Therefore, when selecting a location for a vegetable storage facility, investors should consider not only the distance from the fields but also the location of their main customers.

“Buyers purchasing vegetables from farmers do not want to send a five- or ten-tonne truck over a very long distance either. This is why the trend of building vegetable storage facilities near major cities such as Kyiv, Odesa and Lviv, as well as other large consumption centres, remains highly relevant,” Andriy Marushchak said in comments originally provided to the specialist agricultural publication SEEDS.

The closer the product is to its target market, the faster it can be delivered to a retail chain, wholesale buyer, processor or food-service operator.

The main mistake is calculating only the distance from the field to the storage facility

When planning a new facility, farmers often calculate only the cost of transporting the harvested crop from the field. However, the logistics chain does not end at the storage centre.

A comprehensive assessment should also consider: the distance from the storage facility to major customers; the quality and accessibility of local roads; access for heavy goods vehicles; additional loading and unloading costs; the speed at which customer orders can be assembled; access to electricity and other utilities; the availability of qualified personnel;the potential for future expansion.

For example, transporting potatoes from Kyiv region to a storage facility located 300 kilometres away may be economically unjustified. However, if a farm is located only 50–60 kilometres from Khmelnytskyi, building a large storage facility closer to the city may be more profitable than placing it directly next to the fields.

In this case, the farmer gains access to a larger market, while buyers can collect prepared commercial batches more quickly and efficiently.

Farm-based storage or a major logistics hub?

According to the expert, there are two principal models.

The first is a farm-based vegetable storage facility with a capacity of approximately 2,000–5,000 tonnes. Such a facility is built directly on the farm or close to the production area.

This model gives the farmer greater control over the product, storage period and conditions of storage. It can be justified when a farm produces a sufficient and relatively stable volume of one product every year and has reliable sales channels.

The second model is a large logistics complex with a capacity of 20,000–50,000 tonnes or more.

Such a facility is no longer simply a storage building. It becomes a fully integrated centre that can simultaneously: receive produce from different suppliers; cool and store vegetables; sort and grade products; wash and polish produce; assemble commercial batches; pack vegetables in different formats; prepare products for delivery to retail chains.Because these facilities handle a constant flow of trucks and large commercial volumes, they should generally be located close to major cities and consumption centres.

Why leasing storage capacity can be more profitable for smaller farmers

Constructing a private vegetable storage facility requires substantial investment. In addition to the building itself, the operator must purchase ventilation, refrigeration, sorting, washing and packaging equipment, provide reliable electricity supplies, introduce automation and ensure regular technical maintenance.

For a grower producing, for example, 1,000 tonnes of potatoes, investing several million euros in a complete storage and handling complex may not be economically justified.

Leasing chambers at a professional logistics centre may therefore be the most practical solution.

The farmer gains access to modern equipment without having to finance the entire complex independently. Producers can lease a chamber of the required capacity and order sorting, washing, grading and packaging services before selling a fully prepared commercial product.

“A professional line capable of sorting, washing, polishing and packaging produce can cost more than €1.5 million. It is extremely difficult for a smaller producer to purchase such equipment independently. However, dozens of farmers can benefit from the same technology when it is installed at a logistics centre,” Marushchak explained.

As a result, a relatively small farm can offer buyers produce prepared to the same professional standard as that supplied by a major agricultural company.

Why a large refrigerator is not necessarily a vegetable storage facility

One of the most serious mistakes made by investors is assuming that vegetable storage requires only an insulated building equipped with conventional refrigeration.

Different vegetables require different technological conditions.

For potatoes, it is essential to control temperature, humidity and ventilation, support the curing of harvesting damage and prevent sprouting. Onions require proper drying and the uniform movement of air through the stored product. Carrots lose moisture quickly, while garlic is particularly sensitive to errors in drying and storage conditions.

When the equipment cannot maintain the correct parameters for a specific crop, losses may begin long before the farmer notices any visible signs of deterioration.

According to Marushchak, one previously completed storage project was initially fitted with the most basic equipment and effectively operated as an oversized refrigerator.

The owner could not maintain the required storage conditions for different crops, and demand for the centre’s services remained low. After the basic system was replaced with professional equipment, the situation changed significantly. Farmers became more willing to lease capacity because the facility could offer predictable storage results.

Cheaper equipment can become the most expensive decision

The temptation to reduce investment costs during construction is understandable. However, saving money on ventilation, automation and energy efficiency can lead to significantly higher operating costs later.

Hidden costs may include: higher electricity bills; uneven product cooling; condensation; weight loss caused by excessive drying; the development of rots; the need for constant manual supervision;additional labour costs; downtime caused by equipment failures; a lower selling price due to deteriorating product quality.Equipment should therefore be evaluated not only according to its initial purchase price, but also according to the total cost of ownership throughout its service life.

Energy efficiency has a direct impact on profitability

Electricity is one of the largest operating costs for a vegetable storage facility, particularly when produce is stored for several months.

According to an estimate provided by the Van Dijk Technics representative, a conventional system performing a comparable technological task could hypothetically consume around 100 kW, while correctly selected professional equipment could require approximately 35 kW.Actual energy consumption will depend on the capacity of the facility, the crop being stored, the construction of the building, weather conditions and the technology selected. Nevertheless, the principle remains the same: the more energy-efficient the storage facility, the lower the storage cost per tonne of produce. Energy consumption should therefore be calculated during the design stage, not after the facility has already started operating.

Automation can help address labour shortages

The shortage of qualified personnel has become a structural problem for the agricultural sector. This challenge affects not only Ukraine but also many other European countries.

A professional storage system should be able to: monitor temperature and humidity automatically; control fans and ventilation valves; regulate the intake of outside air; respond to changes in product conditions; record deviations from the required parameters; alert the operator to potential risks.This does not mean eliminating human involvement completely. However, automation reduces dependence on manual decision-making and lowers the risk that a single operator error could lead to the loss of a significant share of the stored crop.

Which model should a farmer choose?

There is no universal solution. A privately owned farm storage facility may be the best option for a business with stable production volumes, sufficient quantities of produce and its own professional team.

A major logistics hub is more appropriate in regions with: a high concentration of agricultural producers; a large consumer market; stable demand for storage services; demand for sorting, grading and packaging; suitable transport infrastructure; opportunities to supply retail chains and wholesale buyers.

For a smaller producer, leasing professional storage and handling capacity is often less risky than constructing an independent facility.

At the same time, Ukraine needs both models: smaller farm-based storage facilities and modern regional logistics centres. The key issue is not simply the size of the project, but whether it is correctly located, professionally designed and equipped with suitable technology.

Vegetable storage can become a standalone business

A professional vegetable storage facility does not necessarily have to be part of a farming operation.

Where a region has a sufficient concentration of producers, storage, post-harvest handling and packaging can become an independent service business.

Such a centre can generate revenue through: leasing storage chambers; receiving and dispatching produce; sorting; grading; washing; packaging; assembling commercial batches; preparing produce according to retail specifications.

For farmers, this creates an opportunity to delay sales, avoid seasonal price collapses and access more professional marketing channels. For investors, it offers the potential to develop an infrastructure business supported by recurring demand.

The central challenge is to avoid turning the project into an expensive warehouse filled with refrigerators. A successful logistics centre must provide a complete technological process, from receiving the harvested crop to preparing a market-ready commercial batch.

Looking for professional advice on designing, equipping or modernising a vegetable storage facility?

Van Dijk Technics provides professional solutions for storing vegetables, berries and fruit, as well as equipment for sorting, washing, grading and packaging fresh produce.