EastFruit continues to analyze the results for 2021. In this article, we present our version of the TOP-10 events of 2021 in the fruit and vegetable sector of Moldova.
- Weather anomalies affecting the quality of fruit and vegetables and their marketing
Moldova is experiencing abnormal weather for the second year in a row. If in 2020 farmers of the country, where the area under irrigation is one of the lowest in Europe, suffered from the worst drought in recent decades, then 2021 was marked by heavy rains.
Spring 2021 was unusually cold, prolonged and rainy, which affected the start of the growing season of all crops. Hot summer allowed to minimize the lag in the ripening of fruits and vegetables as much as possible, but rainy and cool weather in autumn again prevented the timely harvesting and caused a delay in the ripening of vegetables, fruits and grapes. What is most unpleasant, it affected their quality.
In the fruit sector, the lag of peak harvesting and the entry of the new harvest on the market averaged two weeks (for table grapes of late varieties it was up to three weeks). Growers were often unsure of the high quality of grapes, apples and other fruits and vegetables, and unlike previous seasons, they tried to sell them as soon as possible. There were also other reasons, but we will talk about them later.
Thus, the main share of export-grade plums of the 2021 harvest was sold by mid-November, i.e. about two weeks earlier than usual. In Moldova, this is the second case in the last 7 years when there were almost no plums left in the refrigerators of agricultural producers and traders at the end of December.
A similar situation for table grapes is noted: the export volume in autumn 2021 significantly exceeded the normal one in recent years. According to experts, the country’s winegrowers exported at least 70-80% of all table grapes by the end of autumn, which is for the better.
Finally, the most striking example of a change in the marketing strategy in the fruit business of Moldova is the fresh apple market. In autumn 2021, Moldova exported much more apples than in the same periods of the previous two years.
This is an important fact considering that the bulk of apples of the 2020 harvest from cold storage facilities were sold in January-June 2021. This strategy used to work and allowed to get a higher price than in September-December, but the situation has changed dramatically last season. Production volumes and apple storage capacities in Russia have grown, and competition in the regional and global markets has reached an unprecedented level described in the article “#freshsapplecrisis”.
Therefore, it was a huge surprise for the players on the Moldovan fruit market that apple prices fell in the second half of the 2020/21 season and there was almost no demand in Russia. As a result, according to expert estimates, at least 40 thousand tonnes of high-quality apples of the 2020 harvest from fruit storage facilities were processed into concentrate.
It seems that Moldovan growers drew conclusions and began to actively export apples of autumn varieties in September 2021, shortly after they were harvested. Only time will tell how correct these conclusions are. It is definitely not worth rushing to extremes.
But what Moldovan farmers should pay attention to is improving the quality of apples in order to bring it up to international standards. To do this, it is worth taking advantage of the experience of neighboring Ukraine, which has successfully diversified apple exports after the ban on their export to Russia.
- Record volumes of apple and plum processing
According to the estimates of organizations of growers and processors of fruit and vegetables, at least 320-330 thousand tonnes of apples have been processed in Moldova in 2021. About tens of thousands of tonnes will be sent from cold storage facilities to apple juice concentrate factories next spring. In total, the country will process about 350 thousand tonnes of apples from the 2021 harvest, which is very close to a new record.
On average, nearly 300-340 thousand tonnes of industrial apples were sent for processing over the past five years. However, this isn’t the reason to be proud, because the more apples are sold for processing, the less growers earn. Grovers receive on average 5-10 times less for industrial apples than for those sold on the fresh market. To learn why growing industrial apples is a futile business area, read this blog. This once again confirms our theses that ended the first point – Moldovan farmers urgently need to improve the quality of apples.
Plum processing volumes were also very high this year. However, the main reason was bad weather, namely the excessive rains in May, in the first half of summer, and during harvesting in autumn. This affected the possibilities of long-term storage of plums, so the farmers decided not to risk it.
According to expert estimates, at least 30-40 thousand tonnes of plums were processed in the country. At the same time, thousands of tonnes were sent for processing (into distillates and spirits) and to neighboring Romania. At a certain point, it was these supplies that relieved stress from the domestic market and allowed farmers to keep wholesale prices for plums at an acceptable level.
- New attempts to diversify apple exports
At each point we return to the largest problem – the quality of apples grown in Moldova. Quality will again be a key stumbling block for new attempts to diversify Moldovan apple exports.
As Ukraine’s experience in diversifying fruit exports shows, high-quality apples can be sold in the countries of the Middle East, North Africa and Southeast Asia more expensive than in Russia. To this end, apples need to be grown, stored using high-quality and proven ethylene inhibitors, properly handled, sorted on an optical sorting line, packed in high-quality cardboard boxes, which are different from those used for deliveries to Russia and even to the EU. Also, it should be learned how to pack them for a 30-40, and sometimes even 55-day trip in a sea refrigerated container.
Do not forget that having high-quality apples, you also need to learn how to find buyers for them, as well as sell profitably. That is, you have to invest both time and money in marketing. In 2019, the FAO-EBRD project held the largest B2B forum in Moldova with apple buyers from around the world. Moldovan suppliers could not meet the basic requirements of apple importers then, although there were attempts to make trial deliveries, and the importers’ interest in purchasing fruits in the country. We launched virtual trade missions during the pandemic, and our video about apple suppliers from Moldova was watched by many potential importers worldwide.
The exports of apples from Moldova outside the post-Soviet countries totaled less than 1,000 tonnes since then. Apple exports are unlikely to be much higher this season. However, new attempts to diversify them are better than none. In particular, we wrote about the negotiations of the FreshTime cooperative on the export to the UAE. The attempts of this and other large horticultural/commercial enterprises to enter apple markets in Egypt, India and other countries are also noteworthy.
- Record high prices for walnuts
Global walnut prices plummeted to record lows in the 2020/21 season. Rapidly growing areas and production volumes, especially in the global market leader USA, put pressure on nut prices in the world. It was also aggravated by trade wars between the United States and some Asian countries, which led to a reorientation of American walnut supplies to the European market. Therefore, walnut prices in Moldova, despite a relatively low harvest, were shockingly low last season. In particular, the demand remained low even in the second half of the season, and buyers were constantly reducing the price level.
Thus, there was almost no demand for walnut seedlings in Moldova, and the establishment of new orchards was suspended. For nursery growers this was aggravated by the complication of export of seedlings from Moldova to the EU. Similar was observed in neighboring states – there was no interest in laying new walnut plantations due to record low prices. Moreover, the first cases of uprooting orchards that have reached fruiting were reported.
The situation changed dramatically in the middle of 2021. A drought in the state of California, USA, where the bulk of the world’s premium quality walnut is grown, has led to a downward revision of production forecasts. Despite record acreage, US walnut production fell sharply in 2021, leading to a series of unprecedented price increases starting in June 2021.
Accordingly, wholesale prices for walnut kernels of the new harvest in Moldova reached a five-year maximum by the beginning of December, having increased to 140 MDL/kg ($8/kg). At some point, their prices in Moldovan retail approached a historical record – about 250 MDL/kg ($14/kg). Moreover, this was the price in bazaars, and not in store retail, where kernels in consumer packaging have always been expensive in Europe.
Taking into account the growing global prices, the Moldovan EastFruit team does not exclude that the volume of proceeds from the export of Moldovan walnuts will set new records and reach $100-120 million this marketing season.
The prerequisites for the price records are obvious: the demand from exporters remains very high now, and the walnut harvest in Moldova turned out to be relatively low in 2021 – approximately 25-30 thousand tonnes in hard shells.
Another problem of the industry was exposed this year – an acute shortage of workers. According to the representatives of the Union of Associations of Producers of Nut Crops of Moldova (UAPCN), the volume of walnuts harvested in forests and along the roads has sharply decreased this year.
Considering the record high prices this season, it cannot be ruled out that investors in Moldova will again pay attention to investments in walnuts. After all, walnut production keeps developing in the country. While walnuts went out of fashion, Moldovan farmers were establishing hazelnut and almond plantations. Therefore, according to expert estimates, the total area of nut orchards in Moldova reached 17-20 thousand hectares in 2021. Perhaps this sector of Moldovan fruit growing is ready for investment in processing infrastructure in the near future.
It should be reminded that cultivation and processing of walnuts are developing fast in Georgia that used to import them from Moldova. You can see how a modern walnut processing plant works there at this link, and read about it here.
- Fresh apricot exports record
Apricots have unexpectedly become one of the most demanded segments of the stone fruit market in Moldova. The country exported about 5.5 thousand tonnes of apricots to 16 European countries in 2021.
There were objective reasons for this – problems with frost in the EU countries that led to great losses in the apricot harvest. Similar problems have arisen in Central Asia, in particular in Tajikistan and Uzbekistan. The latter is one of the five largest exporters of apricot globally. Therefore, it is not surprising that apricot prices were high and the demand for apricots from Moldova rose sharply.
Accordingly, the exports of fresh apricots from Moldova in 2021 was a record and several times exceeded the corresponding figures for the last 3-4 years. This is all the more pleasant because many horticultural enterprises that grow stone fruits considered apricots a “by-product” of the production of cherries and sour cherries. In other words, apricot orchards were previously planted to employ full-time and seasonal workers, usually enrolled for caring for and harvesting other stone fruits.
Obviously, exports records in 2021 became possible not because of Moldova’s success in the segment, but because of frost issues in other countries. By the way, European farmers are now trying to solve the frost problem by purchasing wind machines and investing in the cultivation of premium-quality stone fruits in greenhouses.
- Cherry quality issues
The main problem for cherry growers for the second year in a row is maintaining cherry quality. It has been significantly affected by precipitation on the eve of and during harvesting in the past few years. Moreover, this happens both in rainy and dry seasons.
On the other hand, the segment of cherry and sour cherry production is one of the few in the stone fruit sector that has showed a stable growth in acreage over the past five years: from 3.5 thousand tonnes and 3.2 thousand hectares in 2017 to 4.5 thousand tonnes and 4.2 thousand hectares in 2021.
For the further development of the segment, especially in terms of export potential, it is crucial for growers to invest in anti-rain protection or in the cultivation of premium cherries for exports in greenhouses (here you can read and see how to grow large-fruited cherries in greenhouses). However, growing cherries is half the battle. You also need to learn how to cool them (preferably with hydrocooling), sort and properly pack for transportation. You can see how this is done in one of the most modern enterprises in Uzbekistan in this video.
- Reducing subsidies for fruit growing in Moldova
The subsidies for orchards and vineyards were sharply reduced in Moldova in 2021. According to preliminary data by the Agency for Investments and Payments in Agriculture (AIPA), the department received 468 applications from agricultural producers for post-investment subsidies in connection with the establishment of new, modernization or removing of old plantations of perennial crops for a total of 70.5 million MDL (about $4 million) in 2021. This is 14% of the total amount of subsidies for the development of agriculture and rural areas requested by private economic entities this year – 507 million MDL (about $29 million).
Last year, AIPA received 1,119 applications for subsidizing investments in perennial plantations in the amount of 212.5 million MDL (about $12.8 million), of which the department authorized slightly more than 1,000 applications of about 181 million MDL (about $11 million). This is approximately 15% of the state fund for agricultural subsidies last year.
Farmers were not happy with the reduction in subsidies. However, this is positive for creating a more sustainable horticultural business model in the country in the long term.
- Protectionism in domestic trade
Amendments to the law on internal trade were adopted in Moldova, obliging grocery stores to allocate at least 50% of shelves for products produced in Moldova. Some additional regulations were adopted to introduce the measure at the government level, but they were not enough. As a result, this provision of the law never started to work in practice.
Some high-ranking government officials declared that this idea was “anachronistic”. Opposition politicians and many organizations of agricultural producers consider this provision of the law not perfect, but strongly oppose its repeal. Nevertheless, producers of fruit and vegetables in Moldova are already concerned about the authorities’ plans to deprive them of preferences in local retail, which they actually do not have.
However, as international experience shows, such decisions only exacerbate the problems of farmers, trade, the state, and end consumers. After all, if they are applied in Moldova, consumers will be limited in the choice of quality products, and will have to overpay for locally produced ones. Accordingly, consumer spending will rise, and access to quality fruits and vegetables will be limited. Likewise, the quality of products in stores will deteriorate, leading to an outflow of consumers into unorganized trade. It means both the volume of revenue of the chains and the amount of taxes paid by them to the state budget will decrease. Most importantly, as we have already mentioned many times, the motivation of Moldovan farmers to dramatically improve the quality of fruit and vegetables, which is the main obstacle on the country’s path to export diversification, will decrease.
- Low prices for potatoes
Low potato prices in Moldova in the 2020/21 season did not lead to a decrease in the area planted with potatoes, as many might expect. By the way, the prices were low due to the lockdowns in the EU and the lack of potato processing for the needs of the HoReCa segment then. Therefore, imported potatoes pushed prices in the country down as well.
Why didn’t the area planted with potatoes in Moldova decrease in 2021? Instead of selling marketable potatoes cheaply, potato growers decided to turn them into seed potatoes, and put back in the ground hoping for a higher price in the 2021/22 season.
As we understand it, the result is the opposite of what was expected. From the very beginning of the 2021/22 season, the lowest prices for potatoes were established in Moldova in comparison with other countries of the EastFruit price monitoring, and even for exported potatoes from Moldova to Russia, Belarus, Ukraine and the Balkans!
For a number of reasons, including the savings on pesticides and the declining level of agricultural technologies, the quality of the potato harvest in Moldova was rather low, limiting export opportunities and continuing to put pressure on prices.
Claims of seed potato suppliers in Moldova that some of their clients intend to reduce or even give up potato production in favor of grains next year are not surprising.
- Increase in subsidies for agricultural insurance
An amendment was made to the Moldovan Law on Subsidized Insurance of Agricultural Risks, increasing the share of subvention in the insurance premium from 50% to 70%. Thanks to this, the total amount of insurance premiums collected by the insurance companies of Moldova in 2021 has increased considerably. Damage payments for insured events have also sharply increased.
In addition, the Moldovan government adopted a new (expanded) list of risks and crops at the end of 2021, the insurance of which can be subsidized from the state fund for supporting agricultural producers and rural areas. One of the paramount innovations in the list are clearly formulated risks associated with a decrease in the quality (and price) of fruit crops. For example, growers have the right to insure against the loss of the quality of apples damaged by hail and for this reason sold not on the “fresh market”, but for processing. Probably next year there will be corresponding insurance products and demand for them.
If you think that we have missed some important events for the produce business in Moldova, please write in the comments section.
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