There is an essential aspect in the investment in any industry, including horticulture: you should always strive to be number 1 or number 2 in the market. However, leadership does not have to be in the industry – a market participant can create his own niche or segment where he can work comfortably with minimal competition.
Considering that there are tens of thousands of fruit and vegetable growers on the market, how can they become number 1 or number 2? It’s very simple – instead of competing with each other, growers can work in the market together. Cooperation is a real fast track for the development of the Ukrainian fruit and vegetable industry.
This opinion was expressed by Andriy Yarmak, economist at the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO), during the 17th international conference “Fruits and Vegetables of Ukraine-2021. New investment opportunities”. The event was organized by the APK-Inform: Vegetables and Fruits project with the information support of the International Platform EastFruit and the Ukrainian Horticultural Association (UHA).
When fruit and vegetable market players complain that the state does not pay enough attention to the sector and does not help to open new sales markets, it should be remembered that this sector is the least attractive for the state in terms of exports. It is also less attractive to investors. When a large investor chooses a country or industry to invest, he wants to invest a lot of money in order to earn even more in the future. However, the fruit and vegetable sector of Ukraine consists of many small and very small players, which are not interesting for a large investor, especially when there is a chance to invest in the grain or oilseed industry. The level of market, weather and technological risks in the cultivation and sale of vegetables, fruits and berries is several times higher than for most other agricultural products.
“In addition, the agricultural land market has now opened in Ukraine. Many investors prefer to buy land than invest their funds in growing vegetables and fruits. The next problem is the sharp rise in global prices for grains and oilseeds, which has made their cultivation a much more profitable business. Therefore, even small farmers in Ukraine often wonder: why grow onions or potatoes, if it is easier to sow wheat or corn and get a comparable income from 1 hectare, without worrying that the harvest will deteriorate during storage or prices will plummet. Instead, prices for grains never fall as sharply as prices for potatoes or other vegetables. In the case of grains, there are also many traders in the market who are always ready to buy the crop, while the sales of onions of potatoes is problematic in the years of their overproduction.
With this in mind, horticultural growers should remember that they operate in a small and very specific sector where size matters. Overcoming many of these obstacles, reducing business risks and increasing sales prices is possible only by combining efforts – cooperation and more active participation in industry associations.” Andriy Yarmak explains.
The economist at the Investment Centre of the Food and Agriculture Organization of the United Nations (FAO) also notes that there are niches in the fruit and vegetable sector in almost all segments, but without cooperation of growers in the industry, none of them will develop actively enough.
“The fact is that these segments are very small in terms of their volumes, and importers want to work with large systemic players. A producer can be big, but not have systematic work to ensure sustainable product quality and good relations with importers – this is very important. And cooperation itself is a fast path to development.” explains Andriy Yarmak.
The specialist also gave an example of the creation in Ukraine of the first UHA trading platform operating on the principle of open accounting.
“It helps growers not only with exports but also with the sales to the trade chains of Ukraine. Each producer participating in the platform can sell their products there, paying only a small percentage for the development of the project. We recently agreed that this platform will form its own fund used to pay for product marketing needs – the opportunity of growers to take part in trade missions, exhibitions, as well as advertising. This platform is a practical confirmation that cooperation in the fruit and vegetable sector works, and the formats can be various,” Andriy Yarmak notes.
Andriy Yarmak also reports that very often Ukrainian farmers ask themselves the question: what to grow? “But this is the wrong approach. The question should not be what to grow, but how to grow, where and why. If a producer aims only to make money, then, as a rule, he will not be successful. After all, money should be a consequence of the success of a business and a business cannot fail to make money,” the expert sums up.
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