To date, organic production in the CIS countries is in the stage of active formation, and supplying of the products on the European market has significantly increased in several recent years. Despite the growing demand and expansion of the consumption geography of organic biobased products, the Black Sea region is not so well, and the geography of export supplies can significantly reorient in the short term. Dmytro Sidenko, sourcing manager at the international company GRANOSA AG (Switzerland), which is the importer of organic agricultural products from CIS countries, reported to APK-Inform journalists about the situation on the organic market in the CIS countries, as well as the prospects and problems of the reporting segment.
The company GRANOSA AG was founded in Basel in 1930. The company supplies agricultural products from all over the world for the Swiss food industry and national animal feed producers. Through careful choice of suppliers, constant product quality inspection and customer-oriented approach, the company conquered leading positions on the Swiss market, as a supplier of conventional and organic products.
- Dmytro, the company GRANOSA AG buys organic agricultural products in the CIS countries. Which products are the most popular and why?
Our company is interested in almost the whole range of organic grain and oilseed crops. We purchase corn, wheat, rapeseed, soybeans, flaxseed, mustard seed, etc. Of course, we mainly focus on operating in the food segment, but not the feed one.
- In comparison with the development trends in the reporting segment in the CIS countries for 3-5 recent years, what are the basic changes?
Ukraine was the first country in the CIS, which started producing organic products certified by the EU standards. And to date, the country remained as a leader in the reporting direction. Kazakhstan started entering the market 2-3 years ago. Also, Russia is trying to come to the market, but they have some problems in development of this direction, as they are more oriented towards provision of the domestic market with organic products, and prefer creating their own standards.
Previously, mainly farmers worked with organic products in Ukraine, and it was some kind of life philosophy for them. But to date, companies-exporters got interested in the market segment, they previously exported only conventional products and switched to organic products in attempts to earn the higher margin.
But Russia has somewhat other specific features: ideological organic farmers are focused exclusively on the domestic market, and companies-exporters organize all foreign supply projects for a specific European trader.
As for Kazakhstan, agrarians successfully passed all certification procedures for several years, and started coming on the European market with large-scale volumes of organic wheat. The single issue is controlling over compliance of Kazakh organic products with the EU standards. The country has completely different level of the agricultural environment: as in Ukraine 10-15 years ago, Kazakhstan continues aggressively developing the segment of crop protection products, there is absolutely no control of their usage. But the prime cost of organic crops cultivation is lower, and Kazakhstan can easily engage in predatory pricing, which will most likely happen in the current year. At the same time, I see fairly large export volumes of organic products of the harvest-2016 from Kazakhstan, and in 2017 the country will continue increasing the figures. I am sure that in the current and next year, Ukraine will face a strong competition from Kazakhstan on the organic crops market, and it will continue growing in future.
- In Your opinion, what are the further market prospects of organic agricultural production in the territory of the CIS countries? What factors will support development of the reporting direction?
It is sure that domestic markets will become the single prospect for the future development, because foreign markets started actively closing for the reporting countries. Ukraine, Russia and Kazakhstan moved to the special list of high-risk countries. Importers monitor each consignment of the supplied organic crops, and regularly find the banned chemicals. In my opinion, such trend developed due to the general pollution of the territories because of the uncontrolled use of chemicals by traditional agrarians. Also, fraud cases are quite usual, which discredit the whole organic crops sector. Importers have growing distrust to products from the reporting countries, and the distrust is constantly receiving more and more new grounds.
The foreign market will not actively expand — it is definitively. But competition rates will increase. To date, one might as well say that we have reached the peak prices for all organic products, which motivates agrarians to increase the production rates, and will cause regular price failures in future.
- As for the global trends on the market of organic crops, which countries are the main consumers of organics, and how can the import geography change in 5-10 years?
To date, the USA is most "light" and "tasty" country for exporters. There were some problems when crop processors did not have any clear idea of organic products, they had no standards, and the market continued actively growing, and organic products were the premium products. Companies purchased organic raw materials without a clear understanding of the main procedures and requirements, at the higher prices than in Europe. In fact, we had a situation when traders supplied all organic products to the USA, which were problematic for sales in the EU. But the situation has already changed. The US authorities have understood the situation, and since the spring-2017 they have tightened the control. To date, the USA keep the first position with Germany in terms of purchasing volumes of organic crops. We can consider the European Union separately, but Germany takes 70% of its purchases. I think that the reporting sales markets will continue shrinking for Ukraine, but the Asian markets will start developing.
- What recent trends were observed in formation of the market of organic crops and its by-products?
I will say briefly: the organic crops market reruns the market structure of large-scale crops. If it may not have the same prices, then the structure is the same. And to date, there is a demand for all varieties of organic crops, which means that both consumption rates of rapeseed and corn are growing. Only prices face some changes. Ten years ago, the organic products kept a niche, segment, and it was a premium segment, which only some European consumers could purchase, and therefore mainly sunflower seed, wheat, bread were organic. To date, the consumption rates of organic goods increased, and the product range significantly increased. In Switzerland, it is impossible to find a standard product without a copy in the organic sector. In Germany, nearly 70% of the products are available in the organic format, including the food group (wheat, sunflower seed, bread, oil) and forages, which makes organic meat, eggs, milk, etc.
- Has Your company faced any problems with qualitative indices of imported organic products? Do all products certified as organic meet the European standards?
We permanently face such problems. It is quite traditional. It is important to bear in mind that a certified farm does not mean that there are no pesticides in its products. Certification is the process confirming that a farm provides organic way of crops cultivation. Therefore, we mainly focus on the certification history of a farm when purchase organic products. The second stage is sampling for the laboratory. Sometimes, we face with problems regarding the presence of banned substances or overcharge of the standards. For example, in Switzerland there is no such term as "excess content" - if there are any banned chemical substances, it is no longer organic product, because its concentration is not a subject for discussion. In other countries, there are some concentration guides acceptable to organic products. For example, Switzerland will not accept all products as organic because Germany does so. Therefore, it is difficult to work on the Ukrainian market. Generally, to date the Ukrainian market is fairly transparent, and the quality of organic products is well controlled. Sometimes, there are troubled cargoes, but they are more related to the polluted territories than to the bad practice of companies-producers.
- What features (customs duties, packing, transport, etc.) of foreign trade with organic products can You stress?
There is no any specific features in the reporting sphere. There is a standard label, which informs that it is organic. The European countries do not need any retail supplies from Ukraine, because Ukraine is a country with raw-material economy, therefore all companies purchase unprocessed grains, etc. I think there are no large-scale prospects for Ukrainian companies to develop retail supplies in the EU. Except for working with the existing brands.
- As for competition on the global market between the CIS countries producing organic agricultural products in accordance with the criteria "demand-price-quality", what rating to countries would You make?
Ukraine still takes the first position in the supply of organic grain and oilseed crops. I would put Kazakhstan to the second position, and Russia - the third one. Belarus is absent in the list, and will not come in the nearest future. In 2 years, Kazakhstan will move to the first position, and Ukraine will move to the second one. Russia will remain on the third position, because they have other priorities, they prefer working with conventional products.
Interviewed by Alina Majakova, Elena Cherednichenko, APK-Inform Agency