In terms of the further development of the agricultural market of Ukraine, such segment as organic farming also continues actively developing. The trend already reached the global scale, and continues growing every year, while remaining quite closed and difficult for forecasting both in terms of yield, prices, and the sales directions. As well as traditional segment, the Ukrainian market of organic products is export-oriented, while the presence of rather large number of counterfeit products on the grocery shelves is the main difficulty for increasing of demand on the domestic market.
Does the Ukrainian government take the sufficient measures to reverse the situation? What are the main difficulties in the production and selling of organic products?
APK-Inform Agency talked with the Head of export department of one of the largest enterprises in Ukraine working in the sphere — the agroindustrial group Arnika, Viktoriya Vasilchenko, about the condition and prospects of the market of organic products in Ukraine, as well as the main obstacles for its development.
— Viktoriya, in 2013 Your company began developing its transition to organic production. How complex was the process for the company? What results has the company managed to achieve?
To date, the need for comprehensive changing of the whole production technologies is one of the most tense moments in the transition process to organic farming. It developed, due to the fact that the term "organic" involves the absolute non-use of chemical herbicides, pesticides, fertilizers, etc., i.e. the complete refusal from all measures that agrarians already got accustomed to use in the traditional production. At the same time, the organic production requires a wide range of technological processes (for example, secondary tillage, observance of the timely planting dates, as well as postplanting works: weeding out, etc.).
In order to cover all reporting processes, it is necessary to use modern specialized machinery and units. To date, the company's fleet of machinery was updated at the level of 90%. There are completely different machinery types that are not used in the traditional agriculture.
Another important point is changing of the attitude of our employees, because it is necessary to convey the ideology to each of them, from the management to maintenance worker. During the transition period of the company to organic production, the composition of our team was significantly updated, and to date it consists of like-minded colleagues, who really care about what we do.
— Taking into account Your experience, how can You estimate the payback period of organic production?
It is quite difficult to estimate and compare the marginality and payback period of the traditional and organic farming. Many people mean by marginality the difference between the selling prices of traditional and organic goods. However, it is extremely important to take into account the expenses. For example, our machinery consumes nearly 130 l/ha of fuel per season, while in the traditional agriculture the figures total nearly 60 l/ha. At the same time, those who believe that in organic farming it is possible to have a high margin and low investments in the production processes, are sadly mistaken.
The organic farming requires the significant level of investments. For example, in 2016-2018 period we invested more than 10 mln EUR. And the process will not stop, we constantly monitor its development and try to buy new machinery, reconstruct our storehouses, look for new sites, etc. The production of organic crops is the process of continuous improvement and renewal. Therefore, to date we are continuing to invest in various processes, including agricultural machinery and infrastructural facility, as well as agricultural science and researches. All investment objects will allow us to ensure the good production performance, proper storage results, and timely exports of organic products of the top quality.
— How do You estimate the level of development of organic farming in Ukraine?
Of course, the organic farming in Ukraine is actively developing, and it will continue developing. Every year we see the growth of land areas that are in the transition period, or already received the status of organic. To date, the increase is still small, but stable.
We are constantly looking for new ways and opportunities for the further development. In the reporting issue, everyone makes his own choice. Someone still continues working with fairly simple mechanisms, and makes crop weeding by hand, and there are companies that, like Arnika, keep in step with the time, and apply the most modern machinery and equipment.
— In Your opinion, what factors are holding back development of the organic sector in Ukraine?
I would mention the absence of subsidies from the government as the first and most significant factor. As for the cases of other countries (for example, such European countries as our neighbours — Poland and Romania), there are some state subsidies aimed at development of organic farming, and they are provided on a regular basis, and in sufficient number. But in Ukraine, there is no such state support.
The need for large-scale investments for the first 3 years (during the transition period to organic farming) is the second important point, because in the reporting time the average farmer is forced to sell his products at the prices of traditional agricultural products, since the organic status has not been confirmed yet. Everyone is aware of the scale of investment required for the complete reversal of the approach to agriculture at all stages of tillage and crops treatment. And in the most difficult period, one even can't compensate all capital expenditures with the higher selling prices. The point really scares many farmers, and slows down to make a decision in favour of organic crops production.
— To date, Ukraine is actively discussing the planned opening of the land market. Would You share Your opinion. How can the issue affect the further development of organic farming in Ukraine?
The issue is the third factor slowing down development of the organic sector in Ukraine.
To date, companies still continue working on leased land, and can not 100% look ahead with confidence. In such circumstances, nobody will give any guarantee that the land that has the status of organic, will not be applied to traditional cultivation tomorrow or next year, and will not be planted with classic crops.
We understand that opening of the land market in Ukraine is inevitable, and we are preparing for the reform. I think that opening of the land market will allow us and other Ukrainian farmers to manage on their own land.
— Are there any problems with covering the needs for high-quality seed material and other material and technical resources, required for cultivation of organic crops?
Unfortunately, the industry really has the problem. To date, there is not enough organic seed material in Ukraine. There are only a few producers of such seed material, and Arnika is one of them. Our company specializes in the production of organic soybean seeds and industrial hemp. In addition, despite the current register of Ukrainian producers of organic seed material, the range of offered products in the country is still small. As a result, we and other farmers are forced to contact the producers of traditional seed material and make contracts in advance for the supply of clean, untreated, non-GM seeds. In the current year, we faced the fact that the required hybrid seeds were in short supply, and it was quite difficult to buy them on the domestic market of Ukraine.
In addition, all types of machinery used in organic farming is imported and produced in Austria, Germany, the USA, etc., it is usually custom-built, and arrive clearly in the certain period.
— How has the attitude of consumers to organic products changed recently? How much have its popularity and demand increased on the Ukrainian market?
Our company is the producer of raw materials, not finished products, so to date we do not have the reporting information in full measure. But I can answer the question as a consumer. I live in a small town of Kremenchuk, and if 3-4 years ago we did not have any organic products even on shelves of large supermarkets, but to date you can often find organic dairy products, flakes, groats.
— Generally, the exports became the main sales direction of organic products in Ukraine, including Your company. To date, Your company exports organic products to Germany, Switzerland, Austria, Poland, Estonia, Lithuania, the Netherlands, New Zealand, and the USA. How can You characterize trading relations with the reporting countries? What difficulties do You have?
It is not possible to associate any country with the certain type of trade. First of all, in any country we strive to find reliable partners for a long period. We try not to work on the spot market, but establish the long-term reliable relationships, and all our clients, with whom we work, have been with us for many years. Even when we find new clients, we try to establish the long-term serious relationship with them. At the same time, it happens that negotiations and acquaintances with each other may take a long time — 1-1. 5 years.
— What markets do You consider as the most prospective for organic products?
I can tell what markets we want to develop in the nearest future. There are the USA and China, which are very interesting and high-volume markets. Also, the markets of Canada, Scandinavia and Japan remain the top priority, but we already have a little experience with them.
To date, Ukraine is not a member of the European Union, and considered as country of the third world. Therefore, to date the products of Ukrainian origin do not find much demand on shelves of supermarkets in the EU or the USA.
Interviewed by Anna Tanskaya, APK-Inform Agency