The profitability of growing medicinal herbs in the first four years is 46% and will grow in the future. The technologist-consultant expressed this opinion for the cultivation of medicinal plants of the company “Shlesem-Ukraine” Olexander Gubanev during the online webinar “Industrial and private cultivation of medicinal plants.”

The event was organized by the Ukrainian Horticultural Business Development Project (UHBDP).

“If, for example, you grow medicinal plants on an area of ​​25 hectares, you will have to spend about UAH 2.5 million ($ 911 thousand) on the purchase of machinery and equipment. During four years of growing gross production, the costs will amount to approximately UAH 3.8 million ($ 138.5 thousand). That is, the total costs, in this case, are 6.3 million UAH ($ 229 thousand).

At the same time, the total cost of raw materials that the farmer will be able to grow over these years will be UAH 9.2 million ($ 335.5 thousand). Thus, we can get a net profit at the level of 2.9 million UAH ($ 105.7 thousand) “, explained Olexander Gubanev, revealing the nuances of the business model for growing medicinal plants.

The specialist explained that these profit figures, at first glance, are not very large. “However, we are talking about the first four years of business, during which the farmer acquires everything necessary for its successful continuation, including machinery, equipment, and irrigation systems. Therefore, starting from the 5th year, the costs in this business will go only to the growing process itself, and, accordingly, the profits will increase,” said Olexander Gubanev.

At the same time, he emphasized that starting a business of growing medicinal herbs without having enough equipment and equipment costs from an area of ​​no more than 10 hectares.

According to the expert, this type of business is not entirely suitable for large agricultural holdings because a large amount of manufactured products, in this case, as a rule, is at the expense of quality. Most of all, this type of business is suitable for small and medium-sized farms.

“Growing medicinal plants requires a high level of proficiency. Medicinal herbs require much more care, knowledge, and skills than vegetable crops. Besides, medicinal plants are mainly wild plants, which have the property of prolonged germination, which has another name, in particular, “germination friendliness.” The top layer of soil for planting medicinal plants should be prepared in such a way as to preserve moisture as much as possible for further germination of seeds,” said Olexander Gubanev. If a person wants to grow medicinal plants, then this is precisely the sphere of agribusiness where you can get some of the most significant profits in the smallest area.”

Сообщение Profitability of growing medicinal herbs at the start of the project reaches 46% – opinion появились сначала на EastFruit.

Manufacturers complain that supermarket chains put very high prices for fruits and vegetables on their shelves, but demand very low prices and large payment delays from suppliers.

EastFruit experts analyzed margin levels in supermarket chains in the cities of Kyiv and Dnipro to assess how much the chains earn on different products. To do this, we conducted monitoring in dozens of stores of all popular supermarket chains of these two cities, taking into account only the lowest price for goods of standard quality. Then we compared the averaged indicator for the city with the average wholesale price, at which gardeners and vegetable growers shipped products from their stores or packaging centers. At the same time, we evaluated only the most popular positions of fruits and vegetables.

Monitoring was carried out in November 2019. The research shows the policy of supermarket chains in pricing different categories of products.

“Carrot was the most profitable product for Ukrainian supermarkets in the fruit and vegetable department. The average mark-up for carrots reached 72% and was slightly higher in Kyiv than in the Dnipro. By the way, regarding carrots, vegetable growers had the most complaints, because prices for it this year fell by an average of 60% compared to last year, ” says Andrei Yarmak, an economist at the investment department of the UN Food and Agriculture Organization (FAO). “At the same time, of course, this does not mean that all networks earned that much. This is an average indicator. However, our data allows us to derive margins for each individual network of each individual city, ” the expert notes.

Table grapes took second place in terms of profitability, at which supermarkets also earned about 72% in relation to the average wholesale (purchase) price. Greenhouse tomatoes took third place, while supermarkets earned them an average of 58% in relation to the purchase price. However, the margin on cucumbers was only about 28%.

Despite the sharp rise in wholesale apple prices this season, supermarket chains also left very high margins on their sale. In both Kyiv and the Dnipro, the average mark-up for the most affordable supermarket chain apple was 56%. By the way, the margin for onions was about 49% on average.

Another deficient position this year for Ukraine is potatoes. Many Ukrainian supermarkets actively traded imported potatoes from Russia. The average margin, in this case, ranged from 33% in the Dnipro to 40% in Kyiv, subject to the sale of domestic products. When selling imported potatoes, they managed to earn an average of 20% more. This is the answer to the question of why potato imports to Ukraine are breaking all records now. Working with imported potatoes are much more profitable.

But imported fruits were not so profitable for supermarket chains. Margins on citrus fruits (orange and tangerine), as well as on bananas, were minimal, not exceeding 5-10% on average for each of the cities. Probably, for this reason, supermarket chains in Ukraine sell more citrus fruits than potatoes per year.

Considering that EastFruit also determined the level of margins for greens, but neither parsley nor dill is the best-selling goods for supermarkets. Therefore, the mark-up level is higher than at the popular mass positions of vegetables and fruits. Higher earnings were in dill, where the average margin was 272%. That is, dill sold in the supermarket is, on average, 3.7 times more expensive! On parsley, the average margin was 193%.

Сообщение How much do Ukrainian supermarket chains earn from selling fruits and vegetables – margin analysis появились сначала на EastFruit.

Vegetable farmers complain that the profitability of growing traditional vegetables and potatoes in Russia in 2019 fell to a critically low level, and only a few managed to earn profits. Despite the restriction of imports from the European Union, the USA, and Ukraine countries, and the huge state support for agriculture, the vegetable growing industry did not manage to maintain its profitability. 

What are the reasons, and should potato and vegetable producers in Russia expect an improvement of this situation in 2020? EastFruit analysts offer their vision of the answers to these questions.

First of all, it is noteworthy that the most challenging situation is in those product categories that are subject to the maximum level of production mechanization. Due to the availability of access to financial incentives, Russian producers were able to purchase modern machinery, build high-quality storage facilities and purchase equipment for processing, cleaning, washing, sorting, and packaging potatoes, carrots, table beets, cabbage, and onions. Large landmasses made it possible to implement large-scale projects, dependent on the availability of labor resources only to a small extent.

As a result, the production of traditional vegetables of the “borsch set” (cabbage, carrots, onions, and beetroots) and potatoes in Russia grew continually, and their quality was improving. The growth of the industry is clearly seen in the dynamics of imports. For example, in the 2017/18 season (June-May), Russia imported 685 thousand tons of marketable potatoes, but already in the 2018/19 season, imports more than halved to 317 thousand tons. Imports of onions, carrots, and beets are also declining annually, albeit less sharply. At the same time, imports are conducted mainly to the Asian part of Russia and the Ural region, due to the geographical proximity to China and the countries of Central Asia (Uzbekistan, Kazakhstan, Tajikistan, and Kyrgyzstan), from which cheap off-season vegetables come in the spring.

At the same time, the export of vegetables and potatoes from Russia is growing. In the 2018/19 season, Russia delivered 47 thousand tons of marketable potatoes to Azerbaijan and significant volumes of production to the territory of Ukraine not controlled by the government. Russian-made seed potatoes were also actively exported to Azerbaijan and the countries of Central Asia.

Another notable event was a sharp increase in onion exports to Serbia and Moldova (16 and 12 thousand tons per season, respectively). However, the most considerable resonance was caused by the shipping of Russian onions to the EU countries, in particular, to Romania, Poland, Estonia, and Lithuania.

It would seem that the industry is developing, but the fall in prices for products has been going on for two seasons in a row. Currently, prices for cabbage in Russia, for example, are already almost two times lower than last year and amount to 10-11 rubles/kg (16-18 US cents). Carrots in bulk are sold, on average, 1 rub/kg more expensive, and beets – 1 rub/kg cheaper than cabbage. At the same time, the decrease in prices in relation to last year for carrots averaged 8%, and for beets – 15%.

Onion prices fell on average by 15% and equaled to 12 rubles/kg, the equivalent of 19 US cents. Potato prices fell even more significantly – an average, by 20% per kg. It is possible to buy potatoes in bulk from a farmer for 8 rubles/kg (13 US cents), which, according to potato farmers, does not cover production costs. However, the prices are decreasing, even though in the 2019/20 season, Russia actively exported potatoes to Ukraine, Moldova, and other countries.

A systematic export of root crops, tubers, and other vegetables could save Russia’s horticulture. However, it is also possible to note specific challenges. First of all, the whole fruit and vegetable trade in Russia is set up to import products, and it isn’t easy to turn it in the opposite direction. Manufacturers themselves do not have the required experience in exporting and logistics. Given the remoteness of Russia’s production regions from potential importing countries, the import costs are higher than those of the products imported. Besides, the cultivation and preparation of vegetables for long logistics, as well as the requirements of importers for the varietal composition, quality, and packaging of vegetables, can differ greatly from those that exist in Russia.

Thus, is there hope for a domestic market? Can it be expanded? EastFruit analysts believe that this will be difficult to do because the consumption of traditional vegetables is declining. Consumers increasingly prefer more exotic vegetables and fruits. The demography of Russia itself does not leave any room for hope for a substantial increase in the number of consumers. At the same time, the costs of producing vegetables and potatoes in Russia continue to grow, fuel is getting more expensive, wages are rising, technologies that have to be imported are becoming more expensive, and the level of state support for vegetable farming is reduced. So it is tough to expect the growth of business profitability.

Сообщение Crisis of vegetable farming in Russia: why the profitability of production is falling down? появились сначала на EastFruit.