The Ukrainian company “Stodola” in the Mykolaiv region of Ukraine grows exotic vegetables unusual for the country, such as watermelon cucumber, scorzonera, horned cucumber Kiwano, kohlrabi and chard, truffle potatoes, purple pepper, various baby vegetables, and also produces preservation. All products are certified by European certificates according to the Organic Standart system.

EastFruit talked to the founder of the company, Jan Ostrovsky, to find out about the production of exotic vegetables in Ukrainian climatic conditions, where the company sells its products, and what it intends to bet on in the future.

“Our main task for today is to develop technologies for growing niche crops”.

– Jan, tell me how your business began. Which crops do you grow today and where? 

– We have been engaged in the vegetable business for 5 years. Previously, this was my hobby, which later grew into a business. I like the process itself: from the idea to plant something and ending with the receipt of the finished product. I like the fast dynamics of this business – within 3-4 months you get the result, the crop, and then the final product. This is what attracts the most.

Our crop area is constantly changing. Right now under “niche” or so-called exotic vegetables, about 3 hectares are allotted to us. In addition, we have a separate greenhouse with an area of ​​about 600 square meters, where we grow seedlings of various exotic crops.

We grow more than 30 exotic vegetable crops. If we talk about the most “niche” of them, then this is a watermelon and spikelet cucumber kiwano, black root – scorzonera, kohlrabi, chard, and different varieties of peppers. We also have truffle potatoes. In this culture, we can not yet reach an acceptable level of productivity. Therefore, so far we are engaged in its reproduction and are studying the cultivation technology in detail.

At the same time, we do not go into large volumes of production, since at this stage we are developing technologies. For example, the studded cucumber kiwano in our conditions builds up a large green mass, but does not bloom and does not produce fruit. To achieve its fruiting, as it turned out in practice, is quite difficult. Therefore, so far we are testing various technologies in order to obtain fruiting in an industrial volume.

N.B. EastFruit. Central America, New Zealand, and Israel are regions where horned cucumber is the most widely cultivated. Outwardly, the kiwano resembles a huge overripe cucumber with spikes. In length, the vegetable reaches an average of 15 cm. The peel is solid and inedible. The pulp is green, with a consistency reminiscent of jelly. The culture is whimsical, while drought and waterlogging are equally destructive for it. African horned cucumber is one of the few exotic vegetables that is used in food in almost any form, including pickled. Kiwano fruits are consumed in salt form (for salads) or in sweet, as a vitamin supplement to jams and desserts. High potassium levels have a positive effect on heart function. Freshly squeezed horned cucumber juice is useful for dietary nutrition.

– What other interesting crops do you grow?

– For example, last year we planted the first batch of scorzonera or, as it is called in another way, black root. This year we have made the emphasis on collecting seed material. The fact is that in order to plant, for example, 5 ha of the black root, you need to study the cultivation technology thoroughly in order to harvest a good crop in the future. Therefore, our main task for today is the development of such technologies. We need to know how to grow, fertilize, and control plant pests.

– What are the biggest problems that you had to face in the process of adaptation of exotic vegetable crops to Ukrainian conditions?

– The biggest problem is the development of a technological map of the conditions of organic farming. It should be borne in mind that our climate is not always suitable for such crops. At the same time, there are cultures for which the sun is necessary for large quantities. For example, these are the watermelon cucumber and the kiwano cucumber that I have already mentioned. We understand that the weather is unpredictable, therefore it is necessary to minimize risks. In particular, until temperatures rise, we try to keep seedlings of crops in our greenhouse, and we plant in the open ground later.

– Your company is engaged exclusively in the production of organic products. Why did you decide to bet on it?

– We have a small production. Based on this, it is difficult for us to compete with large manufacturers. Therefore, we decided to choose for ourselves the direction of production of the final organic product (3 hectares of land certified Organic Standart), which we ourselves grow and process. As the practice of our business has shown, the niche direction of the craft product is more competitive. At the same time, we work both in the domestic, fairly small market and in the organic markets of European countries.

Speaking in the context of promoting our products to export markets, we attach great importance to participation in specialized exhibitions. Over the past few years, we have taken part in 4 such events. In particular, these are such well-known exhibitions as BioFach and Anuga. Based on the results of participation in such events, we received feedback from the client, importers from various countries contacted us, who, having familiarized with our product line, talked about their segments of interest.

As for export markets, participating in various exhibitions, we saw that the most interesting is the watermelon cucumber. In particular, German companies are ready to buy it. Various types of purple, orange pepper in the pickled form are also popular.

Participation in exhibitions helps us in choosing a further vector for the development of the company. Having preliminary agreements and proven technologies, we can immediately provide specific customers with the necessary volumes of a particular product, and in the future, we can grow vegetable crops directly under their order. This year we are launching our product processing workshop. With the help of it, we will process our cultures and then we will provide trial lots to each interested client on the basis of which, in the future, we will form a portfolio of orders for our company.

– Tell us more about the processing industry of your company.

– Today we produce pickled vegetables, vegetables in the form of snacks, vegetable purees, sauces, and vegetable drinks. This year we also plan to launch the production of snacks in the form of vegetable chips. For this, we planted a special black variety of corn. This is a niche product for a narrow consumer segment. Nevertheless, there is a demand for it, and we want to satisfy it.

– The company “Stodola” has already occupied its niche in the domestic market in the production of exotic vegetables, as well as processed products from them. What retail chains do you work with?

– We work with such Ukrainian trading networks as Silpo, Auchan, and Good Wine. By cultivating niche cultures, we simultaneously form a culture of their consumption and increase consumer awareness of a variety of products.

We measure our production volume by tens of thousands of cans. On average, one can consume one kilogram of products. That is, if we say that we have issued 50 thousand cans, then, therefore, we processed 50 tons of products. This is a small amount for the market. Next year, our company plans to increase the volume to one million cans. In the future, in order to increase production, it will be necessary to engage in attracting an external investor.

– When does the company start and end the production cycle?

– It begins in March with planting seedlings in greenhouses. We finish in August-September after the completion of the product verification process for compliance with all necessary quality requirements. In the remaining six months, we are engaged in marketing issues such as sales, promotion, search for markets for the sale of our products.

– How did the current situation related to difficult weather conditions, the introduction of a quarantine regime due to the COVID-19 pandemic, and a drop in consumer demand in your business affect you?

– We did not feel any significant decline in sales. Since our products have a long shelf life, on the contrary, during quarantine, their sales volumes increased. In such a situation, it was convenient for people to purchase them in conditions of limited shopping trips. In addition, our products are sold in the middle price segment, where the listed problems are not felt as strongly as in the case of budget-category products.

We also launch a new, modern product processing workshop. So far we are talking about the company’s own funds. Perhaps next year, when we receive export contracts for the supply of large volumes of our products, we will search for external investors, because we will need large working capital.

“Deciding to enter this business, you should not think about the profit in first years”.

– What amounts are we talking about when it comes to commissioning such a processing plant?

– The price depends on the choice of equipment. You can buy a new Italian line, or you can implement previously used equipment. To start a workshop that meets the requirements of HACCP, you need to invest from $ 100 000. This is the base amount, from which it is worth starting from those who want to implement such a project.

– How profitable is the business now?

– If we talk about the organic segment as a whole, then in the world it is developing much faster than in Ukraine. Nevertheless, the development of the organic sector also exists in Ukraine. If we talk about the profitability of a business, then it depends on many factors. Our company has not yet reached profit, as it invests all the time in the development of its production. In my opinion, one who decides to enter the produce business should not think about profit in the first years.

– What are the forecasts for the development of your niche business in the near future?

– We are optimistic about the future. If we talk about EU countries, the market there is very promising and fast-growing. Plus, its development is stimulated at the legislative level. In particular, we are focused on working with German partners. In this market, we already have certain achievements. We are also interested in the UK market and the Scandinavian countries due to the high consumption of organic products, while domestic production is not able to fully satisfy consumer demand. We also have agreements on the supply of products to the UAE market. But the main question for us today is not even the channels of implementation, but the establishment of technology and the achievement of an acceptable production cost for us.

– Recently EastFruit noted that you published a post published on Facebook searching for fruit and vegetable farmers to cooperate with. Tell us in more detail what kind of cooperation are you interested in.

– There is a number of products that we do not currently grow. For example, berries. The same applies to components such as sugar and sunflower oil we need for production. Moreover, we need such products only in organic quality. Based on this, we started looking for partners who could supply the products we need for our production. Moreover, we are not limited only to the search for such partners in Ukraine. For example, today we get organic spices from Poland since such products are not yet produced in Ukraine. We require organic certificates from each supplier of such ingredients for production.

 – Often, premium products from the fresh market are products with high added value and are more expensive than processed products. Based on this, does the company have plans to scale up the business and grow exotic products for their subsequent sale in the fresh market?

– Yes, we’ve been thinking of such a strategy for doing business. In particular, by sorting the grown products in order to send them to the fresh market in the future. However, it must be understood that this requires additional investment in storage facilities and in equipment. I am sure that in time we will come to this.

Сообщение New exotic veggies from Ukraine: kiwano, chard, scorzonera and truffle potato появились сначала на EastFruit.

Let’s take a look at two things that will define the future shopping trends: the evolution of fruit and vegetable trade, and the development of the real estate market and urban farming.

Let’s start with real estate and urban farming.

In the Eastern Europe region, “smart home” is still something very futuristic. In comparison, in the USA, according to various estimates, almost every third house is equipped with such a system. It includes all aspects of managing all home systems: heating, lighting, power supply, ventilation, electrical appliances, security, watering the lawn, and much more. Besides, many houses and apartments have automatic watering of home plants, and the humidity sensors give a signal to the Smart Day system to water the plant when necessary. 

Yes, this is the new trend: urban agriculture in private houses and apartments. What might it look like? 

Many houses are already sold and advertised as “property with fruit trees and shrubs,” but many fear these options since taking care of them is expensive. But what if the property has its own fully automated urban farm for growing salads, herbs, strawberries, and other berries? Imagine the green wall of a house or an apartment with beautiful and entirely environmentally friendly berries hanging from it, with decorative lighting that can become a fancy decoration to any room? By the way, why not implementing this in offices? Urban farming walls could create an exciting cozy space and provide clean and useful products for employees. Such production requires a minimum area, and it will be possible to order a ready-made set of everything necessary for a new production cycle in any store.

Of course, now, it is not economically feasible. There is still a necessity to improve the growing technologies, reduce the cost of lighting systems and their efficiency, work out the issues of providing plants with food, and much more. But this is only a matter of time if someone will systematically work on this. In this case, each person will be able to provide their family with fresh herbs, salads, and, possibly, berries, even living in an apartment of a multi-story building, regardless of the climatic conditions.

This will have a positive impact on human health and the ecology of the Earth, and allow people to save much money on food when technology becomes more accessible. Indeed, salads, herbs, and berries are delivered over very long distances, often by air, which leads to a significant amount of harmful emissions into the atmosphere and increases production cost. The products themselves are still not perfectly fresh. Picking greens or berries at home will add a lot to freshness and taste. Moreover, as the selection process evolves, new delicious varieties appear.

As you can guess, with time, the autonomy of houses will increase significantly, and they will learn how to store electricity better. The cost of solar panels will decrease even more, and their efficiency will improve. Therefore, many houses will charge their home batteries during the day and become self-sufficient in electricity, without the need to connect to city networks. Using part of this energy to grow products directly in the house will be a logical next step. Besides, when connected to the smart home system, the plants can easily survive if everyone went on vacation for a week or two. Watering and light will work without interruption.

This can have severe consequences for the businesses that supply greens and salads. The industry, of course, will not disappear at all. Still, many will have to change from producing greens and berries to delivering everything one needs for their cultivation in urban conditions.

As for the real estate, a fully self-sustaining house or even an apartment with its own farm can be an absolutely unique advantage in the real estate market.

As for the future of the fruit and vegetable trade, the COVID-19 crisis showed us that having food delivered to our homes is a good option. However, it also became evident that companies who deliver cannot handle a large assortment of fruits and vegetables, because there are many problems with perishable products like greens, lettuce, and berries. At the same time, oranges, apples, bananas, tangerines, and other fruits, which remain fresh longer, are easier to sell in online formats. 

Accordingly, if greens, lettuce, or berries are grown at home, the demand for them in online shops may decrease. Thus, it will also indirectly contribute to the development of e-commerce in fruits and vegetables.

Will salads be sold in ordinary grocery stores? Most likely yes, but it is possible that the stores themselves will become smaller and people will visit them much less frequently. Moreover, even grocery stores may have their production of greens and salads. That is, greens and salads will be grown on shelves rather than put there by the supplier. The example from today’s realities is the Albert Hein supermarket in the Netherlands.

Therefore, it is possible to note the following trends in the long term:

1. a decrease in the volume of commercial production of greens and herbs, as well as some berries;
2. a sharp decrease in the distance that an average bunch of greens or lettuce travels before it reaches the consumer;
3. the transition from city farms to home farms;
4. an increase in the supply of solutions for providing home farms with everything necessary and connecting them to smart home systems;
5. reducing the cost of greens, salads, and even berries by consumers and reducing the retail trade of this category of goods.

These trends will be most relevant in countries with a cold and temperate climate, where people spend much more time indoors than in countries with a warm or tropical climate. Besides, in these countries, people pay more for fresh products, and companies deal with the problem of excess emissions of CO2 and harmful substances in the delivery of these products to consumers.

Сообщение Shopping at a grocery store to buy berries, salads and greens? What old-school nonsense! появились сначала на EastFruit.

In the first part of the blog, we have analyzed global trends for the entire agribusiness and its sectors. In this part, we will talk about how coronavirus and the global economic crisis have already affected the production, export, import, and processing of vegetables, fruits, berries, nuts, herbs, and other fruits and vegetables in the world and the countries of Eastern Europe.

However, forecasting something in this situation is extremely difficult. Therefore, we will build on the most likely scenario. It is worth noting that the world’s level of uncertainty is now the highest in the last hundred years.

Thus, let’s start with the general trends and move on to the situation in the countries.

1. First of all, the consumption structure of food products has changed under the influence of the following factors:
   • Demand has grown for products that can be stored longer because people are less likely to go shopping to reduce the likelihood of becoming infected with the coronavirus. Thus, citrus fruits, apples, vegetables of the so-called “borsch set” (onions, carrots, beets, potatoes) turned out to be in a winning situation, and those that quickly go bad (berries, herbs, cucumber, tomato) are in a less advantageous position.
   • Demand for cheaper products has grown, and demand for expensive products has declined, as household incomes have already dropped. And this trend will only strengthen in the coming months. Again, local products win in this situation, and imported ones lose because national currencies devalued. Also, more expensive products, such as berries and nuts, asparagus, exotic fruits, as well as all products certified as organic, became less popular, while cheaper ones are in high demand;
   • Demand has grown for products that, according to the public opinion, can fight viruses or strengthen immunity. These are, first of all, products such as garlic, onions, lemon, and ginger;
   • The demand for packaged products has grown, despite the fact that it is more expensive because people unreasonably fear that the chances of contracting a coronavirus will be lower if they buy the product in a package;
   • The population’s demand for processed products and frozen products has grown because they can be stored longer, while demand from HoReCa (the foodservice industry) has fallen to almost zero. In particular, this industry was the primary consumer of these products in the countries mentioned above.
   • Demand on products that were grown specifically for HoReCa fell. For example, the main consumers of asparagus in Ukraine are restaurants. It is entirely incomprehensible who will buy it at all this year. For example, in India, a farmer feeds cows with strawberries, broccoli, and salads, because there is no one to even give out for free since these products have always been delivered to restaurants, and local people are almost unfamiliar with them. Even if the restaurants open, it is obvious that many people will not go to them in the first months because caution and lack of money will restrain them. Similarly, HoReCa was a major consumer of frozen foods, fresh-cut products, as well as bulk products. Their production now has to be stopped or urgently reoriented.
   • Demand for many types of imported fruits and vegetables fell due to the devaluation of most countries’ national currencies and an increase in the value of imports relative to local products.
2. Product sales channels have changed.
   • In many countries of this region, authorities have banned food markets. This catastrophic decision led to the loss of sales markets, primarily by small and medium-sized farmers, because the availability of supermarkets in all countries, including the leader in this indicator, which is Russia, is extremely low. In addition, networks in almost all countries in the region sell significantly higher volumes of imports than local products. After all, it is possible to apply the same safety rules that are in supermarkets for open food markets and trays. Moreover, governments should have created a simple procedure for temporarily permitting the work of non-food businesses and restaurants in the format of grocery stores. This would have reduced the concentration of people queuing in supermarkets.
   • Again, HoReCa is the most important sales channel. In the USA, for example, more than half of all fruits and vegetables were consumed by restaurants, hotels, cafes, and other representatives of the HoReCa industry. In many large cities of this region, the share of HoReCa in the consumption of fruits and vegetables was also very high.
   • Import and export in many countries are blocked due to restrictions on travel. Therefore, those countries that are heavily dependent on exports or imports now have big problems. At the same time, countries like Ukraine that do not depend heavily on imports or exports benefit. A striking example is hazelnuts and greens in Georgia. Export has stopped. At least hazelnuts can still be preserved, but the greens must be removed from the greenhouses before the end of the season, and cucumber and tomato have to be planted. These are direct losses.
3. Labor force, its efficiency, and cost have changed:
   • In countries that hoped for an incoming workforce, including Poland and other EU countries, there will be problems harvesting berries and fruits, as well as some vegetables. Even if the local workers who have lost their jobs agree to harvest fruits and vegetables, their effectiveness will be significantly lower than that of immigrants, because the immigrant is always more focused and motivated. As a rule, a worker goes abroad to work, because he or she can earn 2-3 times more than at home. Accordingly, a worker values ​​this work more. At home, he or she will receive less and will be less motivated.
   • In many countries, if there is quarantine at the time of work, problems may arise with the transfer of workers to the fields. These problems are already in place, and farmer labor costs have risen significantly.
   • Countries from which people commuted to work are more likely to benefit, especially in those segments where harvesting requires a lot of manual labor. The positive effect will be achieved if farmers can solve logistic problems and ensure the safety of employees.
4. The difference in prices for fruits and vegetables in different countries has grown significantly due to the emergence of new logistical barriers, more expensive and complicated logistics. Most likely, this trend will continue. Consumers in countries with a shortage of certain products will be forced to pay more to ensure their imports and exporting countries may have too low prices on the domestic market for export items that will not cover production costs. By the way, it is already obvious that both farmers and the population in many countries of Eastern Europe and Central Asia will expand the area under traditional vegetables. And this means that the supply of such products can rise sharply and there is a threat of falling prices.
5. Logistics has become more complex, and shipping costs have risen sharply due to high risks throughout the delivery chain. This severely limits the capability of export and import, especially when it comes to the inexpensive positions of vegetables, fruits, and berries.
6. Losses in vegetables, fruits, and berries grew throughout the entire value chain for the following reasons:
   • People make larger one-time purchases, which leads to an increased percentage of spoiled products at home, which means that demand will be higher to compensate for the loss;
   • Losses also increased at the level of supermarket chains, as the previous information on the demand structure is useless and they have difficulty in predicting the correct volume of product purchases;
   • Another reason for the losses is the inability of the networks to work with local products in developing countries and the lower quality in terms of safety due to the lack of proper post-harvest refinement of products;
   • Losses are possible at the level of farmers and traders due to labor shortages, as well as the inability to timely ship certain types of products. In many countries, huge volumes of products that cannot be sold through conventional distribution channels are already being thrown away.
7. The costs of production and the cost of growing vegetables and fruits can increase significantly in countries that depend on imported material and technical resources: fertilizers, plant protection products, seeds, seedlings, packaging, and those that rely on the foreign seasonal workforce.
8. The mechanization and automation of all production processes will become more relevant than ever before because this will guarantee uninterrupted production.
9. Processing of fruits and vegetables may increase due to higher demand for processed products with longer shelf life, as well as a higher supply of cheaper raw materials in specific segments, making it difficult to sell fresh.
10. Online sales of fresh fruits and vegetables have already risen sharply, both in the B2B and in the B2C segment. This will be the starting point for a faster transition of the business to digital dimensions, which will ultimately reduce the cost of transactions. In response to difficulties with selling early vegetables in Ukraine, EastFruit helped create a UkrOpt trading group based on Telegram, in which almost 1 thousand participants were registered in a week. Our other EastFruit Trade Platform group continues to be the largest among all platforms and already has more than 6.7 thousand participants from 25 countries of the world!

Now, let’s talk about the situation in individual countries.

• Uzbekistan will receive a lot of problems associated with a fall in demand in Russia and a rise in the logistics cost. Besides, Uzbekistan products had previously hardly hit the supermarket shelves in the Russian Federation, being sold mainly in markets. If the work of the food markets is complicated or limited, this will become an additional problem. Therefore, the season for Uzbekistan fruit exporters may not be the best, but processors will receive a lot of available raw materials. After all, the local market is not able to consume such volumes of fresh fruit. There may also be problems with the export of greenhouse vegetables and herbs, even in the next season. Nut exporters are also now forced to cut prices, and the long-term forecast remains negative. At the same time, the country is not particularly dependent on imports. Only the availability of potatoes can be at risk, and prices can be high.
• Ukraine found itself in a rather comfortable situation, since it does not substantially depend on imports or exports, and its domestic market is rather large. The most considerable losses may be experienced by exporters of walnuts, who take the leading position of the country’s fruit and vegetable export. The difficulties of blueberries producers and producers of other berries are also possible, especially if quarantine is not completely canceled until the season starts. But the processors of cultivated berries are likely to receive a more substantial offer of more affordable raw materials. If the crop does not suffer from frost, apple producers are likely to encounter low prices, approximately as in the season 2018/19. Most likely, Ukraine will dramatically increase the area of ​​potatoes and vegetables, and next season their prices may drop significantly.
• Moldova has already suffered significant losses. In particular, apple prices have fallen, and this spring, when they usually rise, and contracts with buyers in the Russian Federation were broken because they were not ready to pay the previously agreed prices due to the devaluation of the ruble and the decline in incomes of the Russian population. Walnut exporters have similar problems since prices are falling, and with them, demand, while the cost of logistics is growing. In the new season, a decrease in demand for table grapes is also possible. But a genuine incentive will be given to the development of local vegetable growing and potato growing, as the country is now almost completely dependent on imports. In the meantime, before the start of the new season, the prices of these essential goods (onions, potatoes, garlic) can be very high.
• Georgia experiences problems with the export of hazelnuts and greens. In addition to these two positions, Georgia also exports significant volumes of tangerines, persimmons, and peaches. There may be some problems with the export of peaches, and the persimmon and tangerine seasons are already over. Georgia already has problems with onions, potatoes, and other vegetables at affordable prices, but early production will begin soon.
• Tajikistan annually exports significant volumes of onions, table grapes, dried apricots, and other dried fruits, as well as, to a lesser extent, fresh stone fruits. The country imports mainly small volumes of citrus fruits, bananas, and greenhouse vegetables. Most likely, problems may arise with the export of fresh table grapes if the borders are still closed by the beginning of the season or due to lower consumer incomes. There is also a threat that many countries will dramatically expand onion areas, which could harm prices and demand. At the same time, Tajikistan can take advantage of a favorable situation in the lemons market and increase exports, though their volume of production in this country is not very large. Dried fruits are likely to continue to be in demand since Tajikistan has a competitive price for them, but perhaps exporters will have to agree to even lower prices.
• Russia and its fruit and vegetable business will find themselves in a rather favorable situation since the devaluation of the ruble, and a decrease in household incomes will increase the demand for those products that are grown in the country and reduce the demand for imports. Russia is a net importer of all types of vegetables and fruits, so the situation for farmers will be generally favorable. The prices for all goods have already risen sharply, and this will ensure the desire, at least, not to reduce the farming area. As for importers, they can drastically reduce business volumes and profits, because imports of fruits and vegetables to Russia are tied directly to world oil and gas prices. Accordingly, we can expect a collapse in imports to levels close to 2015.

Thus, the situation will change very dynamically, so farmers will have to pay attention and track the most important factors. Uncertainty in the contracting of products will increase; therefore, in order to minimize the risk level of the business, farmers should significantly increase the efforts to market and promote their products. Those who will have several options for selling products are likely to be able to go through this crisis as painlessly as possible, which will definitely be very protracted.

Сообщение COVID-19, the global economic crisis and their impact on the fruit and vegetable business of Uzbekistan, Ukraine, Moldova, Georgia, Tajikistan and Russia (Part 2) появились сначала на EastFruit.

The coronavirus pandemic has changed the habitual and well-established ideas of people about almost all areas of life.

Due to the rapidly changing situation in the world, it seems relevant to talk about what is happening now in the agricultural sector, fruit and vegetable industry, and dwell on different segments of the market of vegetables, fruits, berries, nuts, potatoes, fresh herbs, and much more. Besides, we will assess the possible consequences for these sectors in the near and medium-term, starting from the basic scenario of a pandemic. We will dwell in more detail on the situation in countries falling within the scope of the EastFruit project: Uzbekistan, Moldova, Georgia, Russia, Tajikistan, Ukraine, Belarus, and Poland.

In the first part of the blog, we will talk about the global situation in agribusiness, and then we will go on to analyze the fruit and vegetable industry and individual countries of the region.

Thus, let’s start with global trends.

1. The world is already in a state of the most serious global economic crisis of this century, and, possibly, in the worst crisis since the Second World War. What does this mean for economies? This means that currencies will depreciate, and the concept of value will be greatly modified.
2. The negative impact of the crisis on the agricultural sector will be less in comparison with the impact on other sectors of the global economy because the need for food will continue. However, even in the agricultural sector individual sectors and individual countries are already negatively affected. Even the IT industry is likely to suffer more significantly, despite the large increase in demand for IT solutions for remote work of people. Therefore, investing in the agricultural sector now is a good idea.
3. The global economic crisis will make the vast majority of people and companies in the world poorer. This is especially true for countries that previously earned money on the export of oil, gas, and other fossil hydrocarbons (due to a sharp decline in hydrocarbon prices), as well as those that had developed industry or exported industrial raw materials. Therefore, the demand for expensive and optional products that can easily be replaced in consumption can fall sharply, while the demand for more basic, irreplaceable, food products can even grow.
4. The global market, due to border closures and restrictions on food trade, is no longer global. Situations are already possible when in one country prices for a certain type of strategic food can skyrocket and many residents will not be able to afford it, while in another country this product will be sold at a bargain price unprofitable for the farmer because this country restricts the export of this strategic commodity. In the long run, everyone loses due to the fact that farmers stop growing the product, which is becoming unprofitable, and the price crisis takes on a global shape.
5. Investments in the agricultural sector, despite the crisis, may even grow, as the situation in other sectors will be worse. But preference will be given to industries with the highest level of mechanization.
6. Food losses as they are distributed (food losses) will rise sharply, because:
   • now, due to quarantine measures, people are less likely to shop, but they are buying more products. Accordingly, they deteriorate already at the consumer;
   • violation of the supply chain leads to the downtime of ships for many weeks, which often leads to partial or even complete deterioration of the transported food. Similar problems arise in the supply of vehicles and other modes of transport;
   • manufacturers may have difficulty harvesting certain crops due to labor shortages in certain countries, which depend on seasonal labor;
   • farmers may have financial difficulties ensuring the entire production cycle, as well as traders and processors, which can lead to poor quality and increased losses, as well as reduced productivity.
7. The crisis will have a significant impact on agricultural sectors that are directly related to energy prices, in particular, bioethanol, where sugar cane and corn are the main sources of raw materials, as well as on biodiesel, where rapeseed is mainly used. Together with a possible drop in demand for meat, the long-term impact on global corn prices will be greatest. Pressure will also be exerted on sugar and rapeseed prices. But this does not mean that prices will necessarily fall everywhere because the number of new trade restrictions will increase/appear, serious local shocks and price disparities are possible. For example, sugar or corn may well be too expensive in the importing country and too cheap in the exporting country.
8. At the same time, the demand for food crops, such as food wheat, rice, and cereals can grow significantly, because these are basic and inexpensive strategic products that people begin to consume in crisis situations.
9. The vegetable oil industry can also be divided, while cheap oils will have a certain advantage. However, in general, it will suffer less than others, since vegetable oil is an essential basic and strategic food product. A certain negative for producers and processors is possible only in terms of a possible decrease in the demand for protein meals in case of a decrease in demand in animal husbandry. However, the big advantage of the grain and oilseeds is the absence of problems with labor since almost all production is mechanized.
10. Food processing products of food crops are also unlikely to suffer very much, although it is possible that there will be local protectionist measures in individual countries. They may also be negatively affected by the devaluation of the currencies of importing countries against key currencies. However, they are least affected by the fall in the HoReCa segment, that is, the restaurant and tourism business, because such products are easier to cook at home.
11. The meat industry may suffer more than others, as the demand for more expensive types of meat may decrease markedly. At the same time, poultry farming may even win, because it is the cheapest type of meat. The fishing industry could suffer even more significantly.
12. The dairy industry may also suffer losses, especially those segments that are focused on the production of expensive cheeses and other high value-added products. It is likely that the prices of milk protein and fat will converge again.
13. The fruit and vegetable industry will develop completely heterogeneously. Besides, some segments may grow sharply, while others will practically disappear.
14. The global logistics, trade flows, and food production of FMCG (branded, ready-to-eat, and packaged) will also change dramatically. Demand for products for restaurants, hotels, and the catering industry will drop sharply, so there will be a rollback in value-added. Countries, where tourism provided significant demand, will sharply reduce the volume of imports of raw materials and finished products. Accordingly, trade flows will also change.

Summing up, those countries that produce everything necessary to fully provide their own population with food will have an advantage. In particular, Ukraine has a high level of food security, which is a net exporter of almost all basic food products. In addition, Ukraine, relatively recently (in the 90s of the last century), gained invaluable experience in ensuring food security by mass processing of household plots by the population and production of everything necessary on their own. Another benefit for Ukraine is the return of many labor migrants, which will provide the agricultural and food industries with the necessary labor.

However, the sharply increased dependence of Ukraine on the import of fertilizers, seeds, plant protection products, and other elements of technology is causing concern. At the same time, it is still difficult to expect significant problems with their supplies, most likely they will simply increase significantly in price. At the same time, rising food prices can more than offset the increase in production costs.

In the second part of the blog, we will dwell in more detail on the fruit and vegetable industry and the impact of coronavirus and the global economic crisis on the production, trade, and processing of vegetables, fruits, berries, and nuts of certain countries of the region.

Сообщение COVID-19, the global economic crisis and their impact on agribusiness (Part 1) появились сначала на EastFruit.