Producers lose up to 25% of potatoes: how does the lack of storage increase prices for consumers?
11 February 16:31
ANALYSIS FROM 
Despite a slight decline in wholesale prices, potatoes are not expected to fall significantly in the near future. According to EastFruit, the key factors remain dependence on imports, lack of quality seed material and difficult weather conditions that affected the harvest. Should we expect a surge in potato prices and what problems do farmers pay attention to?
Currently, wholesale prices for potatoes in Ukraine fluctuate between 18-28 UAH/kg, but long-term forecasts indicate that the price of this product will remain high, according to EastFruit analysts.
What will help stabilize potato prices?
The construction of potato storage facilities will help to stabilize potato prices. About this in an exclusive commentary
“The volatility1 in the Ukrainian potato market is the result of the lack of the required number of potato storage facilities. Potato production has its own cycles: four “normal” years and then one “jackpot” year. In any normal year, there is a surplus of potatoes on the market in September, October, and November. At this time, the farmer sells large volumes of potatoes “from the field” at a reduced price because there is no place to store the harvest. When the potatoes are sold, there is only enough left to fit in a storage facility, basement or barn, and the price goes up,” explains Mykola Hordiychuk.
If Ukrainian producers had storage facilities, the ability to store potatoes on their own farms, it would certainly have a positive impact on the stability of the market price, adds Hordiychuk. The market would not have had dips and then price spikes in winter, resulting in a shortage of quality potatoes.
“The most important thing is that Ukrainian producers lose a lot of potatoes due to the lack of quality storage facilities. In some cases, losses amount to 20-25%. And all this could be the potatoes that, with proper storage, would be supplied from the producer to the chains and to the end consumer, thereby ensuring a uniform supply of this product to the supermarket shelf,” says Mykola Gordiychuk
Potato shortage for the Armed Forces and other government agencies
Ukraine still faces the problem of an even supply of potatoes to state institutions, including the Armed Forces, hospitals, kindergartens and the Border Guard Service. For two years, the border guards have been unable to find 2000 tons of potatoes for stable supplies in the fall. This is the amount that could be provided by one small producer with its own storage facility, but farmers do not have enough capacity.
“There was a problem for two years. What is 2000 tons of potatoes? This is enough for a small producer who would have a small storage facility for 2-3 thousand tons near his farm. He could fulfill their supply requirements,” Mykola Hordiychuk
We are talking about only 2-3 military units or 2-3 border guard detachments. If you add hospitals, kindergartens, and other government agencies, they would all like to have 500-1000 kg of potatoes delivered to them per week, because they do not have adapted storage facilities for storing potatoes. Therefore, of course, the availability of potato storage facilities with forced ventilation at the producer’s premises will have a positive impact not only on commercial structures, but also on the provision of quality potatoes to government agencies, Gordiychuk notes.
Why is it important to include the construction of potato storage facilities in the 5-7-9 soft loan program?
“Ukrainian farmers are working in an uncertain environment. And in the face of uncertainty, you have to be a fool to invest when the risks are very high, says Mykola Hordiychuk. On average, the payback period for a potato storage facility is 5 to 7 years.
“What farmer will invest for 7 years with 19% inflation, uncertainty from the economy, war, and mobilization? Of course, the 5-7-9 program takes away some of the risks. Why? Because the cost of funds becomes cheaper, and when there is support from the state, it is much easier for a farmer to make an investment decision,” Mykola Gordiychuk
The director of AGRICO UKRAINE LLC gives his own example. He says the company built a storage facility this year. However, if there was no partnership program for seed development with the government of the Kingdom of the Netherlands, they probably would not have invested in development and construction.
The 5-7-9 program will serve as a trigger or driver to motivate farmers to invest in sustainability. There are already results that 5-7-9 has strongly motivated farmers to buy new equipment, and there is also development in the grain sector, summarizes Mykola Hordiychuk
Thus, the stability of potato supply in Ukraine remains under threat due to the lack of quality seed material, weather conditions and lack of modern potato storage facilities. Although imported potatoes temporarily compensate for the shortage, the long-term solution is to invest in our own storage facilities. It is especially critical to ensure that government agencies, including the Armed Forces, hospitals and the Border Guard Service, have a steady supply of potatoes. Financial risks deter farmers from investing in storage, but the government’s 5-7-9 soft loan program could be a key driver of industry development and market stabilization.
Читайте нас у Telegram: головні новини коротко
