Today, potato prices in Ukraine remain the highest not only in Europe, but throughout Eurasia. The wholesale price of potatoes currently ranges from 7 to 10 UAH / kg (28-40 US cents per kg). Moreover, transactions are made mainly at 8-9 UAH / kg, and at the end of the week even at 8 UAH / kg (32 US cents), many producers refused to sell potatoes.
It would seem that prices should be reduced - after all, the harvesting of late potato varieties has recently begun in professional farms growing 10 to 500 or more hectares of potatoes, and the households have completed the harvesting, which means that the offer of products on the market is currently close to the maximum. However, prices not only did not decline, but last week they even tended to increase, and this week they were kept at a high level.
For comparison, in Russia at the moment you can buy potatoes 2,5 times cheaper than in Ukraine, and in Belarus - two times cheaper. Therefore, it is not surprising that such a significant price difference provokes imports. And he, according to our data, continues to increase daily, because the earnings for the trader are very good.
Even in Moldova, according to EastFruit price monitoring data, potato prices are now lower than in Ukraine. But it was Moldova that was the main sales market for Ukrainian products throughout the last season. However, now Ukraine in this market will be replaced by Russia and Belarus, where prices are significantly lower. In addition, this will allow to ensure the return loading of the transport supplying Moldovan apples to Russia and Belarus.
It seems quite logical that the high price of potatoes should have scared away the buyer, and the demand for potatoes should have fallen, but everything turns out exactly the opposite.
“Ukrainian consumers still remember the deficits of the Soviet era. Even more recent is the memory of the incredibly high onion prices this spring. Therefore, they react to high prices outside the box - they run to the market and try to buy more products than usual, which provokes further price increases, ”explains Andriy Yarmak, an economist at the Investment Department of the UN Food and Agriculture Organization (FAO).
“It should be noted that the situation when the psychology of the masses affects prices is not unique - similar cases over the past 15 years have occurred regularly for a variety of goods - for wheat and buckwheat and for vegetables. The most revealing example is the grain market in the 2001/02 season, when Leonid Kozachenko, then Vice Prime Minister for Agricultural Affairs, spent several months in the bullpen on charges of “promoting grain export”. Then, it was the actions of President Kuchma and the Prosecutor General’s Office, which suddenly discovered larger than usual grain export volumes from the country, led to panic in the market. People who usually use no more than 5 kg of flour at home in the winter immediately began to buy it in bags, and at the same time all grain products, such as cereals and pasta. As a result, prices really skyrocketed, flour mills worked around the clock and could not meet demand, exports stopped, and even grain imports began over time, and domestic consumption of grain and its processed products broke all records in one season and is a record until today of the day.
But what happened to the bags of flour and pasta that people bought and placed in closets and on balconies? Almost all of this eventually migrated to trash cans or, at best, was fed to pets. Consumers paid a huge price, and this money went to grain producers. By the way, Kozachenko was rightly justified then, but the forecast of a high price came true, because it was not possible to import grain cheaply, due to the state's interference in the process, and it was not enough of our own, against the background of such irrational consumption, ” tells Andrey Yarmak.
“Prices for potatoes by mid-September are not always at their lowest level for the season. Very often they continue to decline until the end of October, while producers sell products that cannot be stored for a long time and the process of barter exchange of potatoes among the population of the northern regions of the country for other goods is active, ”notes Kateryna Zvereva, Development Director of the Ukrainian Fruit and Vegetable Association (UPOA).
According to EastFruit, the potato harvest in the northern regions of the country in 2019 was even worse than the not-so-good harvest a year earlier. However, the areas under it were slightly expanded, which, in fact, provided a comparable volume of production. At the same time, household farms are very reluctant to sell their potatoes this year - they also remember that last season the purchase prices for potatoes in April almost doubled compared to September and expect this scenario to repeat itself. Under these conditions, traditionally, dealers have become more active - they are trying to buy up potatoes from the population and put them in storage, hoping to sell them at a higher price in winter.
“If we analyze the history of potato prices over the past 10 seasons, comparing the wholesale price in mid-April with the price in mid-September, we see an interesting picture. In five cases, the price of potatoes in April was exactly the same as the price of potatoes in mid-September. In another case, wholesale prices for potatoes in April were 5,5% lower than in September, and in one case, the price increased by only 6% in April compared to September. That is, in the absolute majority of cases (70%) those who preferred storing potatoes to selling them in September incurred losses, since losses during storage are absolutely inevitable. In addition, it is necessary to bear the costs of maintaining the storage facilities, their rent (or depreciation), and the money that is needed to purchase potatoes (or not received due to its non-sale) has its own, very considerable cost in Ukraine, ”says Alexander Khorev , head of the project "APK-Inform: vegetables and fruits".
“It was in the last season (2018/19) that the biggest price increase was obtained - potatoes rose by an average of 86% in mid-April compared to mid-September. Also in the 2014/15 season, there was an increase of 54%, but this was a period of enormous political and macroeconomic instability, and it is probably wrong to take it into account. And once again, the price increase was 35%, which does not allow us to talk about the possibility of high earnings on the resale of potatoes. This means that there has been a clear benefit from the sale of potatoes after storage only once in the last ten years, therefore, in our opinion, a systematic approach to marketing, when a producer systematically sells potatoes throughout the season, is the most optimal approach to sales, ”notes Alexander Khorev.
UPOA analysts note that such a high price for potatoes in September, expressed in hryvnia, as the one that has been established on the market now, has never been in history. “In mid-September 2010, potato prices reached UAH 4 / kg. At the hryvnia to dollar rate, it was then more than 50 US cents per kg, that is, the price in dollars was higher than now. However, the price decreased slightly in the second half of September and in October and began to grow again only in January of next year, and the price increase in April against September was only 35%, ”notes Katerina Zvereva from UPOA.
Can the price of potatoes in Ukraine rise in the coming weeks and be higher in spring than now? The answer to this question should be sought in history. Yes, according to APK-Inform: Vegetables and Fruits estimates, the total potato production in 2019 will increase compared to 2018 due to better crop yields in professional farms and expanding areas. However, the main question is how much excessively purchased potatoes will rot in the storages of urban residents, because now they are buying products for the future, not having the necessary conditions for storing potatoes.
“Just the other day, I witnessed a conversation at one of the forums between a man who wanted to buy 8 ton of potatoes for 1 UAH / kg at once to ensure the consumption of his family for the entire season in the Chernihiv region. He was offered products no cheaper than UAH 10 / kg and was told that in spring prices would be 20-25 UAH / kg. Moreover, the absolute majority of the discussion participants firmly believed in such a scenario of events, and only one person noted that they would simply bring cheaper potatoes from Belarus, ”says Andrei Yarmak.
Considering all factors, EastFruit analysts expect that the potato hype will continue to be promoted by the media, which could lead to continued high prices. This will play into the hands of those farmers who "on the sly" get a good price for their products, which are not subject to long-term storage. Inexperienced consumers, purchasing such potatoes, are likely to throw away at least half of these products in a few weeks.
A similar situation will also play into the hands of importers who continue to import potatoes from Belarus and Russia (through Belarus). At the same time, import will not significantly affect the price - it will simply restrain it. Nevertheless, a slight decrease in prices in the coming weeks is still possible.
But whether it will be possible to earn more on potatoes in the spring is a big question. The likelihood of receiving 20-25 UAH / kg of potatoes in wholesale in the spring seems unlikely at the moment, especially against the backdrop of the further strengthening of the Ukrainian currency, which makes import even more affordable. Moreover, it should be taken into account that the prospects for reducing the price of potatoes in Russia, Belarus and Poland have not yet been exhausted - there the harvesting in many regions is just beginning. The EU also expects a higher potato crop, which means they will not import large quantities.
It is unfortunate that in the face of high domestic prices, export projects of Ukrainian potato growers will be stopped, because in this it was possible to achieve considerable success last season. Nevertheless, we hope that this year's good income will allow farmers to invest in raising the level of technologies for growing, processing, sorting, storing and marketing potatoes. That will help them more successfully enter new markets in the 2020/21 season.
Source: https://east-fruit.com