Vladimir Dyuzhev, Head of Packaging Equipment, Agrotrade Company
Andrey Kiselev, Commercial Director LLC UK FKS
The ending season has become difficult for potato growers. Potato prices remained low for almost the entire period, sales were slow. Farms found themselves in a particularly difficult situation, where they tried to sell their products according to a scheme that had been established for decades - through intermediaries. What this is connected with and how the market will develop in the future, we would like to discuss in this article.
ON THE WAVE OF GROWING REQUIREMENTS
Selling the crop at a bargain price - this task in the potato growing industry has confidently moved into the category of increased complexity in recent years, and with each new season the conditions only get tougher: a lot of potatoes are produced, the demand for it remains low. Nevertheless, a significant number of farms are trying to solve it by following the usual algorithm: agricultural producers rely on dealers.
But the times when trucks drove up to the fields and took away everything grown at once are over. The volumes of "wild" purchases fell (which is not surprising: in large cities, the stalls, where the main flow of vegetables and potatoes went). Against this background, intermediaries began to impose more and more requirements on products, and the matter concerns not only the quality of the goods or the color of the peel and pulp. It is not the first year that a situation has been recorded when buyers negotiate even preferred varieties. This season, for example, in the central regions there is an increased demand for potatoes of the Udacha and Gala varieties and almost zero - for all the others. So, for the recently popular Nevsky, few are ready to offer a price higher than 5 rubles / kg. At the same time, it is now impossible to predict what will be in demand in the fall. Manufacturers are forced to play roulette. Although there is certainly always an alternative.
TRADING & AGRO CONTRACTS
Until recently, cooperation with retail chains seemed unavailable to many households. Retailers made strict demands on product quality, timing and frequency of deliveries (as a rule, the economy was to ensure the uninterrupted supply of large quantities of goods over a long period of time). Only agricultural holdings could afford to organize such work. Over time, the situation has changed.
First of all, the approach to organizing supplies has changed. Today trading networks offer different types of contracts to agricultural producers. The simplest and most common type of interaction begins with bidding. The trading network places an order for a certain volume of products, stipulating the necessary frequency of deliveries (options can be very different: once a week, once a month ...). The agricultural producer evaluates his capabilities and fights only for those lots that are interesting to him.
Thus, everyone wins: agricultural producers sell their crops in a mode convenient for them, and the right amount of goods arrives in time for the stores.
But there is a second option for cooperation. In recent years, large operators (Magnit, X5 Retail Group) have invited agricultural producers (namely producers, not suppliers!) To work on agricultural contracts. The agricultural contract involves a longer period of cooperation between the parties: as a rule, we are talking about the supply of a certain product (for example, potatoes packed in a net weighing 5 kg) for 9-12 months at a fixed price. In the current season, the average price of potatoes supplied under agricultural contracts amounted to 14 rubles / kg, which, taking into account the situation on the market, can be considered a very favorable offer. Of course, there is always the risk that the price can rise substantially at some point, but for this case the agro-contract provides for the possibility of reconciling the cost of production (sometimes the price is initially set only for a month, and then adjusted).
What else is interesting about agricultural contracts for potato growers? Most importantly, such contracts provide a guarantee for the sale of products, and sometimes provide an opportunity to receive an advance payment. Thus, the trading network "Magnit" enters into the bulk of agricultural contracts in the spring and immediately pays contractors 30% of the total amount of the contract.
X5 Retail Group so far concludes agricultural contracts in the fall, after harvesting. But this distribution network assumes the delivery of products: a company representative arrives at the farm, accepts the goods on the spot (thus eliminating the possibility of a batch returning due to quality claims) and picks up the products in their warehouse. In fact, the farm receives all the same advantages that attracted it in working with intermediaries, but it knows exactly when and for how much the crop will be sold.
REQUIRED CONDITIONS FOR SUCCESSFUL WORK WITH TRADING NETWORKS
Ten years ago, farmers knew well that any potato could be sold, albeit not at the highest price. Therefore, the main attention during the cultivation was paid to productivity. Since then, the situation has changed: it has become more profitable to get fewer products, but of higher quality.
Let's put an additional emphasis on this: high-quality, even, beautiful potatoes (ideally, calibrated) are in demand in the networks. In this case, specific varieties do not matter much, but it is better if the agricultural producer's assortment contains goods with red and white peels.
The second important point: retail chains do not accept products in bulk, but in quanta - packages of a fixed weight (most often, these are 25 kg bags). If during the check one of the bags is found to be underweight, the entire batch will be returned to the manufacturer. Thus, an agricultural producer planning to work with retail chains needs a basic set of packaging equipment (minimum: scales and an automatic packer). As a rule, many companies that have been on the market for a long time already have something from this set, so large investments will not be required.
Of course, if the farm plans to sell washed potatoes in a package, the list of necessary equipment will increase markedly.
The third point of the requirements is the presence of a declaration of conformity. By the way, intermediaries who buy potatoes for stores today also demand documents from producers for each batch of product.
We wish you a successful season, a good harvest and excellent sales!