According to EastFruit, in the first five months of this season alone, the country managed to export almost three times more of these products than in the entire previous marketing year. Meanwhile, imports of potato starch to Ukraine have fallen sharply, and the country's trade balance may for the first time reach positive indicators in at least the last five years.
Is everything so rosy in reality, was Ukraine able to reverse the trend for imported potato starch, and what prospects do Ukrainian products have on the world market? EastFruit offers to sort it out with the help of Sergey Samonenko, director of VIMAL, the leading producer and exporter of starch in Ukraine, and Evgeny Kuzin, head of international projects Fruit-Inform.com, the only information and analytical agency in Ukraine for professionals in the fruit and vegetable market.
In the period from September 2020 to January 2021 alone, Ukraine was able to export almost 1,1 thousand tons of potato starch, while in previous seasons, export volumes for the entire marketing year fluctuated within 100-400 tons. Meanwhile, imports in the first five months of the current season reached only 700 tons, which is also a record low for this period in at least the last five marketing years.
The key and practically the only sales market for Ukrainian potato starch abroad this season has become China, which imported about 95% of all Ukrainian exports and has already managed to set a new record for imports from Ukraine. From September 2020 to January 2021 alone, over 1 tons of Ukrainian products were shipped to China.
“On the one hand, Ukraine really managed to make a real breakthrough in the Chinese potato starch market over the past few seasons, and now we can say that China is becoming the main export destination for the Ukrainian industry,” says Sergei Samonenko. - But in reality, there is a problem hidden behind the scenes of Ukrainian starch export to China - Ukrainian producers were simply thrown out of their own market by dumping imports from the Republic of Belarus. Domestic sales bring a direct loss, and export to China is at least some opportunity to provide economic feasibility for the production of potato starch in Ukraine. "
“China in general is the world leader in the import of all types of starch and annually purchases from two to three million tons of this product. Although the main import category for the Chinese market is starch produced from tropical cassava tubers, imports of potato starch are also quite significant. Despite its own significant production capacity, China is the seventh country in the world for imports of potato starch. So, with an annual production of 450-500 thousand tons of potato starch, China still imports another 30-60 thousand tons of this product, ”comments Yevgeny Kuzin.
“The current volume of imports of Ukrainian potato starch of 1,1 tons has a minimal impact on the Chinese market and looks insignificant in comparison with imports from the EU,” notes Serhiy Samonenko.
According to FAS USDA, the main problem for the potato processing industry in China is the rather poor quality of raw materials. For the production of starch in the Chinese market, non-standard rejected products are often used, and in order to meet the market demand for high-quality starch, local players are forced to import it from abroad. “The quality of Ukrainian starch is one of the most important factors for a Ukrainian breakthrough in the Chinese market,” agrees Serhiy Samonenko. “A vivid confirmation of the high quality of potato starch supplied from Ukraine to China can be the already documented facts of copying the packaging of our products in the Chinese market”.
Ukrainian starch is being promoted in the Chinese market, including through modern communication channels, for example, through the local version of the social network TikTok. Recall that similarly promoting their products and, for example, exporters of products from Chile, a country that is considered one of the benchmarks of promotional campaigns in the agrarian world.
“Nevertheless, although Ukraine managed to break into and gain a foothold in the Chinese market, Ukrainian prospects in other directions of export are less significant. And we all remember how dependence on one sales market ends, - warns Sergei Samonenko. - If we consider neighboring sales markets, Ukraine now has practically no opportunities for active supplies of potato starch. All the countries around us, and especially Belarus, Russia and EU members, actively support the production of starch at the state level. As a result, the volumes of our exports to the post-Soviet countries are rather small, and there is also tough competition in these markets. And manufacturers from these countries are actively exporting their products to Ukraine, creating intense pressure on the Ukrainian market and pricing on it. "
“As for the EU, this region practically does not import potato starch from countries outside the EU, but it is a large exporter of this product, annually sending to other markets, including Ukraine, from 250 to 470 thousand tons of potato starch,” comments Yevgeny Kuzin ...
“In addition, the EU has a quota for starch imports from Ukraine for duty-free import of 10 thousand tons of all types of products, which are quickly filled by Ukrainian suppliers, primarily corn starch,” adds Serhiy Samonenko.
In addition, the EU countries, primarily Poland, as well as Belarus are active players in the Ukrainian market for imported potato starch. These two countries each season provide from 85% to 94% of all imports of starch from potatoes in Ukraine.
Meanwhile, against the background of active dumping imports from the Republic of Belarus in recent seasons, according to Sergei Samonenko, out of six Ukrainian enterprises that can manufacture their products, only two were launched in the 2020-2021 processing season.
“The example of the 2019/20 season may be indicative, when several negative factors coincided on the market at once, which led to another sharp increase in imports. Thus, the continuing dumping import of starch from the Republic of Belarus was followed in autumn by a sharp revaluation of the national currency, which significantly improved the possibilities for importing potato starch and reduced the competitiveness of Ukrainian exporters. Add to this the gradual increase in the cost of energy, and we have one of the record figures for imports of potato starch from countries where, moreover, there are active programs to support and subsidize the potato sector. As a result, the market is dominated by imports, and the price of starch in Ukraine for the first half of the season falls by a third from UAH 28 / kg to UAH 19 / kg, ”adds Serhiy Samonenko.
According to Sergey Samonenko, the average margin of potato starch production in Ukraine until 2019 was 10-15%. Thus, Ukrainian producers are already forced to sell their products below cost. All performance indicators of enterprises in the industry deteriorated catastrophically: production volumes fell sharply, profits, profitability and tax payments fell. The situation was not improved by a decrease in purchase prices for potatoes.
Naturally, such a situation in the very near future may lead to a complete shutdown of enterprises and devastating consequences for the starch industry and potato growing in Ukraine. On December 15, 2020, the Association of Potato and Starch Products Producers of Ukraine, guided by the Law of Ukraine "On Protection of National Producers from Dumping Import" dated December 22.12.1998, 330 No. 07-XIV, filed a Complaint "On the initiation and conduct of an anti-dumping investigation regarding the import of potato starch origin from the Republic of Belarus ”to the Ministry of Economic Development, Trade and Agriculture of Ukraine, which is registered under No. 115916 / 20-XNUMX.
Another important factor in the dominance of imported potato starch is the quality of raw materials. “Unfortunately, sometimes the quality of Ukrainian raw materials for starch production simply does not stand up to criticism, although purchase prices for raw potatoes in Ukraine are often higher than in competing countries,” continues Sergei Samonenko.
By the way, as Evgeny Kuzin notes, a similar situation is observed in the sector of ware potatoes in Ukraine, since, against the background of constant problems with the quality of these products, Ukraine continues to spend millions of dollars on imports of ware potatoes, allowing suppliers of products from Belarus to earn money on the Ukrainian market. Lithuania and other European countries.