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Report: Current and future trends in the Ukrainian potato market

“The 2019/20 potato season in the Ukraine turned out to be the most unprecedented within the whole history of our monitoring,” says the market information company Fruit-Inform in a recent report.

“We expected an increase of potato imports into the Ukraine of up to 21,000 tons in our autumn forecast. However, as of March, the imports totaled 300,000 tons! Moreover, we believe that potato imports are underestimated, and the real volumes may total even 450,000 tons, while the official data will most likely vary between 315,000-325,000 tons.

“Such a difference is based on unaccounted volumes of potatoes imported to Ukraine from Russia through uncontrolled parts of the border in Donetsk and Luhansk Oblasts.”

Why have imports grown so significantly? Firstly, in the very beginning of the season, the Ukrainian mass media were sharing the information about a sharp fall in domestic potato production, and, under conditions of an artificial deficit, Ukraine started importing potatoes in July.

Secondly, potato prices in Ukraine were much higher than in neighboring countries; therefore, importers were able to continue to ship potatoes from Belarus and Russia.

The official statistics show Ukrainian potato production to be one of the worst for at least the past 5 seasons in 2019 – just 20.6 mln tons. Such a sharp fall in production is based on a decrease of 9% in potato yields year-over-year. Growers link a fall in their yields with bad weather conditions during the growing period. In early summer, a part of the potato plantings was simply destroyed due to abundant rainfall in the first of half of the summer.

Thus, the total supply of potatoes went down by 8% in the Ukrainian market. Meanwhile, potato prices in April 2020 were similar to those fixed in the same month of the previous year.

However, last year potato prices were growing thanks to rather high demand in the export market, while this year the situation was quite the opposite. Regular imports both restrained the price growth and resulted in lower demand for potatoes.

According to growers, their potato sales rates were quite low in the mid-May despite the end of the potato season. The supply of early potatoes was growing simultaneously and also exerted pressure on sales rates of last year’s produce.

So, what are the current sentiment of growers entering the new season?

One of the largest market players has already said it plans to significantly reduce the area under potatoes. In addition, some smaller growers also plan to reduce their areas, especially in case of those plantations without drip irrigation.

Meanwhile, the market is being entered by new players that either have never grown potatoes, or produced them as a specialty category or for their own needs only. Thus, despite announced plans to reduce the planted area, the commercial segment of potato production will unlikely change considerably. With regard to households, their planted area will most likely expand in view of both high potato prices for two years in a row, and a decrease in their income.

If yields are average, Ukraine may harvest 21.7 mln tons of potatoes, and total supply will grow by 5%. However, the situation with quality of the future harvest is questionable, as – due to lack of soil moisture – growers from the central and southern regions expect a drop in their yields. Meanwhile, abundant rainfall in the western regions resulted in both a loss of crop and spread of diseases, which also will negatively affect the quality.

With regard to sales, exports of early potatoes will most likely be minimal, as Belarus, the main importer, changed its documentation requirements, and Ukrainian growers were not ready for that. Regarding exports of later potatoes, everything will depend on quality and situation in European countries, as, according to estimations of sector associations, areas will also grow there.

As regards the domestic market, more and more growers say they are ready to work with retail chains. Growers on average planned to sell 23% of their crops through supermarket chains in the season 2019/20, and that share grew to 34% in the season 2020/21. This is not an unexpected trend, as, under quarantine conditions, retail chains were the only stable sales channel, while wholesale and retail markets worked irregularly.

Source: Fruit-Inform
Photo: Unian

——————–

The Ukrainian supply and demand balance of potatoes (Jun-May) – 1,000 tons

2015/162016/172017/182018/192019/202020/21*2019/20 ? 2018/19, +/-2020/21 ? 2019/20, +/-
Beginning stocks9089276367497%-28%
Harvested area, thsd ha1 2911 3121 3231 3201 3091 315-1%0%
Yield, metric centners per ha161166168170155165-9%7%
Total production20 83921 74822 20822 50420 26921 698-10%7%
Estimated production20 78420 24222 20822 50420 26921 698-10%7%
Official imports72417320121782%-96%
Estimated imports72417450122547%-97%
Total supply20 88220 33322 23922 58420 78721 758-8%5%
Consumption:15 97015 61916 70516 85515 82516 200-6%2%
ware consumption5 9206 0216 4206 5506 1256 223-6%2%
market part2 8212 3502 6402 6702 4502 520-8%3%
feed stock5 2205 0835 4705 3905 0705 240-6%3%
for planting4 6444 3404 6304 6904 4204 520-6%2%
losses4 8034 6805 4505 6434 9105 520-13%12%
processing185175185225210217-7%3%
Official exports1072119310-84%233%
Estimated exports2072119310-84%233%
Total distribution20 79320 30622 17622 51720 73821 730-8%5%
Ending stocks892763674928-28%-42%
*Fruit-Inform forecast

Source: Fruit-Inform

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Lukie Pieterse, Editor and Publisher

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