Cautious optimism for greenhouse horticulture in Ukraine

The Dutch-Ukrainian forum on the current situation in greenhouse horticulture in Ukraine took place on February 21. During the forum the association for greenhouse horticulture in Ukraine gave an overview of the economic situation.

High energy costs, lost exports to Russia and the high cost of funding while a lot of high tech is needed, are reasons that greenhouse horticulture is in a difficult position. There is also positive news: an increase in exports to the European Union and the expansion of Galicia Greenery. During the forum several Dutch companies presented opportunities for innovations and sustainable solutions.

At the beginning of 2017 Ukraine has about 250 ha of greenhouses for vegetables, 100 hectares for production of flowers and about 8,000 hectares of plastic greenhouses. About 9 ha unfortunately did not survive the snowfall in winter. At the same time, in the past year approximately 8 ha of greenhouse horticulture has been modernized according to the latest Dutch techniques increasing the yield in the greenhouses by 1.5 times.

The sixth Dutch-Ukrainian forum showed a worse picture of the economic situation in the greenhouse horticulture than last year. The bad situation is mainly due to the high costs. Energy prices in Ukraine are high and are not fixed for longer periods so this is causing a lot of uncertainty. The biggest problem is that the energy companies establish their prices just one month ahead of supply, making it very difficult to make a business plan and even estimate the cost of the next few months of production.

The share of energy costs in greenhouse horticulture varies by crop, but is between 30 and 65% of total production costs. Compared to the Netherlands, the producers in Ukraine pay about 60% more for gas and about 30% more for electricity.

Energy prices have risen in recent years, both for producers and consumers. This was one of the conditions of the International Monetary Fund in order to make the installments of the loan to Ukraine. The higher cost in Ukraine and the higher price that is paid for each product in the Netherlands mean that Ukraine loses its possibilities and competitive position for the European market and consumers.

The Ukrainian government wants to replace the import of gas from Russia through alternative energy. In the greenhouse cultivation also alternative energy is emerging, such as boilers, to reduce the cost of gas.

In Uman, towards the south, there is a greenhouse where, as a first, Philips LED lighting is used, this is still a niche and, according to the representatives of the greenhouse horticulture, still not profitable everywhere. There is uncertainty about the regulations ('green tariff') and there are investment risks. Investments in alternative energy and LED are relatively high, partly due to the high interest rates that is charged by local banks. Funding is often dependent on international financial institutions (IFIs). About the opportunities that are offered by international financial institutions for co-financing an overview will be published on our website soon.

Is there only bad news presented at the Forum? Certainly not. When it comes to the potential for exports all participants cautiously see positive signs.

Before the export restrictions to Russia, Ukraine exported 20% of tomatoes and 5% of the cucumbers. In 2015 these exports almost completely stopped and export of cucumbers amounted to just over 1 million tonnes. Since 2016, export to the EU increased considerably. In 2016, Ukraine exported 4.3 million tons of tomatoes and 2.4 tonnes of cucumbers, a record! Despite the high prices buyers are, especially in Poland, interested in the supply. According to Info-Shuvar, Ukrainian greenhouse cucumbers in February 2017 cost € 1.84 to 1.92 per kg in the wholesale market and Polish greenhouse cucumbers sold for € 1.75 - 1,95 per kg. Since 2015 Poland replaces Belarus as the largest export destination for Ukrainian greenhouse horticulture products.

This is reason for optimism in the longer term for all representatives in the greenhouse horticulture sector because there is potential for further developments in export. The success is dependent on the quality of the product that, among other things, must be carefully selected and packaged. The applicable European standards are higher than those used before for Belarus/Russia. So a change is required. Quality is not only a requirement to compete in the international market but also increasingly for the local market. The local market largely consists of small growers, two hectares of greenhouses and maybe one or two hectares of open land for growing vegetables.

Enza Zaden for example, delivers 50-60% of Ukraine sales to such small-scale growers. To be still competitive despite the higher costs, it is important to deliver a consistently high quality product for retail.

The Ministry of Agriculture in Ukraine sees a future for horticulture in niche products such as organic crops whereby diversification in the market is of interest, and a focus on products with added value. Deputy Minister Olga Trofimsteva stressed that currently the greenhouse horticulture in Ukraine does not produce sufficiently for the local market. During the high season about 20% is still imported. With high-quality seeds and greenhouse structures, efficient primary processes and refinement of the products for a higher quality, the professional horticulture can evolve. This professional horticulture has to concentrate on energy savings, certification for export (GlobalGAP) and quality products.

The Netherlands has many years of knowledge and experience in horticulture. Important is that there are always new innovations and technologies that appear on the market. Dutch businesses in starting materials invest approximately 15% of their annual turnover in R&D to contribute continuously to the development and sustainability of the sector.

During the forum, several Dutch companies operating in Ukraine gave a presentation on the latest applications in the greenhouse horticulture. Inter alia presentations were given about with LED lights, (organic) seeds and pest control by using bees.

During the forum also the requirements of the European market were addressed. To gain more knowledge about this subject, the German-Ukrainian Agricultural Dialogue (APD) has started to organize workshops for Ukrainian growers. In February the Netherlands organized a mission for Ukrainian growers of vegetables, mushrooms and berries to Dutch suppliers of equipment (Partners International Business Foodtechlink) and also paid a visit to Fruitlogistica. By such a visit to a trade fair, the difference - also in criteria in for instance packaging - between Ukrainian and European consumers is clearly visible. A growth in exports and the professionalisation of the greenhouse horticulture in Ukraine offers opportunities for Dutch suppliers in greenhouse horticulture: from seeds to lighting, from greenhouse structures to boilers and the control of insects and diseases.