Greenhouse complexes are one of the brightest points of growth in the agricultural sector of the south of Russia. The campaign on replacing imported products with domestic produce has boosted the development of this direction as well as the whole range of adjacent areas.
Over the last 3 years, the production of greenhouse vegetables, in accordance with the association Greenhouses of Russia, has increased by 30%. In 2017, greenhouse vegetables gross output in accordance with the data of the association Greenhouses of Russia has comprised 950 thousand tons, which is 17% more than in 2016. The sphere of greenhouse vegetables growing has been developing before the economic crisis, however, this growth was largely supported by the unprecedented governmental support of the agricultural industry. The level of such support has also been increased by 30% in the last 3 years.
The experts who took part in the roundtable discussion “Greenhouse business: what problems prevent the development”, arranged by the analytical center claim that the sphere is on the edge of a “big breakthrough”. However, there is a whole range of issues preventing it from happening, both old ones, inherited with the old resources and new ones related to the high cost of resources and overadministration of the industry by the state.
What prevents vegetables from growing
Despite volume increase of vegetables grown under glass, they satisfy the needs of the population only by 40%. The rest 60% or around 1 million tons of vegetables a year are imported into Russia from abroad. According to the data of the Ministry of Agriculture, over the last three years the number of imported goods has been decreasing, since 2013 the import of cucumbers and tomatoes due to various reasons, from embargo to the unprecedented governmental support has decreased twice. In the coming years the Russian producers will have to increase productivity by 100% in order to fill the gap that appeared after the “foreigners” have left. However, currently it does not seem feasible.
According to the president of the Greenhouses of Russia association, Arkadiy Mouravjov, currently the industry is developing thanks to the governmental support, namely, two kinds of it: subsidies on reimbursing 20% of expenses on new greenhouse complexes construction as well as subsidizing rates on agricultural credit loans. However, the loans are given on construction of greenhouses of new generation with the so-called photoculture (with the possibility of all-year supplemental lighting). All-year greenhouses provide the required economics for the banks and the industry. Currently, the share of such greenhouses in the overall market is 25%. The rest are old greenhouses. Annually in accordance with the association data, 150-220 ha of new greenhouses are being introduced.
However, the tempo of growth could have been more impressive. According to Arkadiy Mouravjov the development of the industry is hindered by 12 main factors:
1) Lack of financial resources. Currently, it is rather challenging to access subsidized loans as the banks have rather tough conditions.
2) Lack of energy resources. The complexes are cost-efficient (10-15%) but this efficiency is not enough for a short payback period. Own energy production is expensive, cost will comprise around 560-700 million Euro per megawatt. The most effective way is connecting to the communications of Federal Grid Company of Unified Energy System. The energy prices there are 0.035-0.045 per kilowatt.
3) Limited access to land resources. Currently there is a deficit of land suitable for greenhouse construction.
4) Limited access to water suited for plant watering. Apparently, this is an issue in many regions of Russia. One cannot simply pump water from under the soil. Osmotic equipment needs to be installed and as a result of osmosis there is brine that also needs to be disposed of.
5) Lack of human resources. According to Arkadiy Mouravjov currently “we have exhausted the possibility to attract the work force to greenhouses” and have reached the threshold when the human resources will have to be attracted from abroad.
6) Lack of agronomists. The universities do not provide specialized education for work in this area.
7) Lack of access to ways of selling products. Small enterprises will never have access to big trade chains, for that full-scale production is needed.
8) Limited access to governmental support. Application process takes a lot of time and the result is not guaranteed.
9) Limited access to administrative resources. Once there is no administrative support, it becomes challenging to carry out any project.
10) Limited ability of loan repayment. Banks consider the borrowers very carefully, take into account the fact, if they have other ways of repaying the loan apart from the greenhouse itself. Often they require other guarantees of bigger value businesses that could also be leveraged.
11) Lack of project companies who can assist in designing a greenhouse. According to Mr. Mouravjov there are only two or three companies like that in the whole of Russia.
12) Lack of engineering companies capable of bringing the construction project to life. Only specialized companies are allowed to construct greenhouses and they are few in the market.
Alexey Vostrikov, leading consultant of the Ministry of Agriculture in Krasnodar region adds that the main restricting factors, influencing the cost of production are the expenses on technological gas and electricity. “That influences the price formation process, resulting in the vegetables produced in our country being more expensive than those, for example from Turkey”, says Mr. Vostrikov. According to him, the authorities are trying to find “common touch points with the representatives of natural monopolies”. Despite all the above, the area occupied with the contemporary high-tech greenhouses in the region has grown almost three times in the last five years. Today the regional greenhouses including individual farmers grows around 11% of all framed area vegetables of the Russian produce. Before 2010, the area occupied by greenhouse was not more than 70-75 ha with 22 thousand tons of vegetables produced, in 2017 the area of greenhouses is around 240 ha and productivity has exceeded 100 thousand tons. The area occupies the leading position in frame area vegetables production. Greenhouse complexes Zelyonaya liniya (part of Magnet enterprise), Belorechenskiy and Vegetables of Krasnodar region are leading in productivity. It is planned to produce 120 thousand tons of vegetables by the end of the year and to reach overall vegetable productivity number of 150 thousand tons by 2020.
According to the finance director of Vegetables of Krasnodar region, Vladimir Aleksandrov, another issue in greenhouse business is related to the terms of subsidies receiving. “In reality one can get a subsidy June to August. After that period financing is over.” The second issue is the relations with Federal Service for Veterinary and Phytosanitary Surveillance (further FSVPS). “In the season we ship 15 trucks a day. The main requirement of the trade chains is to have a quarantine certificate for each truck. In reality that means bringing the inspector to the enterprise and having to go through a long approval procedure”, says Mr. Aleksandrov.
The head of internal vegetable and seeds quarantine of FSVPS, Vladimir Abrosimov, says that in general their organization tries to “understand the business needs”. “If no quarantine objects are found, we give out permissions for three months to ship the produce without quarantine certificates. That significantly lowers the expenses on administration”, says Mr Abrosimov.
According to Yuriy Velichko, owner of 2 ha of greenhouses in Kourgan district, his enterprise as well as other small producers have difficulty in dealing with the state supervising organizations. “For instance, we are buying a greenhouse produced in Italy. However, for it to be approved for construction, it needs to be certified. As a result, we wasted 28 thousand Euro and 2 years on all the approvals. Why do that, if we have purchased ready-made equipment? With such state supervision we will be in the dead end”, complains Mr. Velichko.
Director of CJSC Greenhouse complex Progress Ambartsoum Nazarov mentions that the main problems are resources and technical conditions. Lack of human resources and lack of desire from the population to work in “severe greenhouse conditions” are also an issue.
According to the doctor of agricultural science, Professor Rouslan Gish, currently all production units work by themselves, preferring to entice employees from each other and it is a dead end. “Over the whole of Russia there are no faculties preparing specialists on frame area. There is an idea to start educational process in close cooperation with the producers. European experience shows that the companies could further invite young specialists for practical training at the enterprise with further employment”, sums up Mr. Gish.
Battle for the crop start with the socket
First deputy of the general director of JSCS UK Egogeos (2ha), Vitaliy Kilko agrees with Mr Nazarov. With that, he remarks that Russia can only be competitive with the countries with warmer climate in terms of vegetables cost, should the energy resources be cheaper. For that, programs of subsidizing such expenses are required. According to the general director of CJSC Raduga Khazir Jarimok, energy cost in Kransodar region is high only in relation to the relatively energy surplus regions. In Adygeya it is higher than anywhere (up to 0.14 Euro per kilowatt). “Our enterprise, however, is using geothermal heating. It is cheaper than gas but water is aggressive thus there are certain issues”, complains Mr. Jakimok.
“There are several challenges in the flower growing industry as well. Flower growing currently does not receive governmental support”, says general director of Yug-Agro Sergey Kourenyov. According to him, 80% of flowers in Russia are imported ones. The same proportion used to be in the vegetable sector. However, the main issues are typical for the sphere, it is high tariffs on electricity. “We are hoping that a support program will be developed, allowing to bring down the tariffs”, says Mr. Kourenyov.
In the winter period, local producers cannot compete with the foreign ones for climatic reasons. From November to March there is very little sunshine in Russia, it is impossible to grow vegetables in greenhouses unequipped with expensive supplemental lighting. According to the key account manager of Syngenta company in Russia, Dmitry Tosounov, there is period of deficit in the offers from greenhouse complexes and southern countries (Morocco, Turkey, Italy) continue exporting their vegetables to Russia. With that in those countries there exist local systems of support. Russian trade chains conclude contracts with greenhouse complexes, purchase for them the seeds for products they want to see on the shelves in the shops, and they in their turn grow the required products”, continues Dmitry Tosounov. According to him, our trade chains are not too active in concluding such direct contracts with foreign growers yet.
Head of marketing companies group LLC Syngenta Dmitry Gorobets adds to the typical problems of the greenhouse business in Russia lack of certified plant protection means. This problem is accompanied with the difficulty of implementing integrated solutions, that would allow control over pathogens inside a greenhouse.
“In the nearest future we are going to replace imported cucumbers with Russian ones. However, we should ask ourselves a question: are 1.2 million tons of greenhouse cucumbers all we can do? Many growers chose tomato for the small farming businesses without understanding that pesticides should be applied in such greenhouses every 3-4 days. From the ecological point of view the produce of professional greenhouse complexes is the purest”, says Dmitry Gorobets.
How to get chained
Many producers face issues with the trade chains. The dialogue has begun but the amount of documentation and certificates sometimes is more than what banks require, says Khazir Jarimok. With that the production of his and many other enterprises gets on the shelves through third parties who have the agreements with the trade chains.
“We realize that we have a lot of obligations mentioned in the agreements, that can take aback the growers especially when one reads the fines section”, agrees Yulia Tikhanova, lead purchasing manager of Lenta company. With that, she remarks that if the producers work efficiently, no fines can be applied. She claims that all the agreement conditions come from the customers' requirements who have recently become rather demanding.
Source: expertsouth.ru - By Evgeniy Andreev