Ukrainan Soya Sector a Value Chain Analysis [Final Report]

201 6 UKRAINAN SOYA SECTOR A VALUE CHAIN ANALYSIS [ FINAL REPORT ] FEBRUARY 2016 FINAL REPORT Th is study is part of a n endeavour of the D anube Soya Association to promote cultivation and utilization of soya and soya products within Ukraine. The assessment of the Soya Sector in Ukraine serves as an important contribution to the Association ’s strateg y and measures aiming at better harvest ing Ukraine’s agricultural potential and at improv ing soya production and utilization in the country. With a view to enhance Ukraine’s position in Europe’s soya supply the present report helps to understand domestic and international soya value chains in particular. Th i s study was commissioned by Danube Soya Association and developed by the Ukrainian Agribusiness Club between August 2015 and February 2016 with the financing of the Austrian Development Cooperation and the D anube Soya Association. We hope that this report provides a valuable contribut ion to similar initiatives in the country and that it will fuel the discussion. We would be delighted if this report found wide use within the community and beyond. In order to publish or reproduce content of this study k indly ask the Donau Soja Association for permission since this study is the property of the Austrian Development Cooperation and the Donau Soja Association. Matthias Krön Chairman Danube Soya Association February 2016 Association “Ukrainian Agribusiness Club” 3 floor, 146 Zhylianska Str. 1032 Kyiv Ukraine [email protected] www. ucab.ua Austrian Development Agency Zelinkagasse 2 1010 Vienna Austria [email protected] www. ada.gv.at Danube Soya Association Wiesingerstrasse 6/9 1010 Vienna Austria [email protected] www. donausoja.org FINAL REPORT Content Abbreviations 2 Short review and key results 3 I. Key points of soybean production 5 II. Legislation background and proposals 64 III. Social impact 83 IV. Supply chain analysis 98 V. Danube Soya in Ukraine 120 Annex A. Basic data on the interviews 121 Annex B. Soya varieties included in the Register of Plant Species of Ukraine 122 Annex C. List of soybean distributors 127 Annex D. List of CPPs producers and their official distributors 128 Annex E. Strategy of Agriculture and Rural Development with respect to soya production 130 FINAL REPORT Abbreviations AUU – Agrarian Union of Ukraine CPP – crop protection products CSR – corporate social responsibility DS – Danube Soya Assoc i a tion GM or GMO – genetically modified or genetically modified organisms MAPFU – Ministry of Agricult ural Policy and Food of Ukraine NGO – non - governmental organization UAA – Ukrainian Agrarian Association UAC – U krainian Agrarian Conf ederation UCA B – Ukrainian Agribusiness Club FINAL REPORT R eview and summary of key results This report is based on the interviews with the Ukrainian market entities that operate on the market of soybeans and its processed products. There were producers, processors, traders, g overnmental bodies, NGOs and investment funds among the respondents – totally 40 interviewees. The basic data about the interviews’ process, shares of the market entities are indicated at the Annex A. During the interviews all the market entities indicated that production of soybeans is a perspective vector of the Ukrainian agribusiness: 95% of respondents confirmed this. The other 5% did not answer this question due to lack of expertise. 85% expects t he increase of soybean production. A verage value of market development is 3.49 1 (between mid - and well - developed). The detailed distribution of answers is illustrated below (figure 1). 3% 1% 5% 8% 45% 40% no answer not developed poor-developed mid-developed well-developed highly developed Figure 1. Assessment of the soybean market development Source: interviews of UCAB Respondents of the interviews think tha t Ukrainian consumers mainly have negative attitudes towards GMO in Ukraine (50%), while only 8% of the interviewees answered “positive”. 3% 50% 15% 25% 8% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% no answer negative uncertain neutral positive Figure 2 . Attitudes of the consumers towards the GMOs in Ukraine Source: interviews of UCAB 1 Respondents were asked to assess the soybean market development by the following scale: 1 – not developed, 2 – poor - developed, 3 – mid - developed, 4 – well - developed, 5 – highly developed. FINAL REPORT After preparation of this report we see big potential of further development of non - GM products promotion. All of the market entities, including key players, show positive attitude towards the non - GM and they should be supported. Large companies are mainly produce non - GM soya due to political pressure they had during previous years, while small and medium size enterprises produce GM soya. On this regard we should show the interest in production of non - GM crops to sma ll and medium sized enterprises and support the large ones in doing the non - GM. Legislation base in field of GM regulation is not working, so market entities together with the state bodies should develop the respective road map of changes that will b e aimed on the satisfaction of market entities ’ interests and correspond to European legislation. This road map should contain following steps: identification and analysis of current state of GM crops production; systematic monitoring of GM crops production; development of “European” amendments to current legislation; set the transition period in order to give some time to agricultural producers to transform their production to non - GM; provide trainings and consultations for agricultural producers in order to highlight the interest of non - GM crops production; agreements with traders in order to provide premiums for non - GM crops for small and medium size producers, etc. The detailed results, deficiencies, problems, reasons and possible solution s are presented in this report. We hope that it would help you to fulfill your vision of Ukrainian agriculture and particularly soybean market. FINAL REPORT I. Key points of soybean production and its competitiveness 1.1. Production of soya seeds Soya varieties included in the Register of Plant Species in Ukraine Considering the fact that there is a lot of soya varieties included in the Register of Plant Species in the Ukraine, we included them in Annex B of this report. Sowing areas. In 1990 soybean was fully niche crop with the share of only 0.3% in total sowing areas of agricultural enterprises in Ukraine. Lack of knowledge on technologies of growing (losses during the growing were equal to 5 - 7% in terms of difference of sowing areas and harvested), limitation of sales market and econom ic crisis led to decrease of production during the period of (1990 - 2001). Agricultural producers concentrated mainly on well - known crops. Preferential taxation system, development of foreign markets, better economic situation and decrease of main commodit ies profitability led to orientation of producers on products that have demand on international market. In 2014 the sowing areas of this culture was equal to 9% in total sowing area of agricultural enterprises. 1990 2014 0.3% 9.0% Other crops Soybean Figure 3. Place of soybean on fields of Ukrainian agricultural enterprises Source: State Statistic Service of Ukraine, own calculations Talking about the place of soybeans among the other crops, we should also mention that in Khmelnytsky and Chernivtsi oblasts 1/5 of total sowing area of ag. enterprises was under soya in 2014, in Kyiv oblast – 17% (figure 4 ). FINAL REPORT Figure 4. Share of soybeans among the other crops in agricultural enterprises by area, % Source: State Statistic Service of Ukraine In 2014 total area under soybeans was at the level of 1.8 million ha. The geography of production has changed for past 25 years significantly (figure 5 ). If in 1990 main oblasts by area under crop were: Kherson (10.4 tsd ha), Crimea (10.2 tsd ha), Poltava (9.8 tsd ha), Kharkiv (9.2 tsd ha) and Mykolayiv (8.7 tsd ha) that represents South and Central - Eastern part of Ukraine. In 2014 main production regions were located mainly on the Central part of Ukraine: Khmelnytsky (225.5 tsd ha), Poltava (206.3 tsd ha), Kyiv (189.2 tsd ha), Vinnytsya (164.9 tsd ha) and Kirovograd (150.2 tsd ha) oblasts. 1990 2014 Figure 5. Main areas of soybean production in Ukraine, 1000 ha Source: State Statistic Service of Ukraine FINAL REPORT Gross harvest. Strong increasing trend in gross harvest we can observe during t he period of 2009 - 2014 (figure 6 ). If in 1990 - 2014 compound annual growth rate 2 (hereinafter – CAGR) was equal to 16.5%, in 2009 - 2014 this value showed significant annual increase (30.1%). 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Agricultural enterprises Private households Figure 6. Gross harvest of soybean by group of market entities, 1000 t Source: State Statistic Service of Ukraine, own calculations Talking about group of market entities mln t dt / ha 2.0 20.5 20.3 it is necessary to ment ion agroholdings . In 21 1.5 18.2 2013, agroholdings produced nearly 36% from 19 the total soybeans harvest (1 mln t), so they 1.0 are pretty big group of enterprises that should 0.5 17 1.62 0.99 0.17 be considered separately in some cases. 0.0 15 Yield. For the analyzed period, Independent Agroholdings Private enterprises households agricultural enterprises had doubled average production yield yield of soybean (CAGR 1990 - 2014 = 2.8% and CAGR 2009 - 2014 = 5.4%), but still Ukrainian Figure 7. Production and yield of soybeans in 2013 average yield is 27% less that in the European by groups of market entities Union. Comparing to the other counties in the world, in 2014 we were at the 16 th place by Source: Largest Agriholdings of Ukraine the yield (25 th in case of counting all the EU (2014, AgriSurvey) countries separately).

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