Orchards and viniculture of Ukraine (2007)

The share of fruits, berries, and grape in the pattern of gross agricultural produce has not significantly changed over the history of independent Ukraine. It made 4.3% in Ukraine in 1990 (at the end of the Soviet period) with a slight drop to 3.7% by the middle of the 1990s.

It to some extent diminished down to 3.1% of the gross Ukrainian agricultural produce in 2006. However, official statistics shows that the profitability of this output has considerably decreased over this period. In particular, it diminished in fruit growing from 83.8% in 1990 to 20.3% in 1995 and 12.7% in 2005. Profitability grew up to 33.5% in 2006 thanks to augmentation of prices for this output. As the output of viniculture grew in demand over the 1990s, the drop in profitability slowed: 1990 – 71.7%, 1995 – 74.0%, 2000 – 62.7%, and 2006 – 39.6%.

Pattern of production by categories of economies has notably changed over the previous years. While 46.4% of production was concentrated in large commercial farms and 53.6% in family farms in 1990, this pattern drastically changed by the middle 1990s to 16.4% and 83.6%. Despite an increase in production and expansion of demand for large lots of proper quality raw stock for industrial processing had been observed over the last years, the sources of this output remained the same in 2007: 12.2% was grown in large commercial farms and 87.8% on family farms (11.8% and 88.2% in 2005).

Though the share of fruits, berries, and grape in the gross output of the agricultural produce has been relatively steady, production volumes are quite variable. It fell 1.6 times by the middle 1990s versus 1990; in terms of value, down to UAH 2.514 bn. The production drop continued until 2001, and then an unstable tendency toward growth occurred. Output totaling UAH 2.905 bn was produced in 2006.

Production of the mentioned output remained at relatively high level in the first half of 1990s thanks to good situation in the industry, which Ukraine inherited from the USSR. Meanwhile, material and technical basis of orchards and vineyards has been becoming outdated and cultivation lands for fruits and berries curtailed further on in the late 1990s. It resulted in decrease of this output profitability and consequently reduction of capital investments to it.

At the same time, dynamic augmentation of investments to Ukrainian food processing industry and the wine, fruit, and berry industries in particular promoted restoration of processing companies’ normal activities. In turn it caused them to regain demand for fruit and berry raw stock of corresponding quality in industrial quantities as well.

These factors facilitated increase of capital investments to fruit growing and viticulture in Ukraine. Some wineries study the opportunity and have already created vertically integrated firms handling everything from the production of raw stock, to processing, and sales of finished output. Due to increasing demand coupled with diminishing profits, Ukrainian producers are clearly interested in implementing the latest gardening and viniculture techniques created abroad. It is based though on multiyear experience of leading business in Ukraine, including over extreme 1990s. The result can be seen in yield rates, which are growing: 58.6 centner/ha and 154.5 ths. ha in 2005 (48.6 centner/ha and 450.7 ths. ha in 1990) for pome fruits, 76 centner/ha and 76.8 ths. ha (34.9 centner/ha and 166.2 ths. ha in 1990) for drupaceous fruits, 62.4 centner/ha and 14.6 ths. ha (10.3 centner/ha and 41.2 ths. ha in 1990) for nuciferous, and 55.4 centner/ha and 19.8 ths. ha (40.1 centner/ha and 22.2 ths. ha in 2004) for berries. Unfortunately, tendency of area curtailment continued in 2006. In addition unfavorable weather conditions resulted in decrease of yield and correspondingly production: 44.7 centner/ha and 139.7 ths. ha in for pome fruits, 42.3 centner/ha and 74.5 ths. ha for drupaceous fruits, 48.2 centner/ha and 14.3 ths. ha for nuciferous, and 54.2 centner/ha and 19.7 ths. ha for berries.

Per capita production has dropped in connection with the fall of fruit and berry output. The index reached 56 kg of fruits and berries and 16 kg of grapes per citizen of Ukraine in 1990, while in 2001 it diminished to 23 kg and 7 kg. Growth connected with the expansion of production is evident again: 36 kg of berries and fruits and 9 kg of grapes in 2005. However, it again diminished in 2006 down to correspondingly 24 kg and 6 kg because of production reduction.

At the same time, individual purchasing power has significantly risen since the early 1990s. This has led to an increase in consumption, as fruits and berries are traditionally considered by Ukrainians as a healthy and necessary part of their everyday diet. Average per capita consumption of fruits, berries, and grapes excluding wine by Ukrainians is returning: 47.4 kg in 1990, 33.4 kg in 1995, 29.3 kg in 2000, 37.1 kg in 2005, and 34.8 kg in 2006.

The processing industry, which was quite successful in the USSR-era times and fell into decay in 1990s, likewise underwent a transformation after independence. Production and demand for raw stock have risen over the last few years along with the increase in personal income and the expansion in demand for fruits and berries. Development of situation in processing industry and with individual revenues has been completely reflected in change of fruits and berries sales pattern. In particular, sales by large agricultural companies in 1990s looked as follows: 86.8% to processing companies; 13.2% to individuals (including at retail markets), and 0% through other channels (as rent payments, directly to trade and catering companies, public establishments, etc.).

Sales to the processing industry practically halved by the mid 1990s, while the share of sales to individuals jumped four times. The indices in 2006 were correspondingly: 15.3% (13.4% in 2005) to processing companies, 38.5% (39.0% in 2005) to individuals, including through retail markets, and 46.2% (47.6% in 2005) through other channels.

Official statistics show that Ukraine is largely self-sufficient in fruit, berry, and grape consumption, as the ratio of production to domestic consumption is quite high: 1995 – 93.7%, 2000 – 105.9%, 2005 – 89.2%, and 70.2% in 2006. Meanwhile, it should be noted that this index does not altogether correctly reflect the picture of Ukraine’s needs in both this output in general and its varieties in particular. The Ukrainian wine making and cognac industries feel an acute deficit in high-quality wine materials and cognac alcohol and have to import them. It is due largely to the fact that the majority of vineyards were destroyed during Gorbachev’s anti-alcoholic campaign of the 1980s. Later, the wine-making industry was damaged in 1990s as a result of economic changes.

In other market segments, there is a rising demand from the record-high number of growing chains for safe fruits and berries of high quality. At the same time, existing customs duties prevent legal imports and encourage smuggling. Consequently, official import statistics are often much lower than the actual import of fruits and berries into Ukraine. It promotes lowering of domestic consumption index and consequently overstating of official self-sufficiency in this output level in Ukraine.

According to official data, the export of fruits, berries, and grapes from Ukraine ranged at the level of 211-305 ths. tons over 2003-2005, which is roughly 9-14% of local production. Export reached 290 ths. tons in 2006, which was 20% of the total production in the state. Meanwhile, growth of this index took place on the background of production curtailment by 34% and export by 5%. A significant drop in production over the last years as well as lack of large lots of high-quality commodities, and discrepancy between local and world standards are the main reasons for low export shipments. Note, though, that frozen wild berries constitute a significant portion of export from Ukraine to European Union states.

Walnuts in shells and shelled are another export staple for Ukraine. The country is the world’s fifth largest producer of walnuts, with a 4-5% share of the world production. Poland (23%), Russia (14%), Hungary (13%), Austria (7%), and Turkey (5%) were the main importers of fruits, berries, and grapes from Ukraine in 2006 in terms of weight.

The same official statistics reports that import to Ukraine ranged from 343 ths. tons to 860 ths. tons over 2003-2005. Import grew by 33% in 2006 and reached 1,144 ths. tons. Ukraine mainly imports fruits and berries that are not produced locally at all or which temporarily disappear due to seasonal variations in growing. Correspondingly, 60-70% of import consists of bananas and citrus fruits. Also, dried fruits (raisins and dried pitted and halved apricots) and tropical nuts are imported in large quantities due to the intensive development of the confectionery industry. Ecuador (29%), Turkey (15%), Poland (13%), Egypt (9%), and Georgia (4%) topped the list of importers in 2007 by physical volumes.

Ukraine possesses everything needed for building up high-quality gardening and viniculture output. These include suitable soil and climate conditions, the restoration of the processing industry and growth of demand for raw stock, expansion of individual purchasing power and the related growth of demand on the retail market, accelerating development of retail chains and a consequent improvement of output sales channels, as well as the availability of skilled and relatively cheap labor in these industries.

Comparatively high interest rates along with the necessity to significantly update infrastructure and implement modern production practices are among the hindrances to prompt production restoration. Despite these facts, gardening and viniculture have a promising outlook for becoming one of the flourishing segments of Ukraine’s agriculture sector in the future.