EU-funded Project “Implementation of Ukraine’s Commitments under WTO and ENP Frameworks in the Rural Sector (Sector-Wide Approach)”

Effective Post Harvest Technologies in Ukraine

John MillnsLviv, Friday 8th October 2010

Slides Courtesy of the International Finance Corporation (IFC), Part of the World Bank Group

EU-funded Project “Implementation of Ukraine’s Commitments under WTO and ENP Frameworks in the Rural Sector (Sector-Wide Approach)”

Large market for fresh fruit and vegetables > 5,5 million tons (2-2,5 billion USD)

Strong retail growth during the last 5 years andretailers unable to keep up with growing demand

30% of vegetables and 70% of fruit sold by retailers are currently imported

Opportunities to increase local production are significant, yet unrealized

Post harvest barriers to increase local production include:• Ineffective supply chains• Investment needed in storage and infrastructure• Huge losses ( 5 million tons per year) as result of poor quality storage and transport

Ukraine Fresh Fruit and Vegetable Market

EU-funded Project “Implementation of Ukraine’s Commitments under WTO and ENP Frameworks in the Rural Sector (Sector-Wide Approach)”

Key Market Channels for Fresh Produce

Small stores3%

HoReCa21%

Bazars*59%

Supermarkets17%

IFC estimates for2010 - Share of key channels for sale of fresh produce, % (*markets include summer street stands).

EU-funded Project “Implementation of Ukraine’s Commitments under WTO and ENP Frameworks in the Rural Sector (Sector-Wide Approach)”

Losses in the Supply Chain

Ukraine Holland

Farm level 30 - 35 % 15 – 20 %

Sales point 10 % 5 %

Consumer 25 – 30 % 10 – 15 %

Total losses ~ 65 % ~ 35 %

EU-funded Project “Implementation of Ukraine’s Commitments under WTO and ENP Frameworks in the Rural Sector (Sector-Wide Approach)”

Ukraine FFV Cool Chain Review (December 2009)

Main findings:

Large losses

Only 10% of storage facilities meet with modern requirements

Projected investment needed to replace outdated storages $2 billion

EU-funded Project “Implementation of Ukraine’s Commitments under WTO and ENP Frameworks in the Rural Sector (Sector-Wide Approach)”

Ukraine FFV Cool Chain

Large losses; Ukraine is losing around 5mn tons of harvested potatoes, vegetables and fruits, costing Ukrainian growers and traders over a billion US Dollars

Poor storage quality: Only 4% of cold storage for potatoes, 10% for vegetables, and 19% for fruits meets with modern requirements

Production is growing faster than storage capacity, placing pressure on markets after harvest

EU-funded Project “Implementation of Ukraine’s Commitments under WTO and ENP Frameworks in the Rural Sector (Sector-Wide Approach)”

Ukraine FFV Cool Chain

Ukrainian firms currently spend about US$50mn on new storage facilities for fruits, vegetables and potatoes every year

A further US$2bn needs to be spent in FFV cool storage. Most of the new facilities are distribution centres for trade rather than storage.

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Transport of Fresh Produce

In Ukraine, losses during transportation are much greater than in the EU for the following reasons:

1. High temperatures prior/during loading onto trucks

2. Poor packaging

3. Transportation without refrigeration

4. Transportation without isolation during cold season

5. Drivers often try save diesel turning off refrigeration

6. Poor quality roads

7. Multiple re-loading due to an unstructured market

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Ukraine FFV Cool Chain

Existing cold storage for fruit and vegetables. Capacity (brown) vs. demand (red), thousand tons.

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Estimated Need for Cool Storage Capacity

Region Storage capacity required, thousand tons

Potatoes Vegetables

Fruit Veg+Fruit

West 1,761 486 135 621

Centre 1,658 403 78 481

East 547 265 53 318

South 133 279 32 311

Ukraine 4,099 1,433 298 1,731

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Viability of cold storage investment (USD/ha)

Indicator Potatoes Apples Onions

Carrots

Project size, ha 250 60 40 25

Production investment

8,000 18,850 5,000 5,200

Storage investment

9,800 26,775 25,000 22,000

Prod operation cost

2,667 4,800 6,400 2,167

Storage operation Cost

373 1,470 1,493 1,517

Storage premium by May 15

365 9,500 9,880 14,592

Quality premium 747 2,100 1,493 2,357

Payback time, years

24 4 4 2

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Investment Directions in the Cool Chain

Over the next few years, demand for the following types of facilities are expected to grow:

Modern cold storage facilities at farm level for vegetables (as well as pre-cooling)

Controlled Atmosphere facilities at large fruit farms

Modern facilities near large cities, used as distribution centres for wholesalers, importers and retailers