Billionaire Dmytro Firtash, who controls much of Ukraine’s natural gas, fertilizer and titanium sectors, clearly has a nose for money. So it’s no surprise he is setting his sights on Ukraine’s huge agribusiness potential.
DF Agro, the agribusiness arm of his Group DF holding, has unveiled a 30-35 million euro, 18-hectare greenhouse project in his hometown of Synkiv, Ternopil Oblast.
Dubbed the largest greenhouse project in western Ukraine, plans envision it being expanded to 40 hectares in coming years, helping to fill the year-around Ukrainian market demand for fresh tomatoes, sweet peppers and cucumbers.
We are building “one of the most modern greenhouse businesses in Europe,” Firtash said at the Sept. 21 opening ceremony. “On Monday (Oct. 1,) the first truckload of products will leave (the complex). The cucumber harvest has been completely sold.”
Annual production plans include 350 tons of cucumbers, 1,550 tons of peppers and 4,000 tons of tomatoes. DF Agro said it will cut Ukraine’s need to import sweet peppers by 20 percent.
For Firtash, the new greenhouse is a big leap into agriculture. But for Ukraine, it’s a drop in the bucket of what it will take to replace fruit and vegetable imports with domestic produce.
Meager investment into greenhouses and refrigerated warehouses, among others, mean Ukrainian consumers experience a shortage and high prices for certain types of out-of-season fruits and vegetables.
As a result, Ukraine imports around 40,000 tons of vegetables every year from warmer countries, according to official figures. Much of the produce comes from Turkey, the Middle East, Egypt and Poland.
Meanwhile, sizable portions of domestically produced vegetables and fruits rot in poorly ventilated and refrigerated storehouses. In 2011, hundreds of tons of rotten onions had to be thrown away.
According to Ihor Strelyuk, a vegetables and fruits expert at the Ukrainian Agribusiness Club, new greenhouse projects will help put more vegetables on Ukrainian tables.
“The project launched by Firtash will be especially good for sweet peppers, which are now largely imported,” Strelyuk said.
Harvesting more domestic produce in greenhouses will not alone, however, solve the nation’s shortage issues, said agriculture expert Andriy Yarmak.
“Producers have to start making products of better quality, storing them in better conditions and maintaining stable supplies during the whole year,” he said.
This will be hard for average farmers and suppliers for whom loan rates are currently extremely high.
Agriculture Minister Mykola Prysyazhnyuk recently said government could step in by offering millions of hryvnias annually in subsidies. “The government is considering compensating vegetables producers the costs of storing their produce,” Prysyazhnyuk said.
Despite the hurdles, progress has been made.
“In the past five years, Ukraine has greatly improved storage infrastructure. While 5 years ago only 6-9 percent of tradable vegetables and potatoes were stored in good storage facilities, today the percentage went up to about 47-50 percent,” Yarmak said.
“The situation with respect to fruits is even better. About 65-70 percent of fruits are now stored in relatively modern storage facilities while five years ago the capacity was satisfied by only 20-25 percent,” he added.
Still, industry experts say that an astonishing 60 percent of fruits and vegetables harvested in Ukraine don’t make it to consumers because of poor logistics and temperature control management. That’s twice what perishes in the Netherlands and above other European Union countries
And the rising cost of energy remains a major risk for many greenhouses.
The price of Ukraine’s gas imports from Russia’s Gazprom exceeded $400 per 1,000 cubic meters in recent years, causing some greenhouses to shut down. According to estimates from the Ukrainian Agribusiness Club, the amount of glass greenhouses dropped in 2011 from 407 hectares to 384 hectares. Surging gas prices mean greenhouses have to cut margins or find alternative energy sources.
“Vast majority of green houses, especially the old Soviet types, were heated with gas. They are very sensitive to the price of gas,” says Strelyuk.
Firtash has an obvious advantage. He controls a sizable chunk of Ukraine’s fertilizer supplies. A former partner of Russia’s Gazprom in the supply of gas to Ukraine, Firtash-owned Ostchem continues to import fuel into Ukraine at an undisclosed price that is negotiated separately from the state.
As small to mid-sized farmers increasingly complain about expensive fuel, fertilizer and loans, Firtash seems to have all the resources at his fingertips to heat up greenhouses and enrich the nation’s already superior Black Soil.
Asked whether he would heat up his own greenhouses with his own gas and fertilizer at subsidized prices, giving his farming businesses a competitive advantage, Firtash conceded that the share of energy expenses in the cash cost of DF Agro’s products is around 50 percent. But, he added: “The gas business is not related to the greenhouse business. Yes, I’m a shareholder in both businesses, but they are not related. These are two different companies.”
Not all Ukrainian greenhouses are so energy intensive, though.
Warm and sunny Crimea benefits from a mild, hospitable climate.
“There are more (plastic film greenhouses popping up) each year … and they are very profitable,” Yarmak said.
Experts say investments into greenhouses are a solid bet, if the main risks and potentially large heating costs can be contained.
“More people are trying to lead healthy lifestyles by eating more vegetables and fruit. Demand will grow,” said Lesya Sukhodolska, a spokesperson at Ukragroconsult, a leading domestic agribusiness consultancy.
Export potential is another driver.
“Many interesting projects are being discussed,” Strelyuk said.
Kyiv Post staff writer Svitlana Tuchynska can be reached at [email protected]
