Prime cost of Ukrainian agricultural production in details

Source

APK-Inform

256

 

Despite some macroeconomic difficulties, political, weather and other risks, the Ukrainian agricultural industry continues demonstrating the confident economic performance. According to the State Statistics Service, in 2018 the agricultural production volumes in Ukraine increased by 7.8% compared with 2017, while the growth of production figures developed in all types of agricultural households.

According to the official statistics figures, in 2017-2018 more than 80% of agricultural enterprises made a profit, and the agricultural industry remained one of the most profitable segments of the Ukrainian economy, generating more than 40% of the general profit to the country's economy. At the same time, the volatility of agricultural products prices and the weather factor remained the main reasons for the unstable profitability of many crops. In addition, the export orientation of the ordinary Ukrainian producer makes the industry dependant on all events of the global market — should it be trade wars between the major superpowers, lowering of the planting campaign rates in the USA, or the unstable weather conditions in South America.

Every year in early July, the Ministry of Agrarian Policy and Food publishes the official figures on the profitability of the agricultural industry, and the prime cost of agricultural products for the previous calendar year. Although the official statistics are very generalized, the figures appeal to be of interest, because they show the general market trends. Let's consider in detail the expenditure structure of Ukrainian agricultural producers in 2018, and make some comparison with the previous year results.

 

 

 

In comparison with the figures of 2017, the share of labour expenses increased from 5% to 5.7%. Thus, despite the significant positions of agriculture in the economy of Ukraine, the labour costs remain rather low in the general structure of prime cost of agricultural production. At the same time, to date almost every Ukrainian agricultural enterprise faces some deficit of the personnel. Even though the agricultural sector can offer rather high salaries, and the official figures confirm the fact. According to the State Statistics Service, in 2017-2018 period the average nominal salary of the regular employee in the agricultural sector exceeded the minimum national living wage in 2.3 times.

Also, it should be noted the growth of the share of fertilizer costs in the general structure of prime cost of all agricultural products in 2018 compared with 2017 (up 0.7%). At the same time, in 2018 on the fertilizer market the situation was rather challenging: in addition to the rising costs, there was also observed the record low supply of fertilizers to agricultural producers. Farmers just stopped any purchases, and waited for more favourable prices.

 

 

 

 

It should be noted that in 2018, the share of the costs of seeds in the structure of agricultural production also increased — from 7.5% in 2017 to 8.1% in 2018.

At the same time, the share of the cost of seeds in the structure of prime cost significantly varies depending on the crop variety. Thus, the following grains and oilseeds demonstrated the smallest share of the cost of seeds in the primal cost structure of agricultural crops: millet, barley, rapeseed, and wheat, and the largest share — in the cost structure of buckwheat, sunflower seed and corn. According to the Executive Director at the Seed Association of Ukraine, Suzanne Grigorenko, despite the growth of production costs in recent years, the share of the cost of seeds remained relatively stable. At the same time, agrarians became increasingly aware of the benefits of purchasing of high-quality seeds. In addition, grain crops still demonstrated the predominance of own-produced seeds and/or Ukrainian production/selection seeds.

According to the expert, corn and sunflower seed are the major crops for producers and importers of seeds, because the segment of the reporting crops has the largest number of hybrids, as well as companies-suppliers. To date, the reporting crops are the most interesting for agricultural producers. Companies from France, Germany, the USA, Serbia, Austria, Switzerland and other countries mainly cover the market of seeds of these two crops. Every year, seeds suppliers bring dozens of new hybrids of sunflower seed and corn on the market of Ukraine, planning to satisfy the growing demand of Ukrainian agrarians in high-quality seeds. Due to the growing demand, many foreign companies make attempts to localize seeds production: in 2019, for the first time the seed company Euralis started producing winter rapeseed of French selection at the facilities of its plant in Cherkasy oblast. In the current year, the other French company MAS SEEDS opened the research station in Kyiv oblast, which will focus on making of hybrids of Ukrainian selection.

According to the published official figures, for the recent year the profitability of the production of major agricultural crops in Ukraine significantly changed: if in 2017 rapeseed was the most profitable crop in Ukraine, then in 2018 soybeans won the garland. As for sunflower seed, in 2018 its profitability level significantly decreased (down almost 10%).

 

According to S.Grigorenko, agrarians plan to increase its purchases of seeds from the official representatives of the most profitable crops — sunflower seed and corn. And according to the official figures, the profitability of the crops already started growing. As for the less profitable crops, mainly cereals, agrarians preferred using seeds of their own production, and the segment demonstrated some decreasing of the profitability.

Traditionally, oilseeds — rapeseed, soybeans, sunflower seed — are the most profitable crops, due to the high export demand for Ukrainian rapeseed and sunflower oil. Ukraine is the global leader in the production and exports of sunflower oil, and covers more than half of the global exports of the product. It is no wonder that sunflower seed is a stable highly profitable crop. The processing capacities of the oilseed exceed the production figures by almost 5 mln tonnes, and agrarians do not have any problems with selling of the crop. However, declining of the global prices for sunflower oil in 2018 led to the similar decrease in the profitability of sunflower seed production. Also, the high export demand for Ukrainian corn supports the profitability of the grain production at rather stable level.

As for the current year, the weather still never fails to amaze. Taking into account the first figures on the grain harvest in 2019, the situation is quite good, and there are many forecasts for the good profitability levels of several agricultural crops. The favourable conditions of the global market, and the balanced policy of the new authorities of the country will assist to Ukrainian agricultural producers to improve the profitability and increase their profits.

 

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