Information for fruit and vegetables business in CIS
Fuel price increase might entail losses in farm sector
According to the specialists of Agricultural Marketing Project (AMP), the high production costs of agricultural products in Ukraine due to price increase for fuels might entail a drop in profitability of agricultural production.
The AMP Chief Market Information Specialist Andriy Yarmak said the cost-price of wheat might increase 25 to 35 percent this year in comparison with 2003 and might range within 300 to 390 hryvnias per tonne ($56 to 73 per tonne), even despite expected high yields. The production costs of some other crops (for instance, fruits and vegetables), which involve a traditionally large share of manual job, will increase in a smaller proportion.
These estimates are based on the assumption that fuel prices will not be rising any more, Yarmak said. Further increase of fuel prices might entail still greater increase in the cost-price, which might exceed the expected selling prices and, consequently, entail losses for farmers and other categories of agricultural producers.
At the same time, grain prices after the start of harvest may prove to be higher than it was earlier expected, as in the situation of overall price increase for all kinds of foodstuffs, the demand for bread and other grain-origin products does not drop and sometimes even increases. Besides, in condition of global growth of oil prices, grain consumption may increase considerably for production of ethanol, which can be used as an alternative fuel.
Despite the fact that fuel price increase is going on in the majority of countries due to a sharp rise of global oil prices, the growth of prices for foodstuffs at the same rates is hardly possible, as it would entail a drop in consumption. In this situation, producers of the essential food products will be least affected by losses.