Information for fruit and vegetables business in CIS
The possible price increase on fertilizers won't cause rapid growth of vegetable production cost in Ukraine
Gas price for the Ukrainian enterprises will undoubtedly increase much in 2006. Many branches of Ukrainian industry will be affected including the national produce business. We informed earlier about the possible negative consequences of gas price increase for the greenhouse production. Talking with the players of fruit and vegetable market, we see that many of them worry about possible growth of the fertilizers' production cost on the Ukrainian enterprises, as gas is used in the technological process. The players of this market is now actively looking for the possibilities to supply fertilizers from Russia, as the Ukrainian products are likely to be too expensive.
The experts of "Agrooglyad: Vegetables and Fruits", the weekly journal of the produce business of Ukraine have analyzed the potential consequences of the price growth on mineral fertilizers for the produce business of Ukraine. The results of the mini-survey show that the share of mineral fertilizers in the cost structure for the major vegetables is about 12%. Respectively, if the price on fertilizers increases 12%, vegetable production cost will grow approximately 1.2%. To the present moment there are no distinct prognoses of price increase on mineral fertilizers; however, many market players think the price will grow no less than 50%. If this prognosis comes true, the production cost for vegetable crops will increase 6% in average in Ukraine. Even if the fertilizers' price doubles, the production cost will increase only 12%.
The margin for vegetable producers in Ukraine reached hundred percents this year, so that the price increase on fertilizers won't affect much the production cost and price of vegetable crops. The production technology, handling and marketing practices will influence the production cost much more seriously. For example, those farmers, who apply drip or regular irrigation for vegetable production, spend significantly less money on fertilizers than the farmers who produce rainfed crops.
At the same time possible price growth on mineral fertilizers can affect severely the grain producers, as the share of mineral fertilizers in the cost structure is nearly twice greater than for vegetables. This fact can encourage grain producers to start fruit and vegetable production business.
Read about the details of the production and price perspectives for vegetables, fruits and berries in the next issues of "Agrooglyad: Vegetables and Fruits" weekly.