Growing imports of potatoes and potato products from Russia and Belarus puts pressure on Ukrainian producers


Growing imports of potatoes and potato products from Russia and Belarus puts pressure on Ukrainian producers

09/21/2020

Today, the main competitors of Ukraine in the potato segment are Russia and Belarus

Today, in order for the Ukrainian potato industry to develop, it is necessary to apply measures that would control the import of potatoes and potato products from Belarus and Russia. This opinion was expressed by the director of ChMP “Vimal” Serhiy Symonenko during the third meeting of the working group on promoting the development of potato and vegetable growing, writes the Ukrainian Fruit and Vegetable Association (UPOA).

To resolve the issue of potato growing in Ukraine and improve the situation in the sector, we must consider 5 headings: fresh or chilled potatoes (code according to UKTVED 0701), flour, cereals, powder, flakes, potato granules (code according to UKTVED 1105), flour-grinding products -large industry; malt; starches; inulin; wheat gluten (code according to UKTVED 1108 13 00 00), potatoes subjected to heat treatment or others, in the form of flour, cereals or flakes, etc. (UKTVED code 2004 10), potatoes in the form of flour, cereals or flakes, etc., cut into thin pieces, fried or dried, salted or unsalted, flavored or unflavored, in hermetically sealed containers, suitable for consumption, etc. (UKTVED code 2005 20).

“Today the main competitors of Ukraine in the potato segment are Russia and Belarus. And the situation with state support for these industries in our country in comparison with neighboring countries has significant differences. So, for example, in Russia there are compensation for credit interest, partial compensation for the purchase of equipment, credit programs for the construction of storage facilities and regional programs for the development of potato growing. If we look at Belarus, there is also a full range of programs and data from programs implemented for the state budget. Industrial enterprises for the processing of potatoes are now being built – 3 such facilities have already been built, and it is planned to build another plant for the production of mashed potatoes and French fries. In Ukraine, there are no similar programs yet, and only this year the government began to pay attention to this issue, ”Sergei notes.

Today we cannot consider Russia and Belarus as separate subjects of foreign economic relations regarding the import of potatoes and potato products into the territory of Ukraine. In fact, Belarus is used by the Russian Federation as an opportunity for duty-free import into the territory of Ukraine of a wide range of goods, including potatoes. That is, all 5 items that were considered above are imported into the territory of Ukraine from Russia, in transit through Belarus. And such a scheme makes it possible to avoid trade restrictions that exist directly between Ukraine and the Russian Federation.

Let us recall that the complication of trade relations began on January 1, 2016, when, by the decree of the President of the Russian Federation, Russia practically unilaterally left the free trade regime with Ukraine. After this event, a duty was imposed on the import of a number of Russian goods, including fresh potatoes and their processed products.

Studying the dynamics of potato imports from Belarus and Russia, there is a clear tendency for an annual increase in supply volumes. For example, according to official statistics, in 2019 Ukraine imported 250 thousand tons of fresh potatoes, and Belarus and Russia were the main suppliers of these products. For comparison, a year earlier, 5.8 thousand tons of potatoes were delivered. In 2020, the growing momentum continues. For 8 months of this year, Ukraine has increased the import of potatoes by 6 times.

For other commodity items, such as potato flakes and starch, the increase in imports, although not so rapid, is also growing annually. For example, in the starch segment, imports almost double every year. In 2017, starch imports are less than 1000 tons, in 2018 – 2 thousand tons, in 2019 – almost 5 thousand tons and it is predicted that by the end of 2020 the figure will reach 7 thousand tons. Thus, we already import more starch from Belarus than is produced on the territory of Ukraine.

Read also: Potatoes have risen in price in Russia, and carrots have fallen in price in Ukraine and Central Asia. Market Overview Week 38 2020

“At the same time, it is interesting to note that there is a drop in the customs value of starch. And Ukrainian producers say unambiguously that now starch is imported to Ukraine at a dumping price. In Belarus, producers are faced with the task of increasing exports. In order to realize this, enterprises, for example, large starch factories, are beginning to take over 2-3 other factories, which in a real situation are unprofitable. Accordingly, these enterprises have a general balance and the export of starch takes place as a team. Thus, the export takes place at a price below the cost price, and the losses are written off, conditionally, to the production of vodka. That is, now the situation has no economic justification, ”adds Sergei Symonenko.

Consequently, under pressure from Belarus and the Russian Federation, Ukrainian processors significantly reduce their production volumes, market operators are almost not interested in further development of potato growing or processing areas.

Therefore, in order to change the current situation, it is necessary to introduce appropriate measures at the state level. If the above items are included in the list of goods that are prohibited from being imported into Ukraine from the Russian Federation, this will not give the desired result, since all efforts will be offset by transit supplies through Belarus. Therefore, it is necessary to react to the situation with the supply of potatoes and potato products from Belarus. One of the possible solutions could be the exclusion of the above goods from the free trade regime between Ukraine and Belarus. And in this case, it is possible to implement either a complete ban on imports or introduce tariff restrictions by introducing import duties on products. And only such a comprehensive solution will help protect the Ukrainian market from unfair competition from the Russian Federation and Belarus.

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