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IAMO FORUM 2005 SOME SPECIFICS OF AGRICULTURAL COMMODITIES MARKETING AND PROCESSING IN UKRAINE

IAMO FORUM 2005 SOME SPECIFICS OF AGRICULTURAL COMMODITIES MARKETING AND PROCESSING IN UKRAINE Alexander Kobzev , International Finance Corporation. Swedish International Development Cooperation Agency Шведське агентство з питань міжнародного співробітництва та розвитку.

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IAMO FORUM 2005 SOME SPECIFICS OF AGRICULTURAL COMMODITIES MARKETING AND PROCESSING IN UKRAINE

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  1. IAMO FORUM 2005 SOME SPECIFICS OF AGRICULTURAL COMMODITIES MARKETING AND PROCESSING IN UKRAINE Alexander Kobzev, International Finance Corporation Swedish International Development Cooperation AgencyШведське агентство з питань міжнародного співробітництва та розвитку Canadian Agency for International DevelopmentКанадське агентство з міжнародного розвитку

  2. IFC Survey and Monitoring Activities • Aseries of four annual surveys “Farming and Agribusiness Development in Ukraine”. • Surveyed 400 private family farmers and reformed collective farms • Five Ukraine’s regions studied (West, East, North, South, and Center) • Issues: Farm production, marketing, finance & insurance, and land relations • National error – 4.9 % • Survey “Specifics of Agricultural Produce Processing and Marketing in Ukraine” • Surveyed 100 food processing enterprises • Issues: Raw product supplies, raw product quality, distribution chains, and other issues • National error – 8.9%

  3. Main Distribution Channels of Commodities Weight of main distribution channels employed for sale of grain and oil-bearing crops, % of the total sales of these crops • Main marketing channels: wholesale companies, processors, wholesale & retail markets • Insignificant role of exchanges and trade houses • Growing role of new marketing channels: i.e. supermarkets

  4. Main Criteria for Choosing a Channel What are criteria for choosing a distribution channel by producers, % of overall responses 79% of the surveyed producers of grain/oil crops and 67% of the surveyed vegetable-growers recognize price as the decisive factor for choosing a particular customer

  5. Marketing Channels Profitability Profitability of certain distribution channels for agricultural produce, % of total responses Retail and wholesale markets appear most profitable distribution channels, whereas government procurements looks least profitable as a sales channel

  6. Payment for Delivered Commodities Payment schemes used by farmers selling their produce, % of overall responses Farmers’ readiness to sell their produce for deferred payment, % of overall responses

  7. Commodity Supply during the Marketing Year Proportion of produce sold in the course of marketing year, % of overall responses 44% of harvested grain and oil crops and 58% of vegetables are sold in the period between June and September Need for cash and lack of storage facilities// high cost of storage are the main reasons for uneven supply of commodities

  8. Knowledge of the Market and Product Requirements • Producers are best aware of wholesale companies and processors’requirements to produce, and least aware-of export and supermarkets’ requirements • Only 18% of agricultural enterprises and 4% of private family farms are familiar with “rules of the game” in the Ukrainian agriculture export market

  9. Processors’ Requirements to Raw Products Significant factors influencing the choice of raw material supplier by processing businesses In 90 % of all cases, the quality of raw material is key for signing a contract between a processor and a particular supplier Second most important factor is price for raw material, as was reported by 80% of processing enterprises Availability of needed amounts of raw material and timely deliveries are the other two important factors, influencing the purchasing decision of processors

  10. Low Quality of Raw Product Major reasons of low quality of raw material, % of responses Three main reasons of low product quality: storage conditions, bad crop varieties/ unproductive breeds of cattle, conditions of raw product delivery

  11. Marketing Issues: Supply Side

  12. Marketing Issues: Demand Side External Issues Internal Issues • Worn-out production assets • High production costs • Lack of qualified workforce • Inefficiencies of regulatory environment • Tax inspections and other types of government intervention • High interest rates on commercial loans • High level of taxation and poor administration of taxes

  13. Short-term Business Priorities What Processors Intend to Do in the Nearest Future, % of responses Upgrade of production facilities is rated as the top priority for ag processing enterprises

  14. Improve the enabling environment: Develop and adopt the laws “On Wholesales and Retail Markets”, “On Agricultural Cooperation/ Farmers’ Cooperative”, others Advance agricultural marketing infrastructure Promote new farm insurance products, warehouse receipts, long-term crediting Facilitate the development of farm marketing cooperatives Promote transfer of knowledge and information Extend market information Develop regional brands and trade marks Adopt international quality standards Agricultural Marketing: IFC Agenda

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