On February 8-9, the 3rd Annual Agricultural Conference “Export Strategy: Trading and Logistics” was held in Kyiv, where Shakir Shamilov, director of Kusto Agro Trading, took the floor.
He presented a report to the conference participants. Its topic was “Traders’ effort consolidation to promote Ukrainian grain to foreign markets.” As part of his speech, Shakir Shamilov highlighted a few important issues which have to be addressed to protect agrarian companies’ interests.
Ukraine is taken as a cheap agricultural producer
This stereotype about our agricultural producers and traders has been developed both in Europe and in south-eastern Asia. Everyone strives to purchase Ukrainian agricultural products for little money – our farmers are treated like low-cost labor. That is why Ukrainian producers, traders, exporters, and sellers have to develop their common policy. Unless there is real unification, Ukrainian agribusinesses will not be able to win acceptable conditions on the foreign market and to earn well enough.
Rail transportation issues
It’s not a secret that Ukrzaliznytsia is a state within a state. Bureaucratic hurdles and the company’s own rules of the road create a lot of difficulties in goods transportation. Even if a company has its own railroad freight cars, a station may simply refuse to accept them. A threat to fail obligations to contractors is growing.
Ukrainian traders and producers need to unite to have the situation changed. Exactly agrarians are the driving force for the Ukrainian economy today. The railways have to help develop the economy, but not to stand in its way. However, we have other laws in effect in our reality.
No order in foreign markets dealing with some croppers
Pea is a niche cropper which has become a profitable market position for Ukrainian agrarians. This plant is also a good green manure crop. It seems to be a good solution for agrarians, but there is one catch. Ukrainian traders and producers may encounter very important issues, and the lack of discipline in the foreign pea market is one of them. It may sometimes happen that the delivery is carried out, but payments are not made.
Buyers juggle with regulations when importing agricultural products
This is another pattern of misconduct. Buyers manipulate their rules and regulations when importing agricultural products.
We can talk about India in this respect. This country has recently refused to buy wheat, introducing a 20% customs duty. The Indian government took this measure to protect local producers. The authorities feared the latest case with pea to reoccur. The pea prices then collapsed because Indian farmers harvested a record yield of 22 million tons. Moreover, another 5 million tons of the imported product added to that amount.
However, manipulations with imports started back in 2014. The Indian government was about to ban imports of the pea cropper because the product was not decontaminated by methyl bromide. Eventually, this decision was constantly postponed until it was decided to make the requirement effective from April 1, 2017. This jeopardized supplies not only from Ukraine but also form the entire Black Sea region. The measure was again postponed, and permissions to ship grain to India without methyl bromide treatment were extended until June 30, 2018.
Because of these circumstances, Pakistan and, in its turn, Ukraine are affected. If the price goes down in India, it will surely do so in Pakistan. Besides, when registering necessary papers in case of a purchase, the buyers request an HS-code to be indicated, which significantly reduces the customs rate for them.
As it turns out, Ukrainian traders experience pressure because of unfavorable terms. This adversity should be changed. First of all, we have to re-evaluate our position and take more advantageous one, but this is possible exclusively due to the joint effort.
Chinese experience relevance
Nowadays, China is a consumer of our products. We already have a successful experience in supplying corn, flour, oil, and oilcakes to this market.
But Chinese partners not only buy products or raw materials, they also get necessary knowledge helping them develop their own agrarian sector. In this respect, Chinese government sends students to foreign agrarian universities. They officially receive an education there and return to China being qualified specialists.
Ukraine can also implement a similar program for our students, providing them a possibility to adapt experience, say, in logistics and trading, in leading agrarian countries. But it is also crucial to create proper working conditions inspiring young professionals to come back to their own country.
Ukraine has to establish a union of traders
Right because it is very important to stay protected from unpleasant circumstances and be able to develop, it is necessary to consolidate efforts. Trading companies’ unification is an important step in this direction. This measure will simplify work and provide a number of benefits: it will allow exchanging data on counterparties and create a respective database. Traders will have an opportunity to check buyers from Pakistan or from any other region, minimizing risks.