The Ukrainian potato company Potato Agro has announced that it will open its own processing plant next year. It would be Ukraine's first serious chip factory and give a boost to the country's unprofessional potato industry.
With a production of about 22 million tons per year, Ukraine is the fourth potato producing country in the world, after China, India and Russia. Despite the large volume, the potato industry in the country is still very traditionally organized. Only 5% of production is in the hands of professional growers, accounting for approximately 23.000 hectares. The majority takes place at household level. The average yield in Ukraine is 16,6 tons per hectare.
Barriers to processing
The figures say a lot about how the potato chain is organized in the country. Production is generally small-scale and sales are local. It is therefore not surprising that the manufacturing industry in the country is barely getting off the ground. Moreover, the quality of the home-grown potatoes is an obstacle. Storage capacity in Ukraine is also very limited, the cost price is relatively high and investment opportunities are limited. The import of potatoes from Russia is seen as a major threat.
No more than 3,5% of Ukrainian potato production is intended for processing. The country has a handful of (small-scale) factories for chips, fries and starch potato flakes. A study by the Dutch embassy in Kiev in 2018 showed that Ukraine is a net importer of potato starch and that 90% of frozen fries in supermarkets are imported. The main supplier is Poland. For the Netherlands, Ukraine is, among other things, a seed potato destination, where almost 2019 tons of seed potatoes went in 4.000.
New factory
Despite the limitations in terms of quality, storage, cost price and returns, Potato Agro has announced that it will open a chip factory next year. AgroPortal.ua recently reported this. Potato Agro is a major player in Ukraine, located in the center of the country, which grows and supplies potatoes under the BestPotato label. According to the company's CEO, Konstantin Sarnatsky, the plans have been delayed by the coronavirus outbreak, but are not on hold.
According to Sarnatsky, Potato Agro now supplies potatoes for processing chips. Good for a production of 400 hectares. Another 400 hectares are reserved for potatoes that can be processed into fries. This would bring the total area to more than 1.000 hectares next year. Potato Agro's ambition is to expand production by 40-50% annually.
Previous McCain plans failed
In the past, McCain has had serious plans to open a processing site in Ukraine. The idea was that the Russian market could be supplied from here, among other things. However, the plans have failed, reportedly due to a lack of cooperation and corruption in the country. Other international chip products have also ignored Ukraine so far.
The question now is whether Ukraine itself is able to boost potato processing in the country. The need from the potato sector seems great. The Ukrainian Association of Potato Growers, УРÐ'К, has repeatedly sounded the alarm last year about increasing imports from Russia, which are displacing the Ukrainian potato in the supermarket. This is said to be partly due to a lack of professionalization of domestic production.
Growing demand for fries
Meanwhile, the demand for fries in Ukraine is increasing. "Sales of fries are now the most important market for the global potato sector," notes Igor Chechitko, market expert in Ukraine. “That demand will continue to grow.” According to him, Ukraine is no exception. The catering industry in the country is also developing.
“For various reasons, we hardly produce our own fries,” says Chechitko. "The potato market has been through difficult times in recent years, making it difficult for growers to take production to a higher level." The question is therefore whether Potato Agro's plans can be realized and whether the first step is taken in the professionalization of potato cultivation in Ukraine.