Information for fruit and vegetables business in CIS
Logistics as one of reasons for unprofitability of apple production for export in Uzbekistan
Apple growing in Uzbekistan can result in domestic farmers’ severe losses with rather expensive export logistics as one of the reasons. Under conditions of relatively low prices of apples and often their low quality, high logistics costs make Uzbekistani fruits uncompetitive in the global market, says Mr. Andriy Yarmak, Economist of the FAO Investment Center.
“Apples are one of the least expensive fruits in the world; therefore, a country’s ability to compete in the global apple market depends on its ability to transport its apples at low cost, as transportation has a big impact on a price”, he says.
Taking into account logistics costs, prices of Uzbekistani apples will be at least twice as high as average prices in Russia.
According to Mr. Yarmak, Uzbekistani fruit and vegetable market was always focused on Russia. With the season 2017/18 as an exception due to abnormally high fruit prices connected with a loss of a third of the European crop, average price of apples reaches about RUB 20-25/kg in Russia in February. It represents the ex-storage price fixed for unsorted apples of Russian origin and is equivalent to $0.30-0.40/kg.
He estimates the cost of transportation of Uzbekistani apples from Fergana to Yekaterinburg and Moscow at $0.25-0.30/kg and $0.35-0.40/kg, respectively. “Thus, transportation costs as much as apples, which are already available in Russia”, Mr. Yarmak concludes.
Difficult logistics negatively affect the idea of starting the apple growing business in the country, where the cost of necessary imported equipment is rather high, or a farmer has to save on technologies, having lower quality of products as the result.
“There is another important thing: many farmers have no idea that establishment of an apple orchard, even with shade nets, is not the largest investment into an intensive apple orchard. By the way, it is still averagely 20-40% more expensive in Uzbekistan than in Moldova, Ukraine or EU, as Uzbekistani farmers have to import all technological elements, inclusive of fruit trees”, Mr. Yarmak says.