Dispite the unjustified full-scale attack by Russia since the 24th of February at our Agroindustrial Group Arnika Organic, we have finished the sowing campaign and the harvesting summer season. But the main problem that we’ve faced now – is lack of shipment opportunities, thus less or double-priced export.
Challenges not yet seen
The organic sector of Ukraine has faced lots of problems, except safety issues, among which are the following:
- Availability and access of different resources, especially those that are imported (fuel, seeds, and spare parts)
- Blocked sea ports and access to other shipment opportunities
- Shortage of storage capacities prior to new harvest
- Access to land, namely in Eastern and Southern regions. In those regions fields are either occupied or mined. In other regions there is a huge risk of unsafely because of air raid strikes.
- Inability to assess the damage caused in the occupied territories: like, destructed production facilities, land damage, stolen grain, and other production resources
- Absence of any investment opportunities to re-start businesses, to make relocation and/or to build new infrastructure (for example, storage, transport, etc.)
Exports – lots of alternatives and experience needed
During the last years at Arnika Organic the team has developed lots of ways of transportation that have been workable and favorable for our clients and us. We delivered by trucks, railway, river, and sea, in vessels and containers, all over the world – to the US and Japan, to the EU and Middle East. But unfortunately, today the whole system and tons of team efforts have collapsed, and we must reinforce our efforts to find new shipment opportunities.
For us and for dozens of other organic exporters is important to fulfill obligations on front of all our international partners, not to lose established markets. Besides that, export will help us to preserve businesses, to pay taxes and to keep our teams.
Trucks, river and railway – efficient alternatives?
So, what are the current export challenges and opportunities for certified organic commodities. Transportation by trucks has become too expensive and time-consuming. Prices per truck have become higher since the beginning of this year. For instance, the truck to Switzerland went up to 5500 Euro from 2700 Euro, to Germany two times as well, up to 6000 Euro. Besides high pricing, there are also other challenges, like the availability of trucks, the expectation time at borders and availability of fuel and its high price. All these make this mean of transportation not favorable at all in terms of time and money.
River transportation is not working efficiently in the current conditions either. There were several ports that we as a company worked with, including occupied Kherson, Reni and Izmail in the Odessa region. But because of substantial volumes of conventional goods needed to be exported, organic producers are not able to use terminals and shipment capacities in Reni and Izmail. Those terminals are sub-leased, which makes impossible to use them for organic exporters.
Railway transportation is more workable, comparing to any other. But there are certain challenges here, as well. Ukraine uses a rail gauge of 1520 mm width (broad gauge) while the EU standard gauge is 1435 mm wide. This means that Ukrainian wagons cannot be used in most of the EU Member States and that goods must be transshipped. But the current transshipment capacity is by far insufficient and not adapted to operate substantial volumes of cargo. In addition, transshipment is time consuming and requires special machinery.
Besides that, organic exporters from Ukraine are facing difficulties with accessibility of warehouses for the purpose of transshipment on the EU territory. To use warehouses for organic purposes – the warehouse should be cleaned and washed. This could take up to 2–3 days, including survey to check the place. But because of substantial volumes of conventional commodities, organic exporters have troubles accessing warehouses, that put them in unequal market opportunities with other market players, exporters of agricultural goods.
Master challenges together
And even though, we are now all face circumstances of irresistible force, challenges that we’ve not yet seen, there is something we can do together. First, transshipment capacities: They should be provided also for organic exporters. What should be done? Alternative freight lines, transshipment and container capacities as well as seaport capabilities should be actively explored in Member States where there may be spare capacity (for example in Baltic States, Bulgaria, Hungary, Slovakia).
Second, state support/guarantees from Ukraine to the EU transport owners: EU transport owners (of wagons and trucks) have certain and understandable safety issues, when talking about cooperation with Ukraine. Thus, the Ukrainian government should provide additional financial incentives and guarantees to the EU wagon and truck owners when they enter the Ukrainian territory (to cover the cost of damage or lost). Loading of EU standard-gauge wagons can take place at both sides of the border as the different gauges enter in some points (up to 60 km) into the Ukrainian territory and vice versa. So, also the right to use those 60 km zone as a transit territory for shipments should be granted to Ukrainian exporters.
Creating financial and investment opportunities
Finally, creating financial and investment opportunities, to facilitate public-private partnership in field of construction, reconstruction, and further developments.
Together with international financial institutions Ukraine should find any available funding and the most appropriate procurement procedures to support (re-)building or strengthening logistics and storage infrastructure in regions that are close to borders with the EU Member States.
