Top-manager of the «Dnipro Orchards» Alexander Pakhno told how a Ukrainian apple can become a famous brand in the international market.
The orchard project «Dnipro Orchard» started in the Dnepropetrovsk region a year ago. This modern trellis (with the use of supports for trees) orchard size of more than 50 hectares. Today its head Alexander Pakhno is waiting for the first harvest and is sharing ambitious plans for the future. In five years, there will already be 500 hectares of orchards, which will give 20 thousand tons of elite apples annually.
– I’m not new to agriculture. I worked for a long time in an agrarian company that grew wheat, corn, sunflower and soya on 37 thousand hectares in the Dnepropetrovsk region. Nowadays we continue the plant growing. Since 2013, we grow Maizadur and Syngenta corn seeds for the company on 600 hectares under irrigation. But I wanted to engage in other high-tech business, lay marginal cultures with a relatively short period of investment return. Different options have been considered. Orchars liked most. It’s beautiful and technologically.
We started to study technologies and business processes from the end of 2013. We went abroad for training, communicated with specialists from leading nurseries, and developed out the business plans. We began to prepare a site for planting in 2015. Planted a Orchar last season. We are expecting the first harvest of apples by Uapple-brand this year.
The total area of the orchars covers 53 hectares, we planted 35 hectares last year and another 18 hectares this year. According to our business plan, we want to work on a territory of 500 hectares over the next 4-5 years. Now we are starting to build a storage for 19.2 thousand tons of apples. Next year we will finish the first part of the construction for 2,5 thousand tons. We also plan to make our own processing, but later. We will produce juices of direct pressing.
How much money is needed for this?
Investments depend on which seedlings you choose, what equipment and sprayers are used, what supports, which irrigation system, weather station, anti-hail protection etc. Planting of the one hectare of orchars costs from $ 25 to 55 thousand. If you take seedlings one year old, you will have to wait for the result longer, and you will not form a tree like in foreign nurseries. If the age of the seedlings is two years, then the profit will be faster.
In general, fruit-growing allows you to earn the same in a small area as the usual plant growing on thousands of hectares. Apple business pays off in the fourth year after the landing of the orchars (if properly handled). You will start earning the first profit from the fifth year. Self-sufficiency comes when the farm gets 12 tons of apples from one hectare. You can go on self-sufficiency for the second year after planting the orchars.
How did you choose the varieties for the orchars?
We analyzed which types of apples are the most popular in the world, how many years will the demand for them continue, what markets for these varieties, take into account yields, climatic features. Today grades of Gala, Golden, Granny Smith, Pinova, Fuji and Red Delicious there are in our arsenal. We took varieties from the leading German and Dutch hotbeds. We chose the knip-baum standard seedlings to get the first harvest faster.
Did this year spring frosts affect on your orchars?
We were lucky, the frosts did not hurt. It was -4℃ degrees during the green kidney phase. The trees survived, the orchar was not damaged. Many of our colleagues suffered huge losses this year. The effect of frosts can be minimized with the help of modern technologies. For example, you can use European sprinkling technology – to glaze the kidneys with ice so that it does not freeze during frosts. Another technology called “mill”: it accelerates the air and does not allow trees and ground to freeze. We did not need to use them yet. But we are eyeing, we want to cover the orchar with an anti-hail net.
How many harvests do you expect?
We expect a harvest of about 20-25 tons per hectare this year. We have 2,857 trees on each hectare, one apple weighs 180-200 grams. We will receive 60 tons per hectare at a time of full fruiting. This is the second year after planting. We will leave 50 apples per tree, next year – 75, and then – 100 apples. So it is necessary by the European technology.
What other technologies do you use?
We try to learn the best world experience. All technological processes are automated as much as possible. All equipment are foreign-made. We have one tractor for 12 hectares of area, plus a set of sprayers, braids, etc. Dutch specialists provide support, they create technological maps. The most useful device in the orchar is a weather station, which is connected to the Norwegian hydrometeorological center and the Dutch server of a consulting company. We simulate various problems that might arise in agronomy, based on these data. Obviously, any problem (parasite or disease) occurs at certain temperatures or weather conditions. The computer calculates this, and we see on the monitors what situation may arise soon. Then we take precautionary measures. Agronomists work in our orchars. Automation is great, but you need to watch the trees constantly.
Finding a good agronomist is a big problem for businesses. How did you solve this problem?
To open an enterprise is not a problem, but there is no one to work for. This is one of the hardest problems of any business. There is no modern school of orchars in our country, specialists with a European level of knowledge are not trained. We did not hire specialists from the “old school” of agronomy to our enterprise. I respect them, but new farms require fresh forces. Now we have only three agronomists. The oldest of our agronomists is 25 years old, and the youngest is 21 years old. Excellent command of English was the main condition for hiring, so that they could communicate freely with foreign consultants on agronomic topics. We taught specialists “for us” – they were sent for an internship abroad. This requires high costs, taking into account the cost of flight, accommodation, and services of speaker-consultants. However, this is the only way to grow a cool professional for the company. Now only 20 people work in our orchars, and that’s enough.
About competition and access to international markets
How high is the level of competition in the apple business in Ukraine?
Competition – this is when you compete with other enterprises for the same market. There are three conventional directions for growing apples in Ukraine: elite, ordinary and apples for processing. The elite segment is only 10% occupied, and we position ourselves precisely as elite producers of apples.
If you remember, there were a lot of Dutch apples after the jump in the euro exchange rate in Ukraine. They cost 24 hryvnia, that is, about 2.4 euros. This segment is free now. Although there are elite varieties of apples for 70-90 UAH in supermarkets, but this is a niche product. Ukrainian apples of similar quality are very few so far in the country. They can not be found after January because they can not be stored correctly. There are many half-quality apples – we see them in the low price segment. Yes, there is competition and corruption. I do not exclude that they pay a lot of money to get the goods into the sales network. Because I do not see another possible reason why such fruits are offered to consumers. Such apples must be thrown away or processed, but not eaten.
The producers, which were oriented to Russia, account for more than 60% of the market. They grow the appropriate varieties of apples (for example, Champion and Renet Simirenko), which the European manufacturer does not understand and will not buy. Not everyone can reorient themselves quickly with the change of sales markets. They are very negative about the prospects for the apple business here. Simply, they are not accustomed to making efforts and working on quality. Therefore, they continue to sell goods to Russia in a roundabout way. Or they begin to dump inside the country if a detour to Russia does not work.
Will you sell apples in the domestic market or start exporting immediately?
We focus on export of apples. But we will sell here, too, if there is an acceptable market value. Why did we choose export? Despite the obstacles, there are clear rules of the game. You will not be left without buyers if you offer good apples, a large volume and is ready to invest resources in logistics and packaging. In addition, the price of apples in the world is about the same in recent times. There are no such distortions as in Ukraine. For example, the average price of apples in Indonesia is $1-1.10 throughout the year.
What should be considered when apples exporting?
In Ukraine, only one million tons of apples are produced per year. And in China, they produce 45 million tons, and 5 million tons are imported. Germany is experiencing a deficit of more than a million tons of apples. Those 20 thousand tons that we plan to produce annually are a drop in the ocean. We do not have any problems with the customers. Approximately 40 international companies and traders are ready to conclude preliminary contracts with us now.
The conclusion of partnership agreements on various profile events, exhibitions in Europe and in Ukraine is most expedient. We will do test shipments to the Scandinavian and Asian regions. Because our harvest is not enough to form an export party this year.
In my opinion, the three components are important for export for real. The first is the quality of products, which is confirmed by certificates that are recognized in most countries of the world. In our case, this is GlobalGAP (we’ll get it in September). The second is logistics. You need to calculate all the risks, conditions and terms of delivery, and find carriers that can adhere to the conditions. If an apple travels a long distance within 20-30 days, then it needs a certain level of temperature and humidity. Therefore, special materials, fasteners, etc. are needed. The third component – this is the correct size, taste, manufacturer’s readiness for systematic work.
And what about the big apple competitor – Poland, which is very close geographically? This will not prevent the development of the business?
This country produces 3 million tons of apples annually. This is the best indicator in Europe. They are professional, have many competitive advantages. The main varieties produced by Poland are oriented to the Russian market, too. This is Ligol, Champion, Idared. They are not on the list of the most popular apples in the world. Apples of Kanzi, Pink Lady, Crimson Snow, Red Delicious varieties are the most popular. Therefore Poles sell their products to Ukraine and Georgia actively. But Poland can not supply apples to Indonesia because they do not have a quarantine permit. And this is an excellent opportunity for Ukraine.