Agricultural machinery market is the most important component of implementation process of the most modern and leading agricultural technologies in agricultural production. Understandable and civilized game rules on this market promote speed-up of fundamental Ukrainian economic sector modernization process, and so they promote competitiveness increase of Ukrainian agricultural production on world markets. It is difficult to overestimate the actuality of this question, and to understand better tendency and development vector of Ukrainian agricultural market, we turned with a list of questions to a specialist, who is its participant and is able to influence on making of important state decisions that are necessary for market and agribusiness development, - to Alexey Bondar, the member of All-Ukainian Agricultural Board, the specialist in spheres of supplying and service supporting in modern highly-technological agricultural machinery, a specialist of marketing research of Ukrainian agricultural machinery market, the author has more than 30 publications.
All-Ukrainian Agricultural Board was created in April, 2014. The organization unions companies for interests defense of domestic agribusiness in the state government. Its members are agricultural producers, providers of plants protection products and fertilizers, and also dealers for agricultural machinery selling.
Alexey Bondar, born in 1980, graduated from the National Agricultural University, faculty of Agricultural Management, in 2002. During 2002-2005 years he worked at agricultural analytic company “Agrarica”, during 2005-2008 he was a marketing director in the “Ukragrolys” LTD, during 2009-2012 – a chief manager of sales department of the Rostselmash representation, starting from 2012 – a sales director in “Agrotechnica-Podillya” LTD.
- Alexey, the year 2014 became a really experience for market participants because of complex crisis, where our country is. Let me ask You the first question in the beginning of our conversation. How have been developing Ukrainian agricultural machinery market during last 10 years, how would You characterize it?
- During last 10 years the agricultural machinery market turned upside down. In the year 2014 80% of Ukrainian market went to the agricultural machinery of Ukrainian and CIS’ countries manufacturers, and today their share is not more than one-third of the market. It means that agrarians changed dramatically their preferences. They invest huge sums in technical equipment and in implementation of the most modern agricultural technologies. So, agricultural producers made a big jerk forward in technical upgrading of their enterprises. If to characterize the market dynamics in few words, it increases gradually, except year 2009.
- In what condition the agricultural machinery market is today and what prospects does it have?
- In the current year we can see a shard decline in sales, as it was in the year 2009. Tractors segment decreased this year for 40-50% compared to the previous year. An expecting sales volumes reduction of trailed equipment is 34-40%, and combines harvesters segment will decrease in 2.5-3 times. Customer demand has moved to cheaper machinery and equipment, for example in ZUK’s segment share of used machinery has increased, and among procurers of trailed equipment share of domestic machines has increased. These are traditional market tendencies for a period of rapid devaluation of national currency. Rapid market renewal in 2015, as it was in years 2010 and 2011, is not expected yet.
- Yes, Ukrainian agribusiness made a big jerk forward concerning the case of technical upgrading and development of advanced technologies during last 10 years. This is an important step to the way of competitiveness increase of Ukrainian production on the world markets. But at the same time Ukrainian agricultural machinery production didn’t withstand the competition with imported agricultural machinery and loosed on a grand scale. On Your opinion, was it justified or not?
- It became a harsh reality for most Ukrainian agricultural machinery manufacturers. For this time the tractors and combines manufacture particularly stopped in our state. I consider Ukrainian enterprises that manufacture self-propelled machines, fall behind hopeless and they will not be able to produce competitive agricultural machinery by themselves. Prospect for them is just in cooperation with leading world manufacturers. Concerning trailed agricultural equipment, in some market’s segments Ukrainian agricultural machinery manufacturers do business rather successfully. In Ukraine there remained about twenty enterprises that work stably and which not just successfully sell their production in our country, but also expert it in tens world countries. These enterprises are able to develop manufacture by their own, and state must support them. The same as to create conditions for new productivity powers development with attraction of western investors.
- Please, give an example of the most successful domestic agricultural machinery manufacturer, which competes confidently with western brands on Ukrainian agricultural machinery market, and what actions the company undertook opportunely to become popular not only in Ukraine, but in other countries too.
- The most bright example of right and opportune reaction on time challenge is factory “Chervona Zirka”, which during last years completely renewed manufacturing lines with equipment of leading world manufacturers. Today Kirovograd enterprise has the most modern painting line in Ukraine, metal laser cutters and robotized welding. So, metal processing and painting quality do not concede most enterprises, which produce agricultural machinery in Western Europe, but, unfortunately, metal quality concedes to competitors.
- To create conditions for new manufacturing powers development with Western brands participation, a complex of actions is necessary, which will allow to implement European quality standards on the market, and it is ambitious and not easy task. What first steps in this direction the state must do, experience of which countries can be used to achieve the goal?
- For real coming in Ukraine of the biggest world agricultural machinery manufacturers with their manufacturing programs corresponding conditions are necessary. Namely, big, stable and growing market, powerful state support of domestic producers and, of course, clear to all “game” rules on the market. So, prime cause of coming to our market of serious investor is stable and growing state economy, thanks to which it is possible to build long-term manufacturing plans. Unfortunately, now we don’t have possibility to offer that to our western partners. But already today, in our power to go to European agricultural machinery trade rules and to simplify its turnover at Ukrainian agricultural machinery market.
-Please, name specific steps, at least some of them, which would allow to implement European trade of agricultural machinery rules and to simplify its turnover. What is it necessary to do even today?
- For a start we must take final leave of the agricultural machinery certification system, which we have got from soviet times and to go to generally accepted in the EU declaration system. Declaration – it when during export or import of agricultural machinery customs authorities will accept for registration the manufacturer’s declaration, but not certificate of accordance, as it is now. In its turn, the body of state control will check just accordance of agricultural machinery to so-called “technical file” upon its delivery. Also it is necessary to simplify significantly the system of machinery registration, i. e. to decrease quantity of required documents, output from turnover reference-calculation, etc. We learned attentively registration procedure of most EU’s countries and made a conclusion that Poland experience can be the most appropriate for our country. There they have no references-calculations and the registration procedure is greatly simplified.
- Creation of new manufacturing powers with participation of leading world agricultural machinery brands – is a strategic aim, which can be achieved by absolute interests compliance of all agricultural machinery market participants, and, in first turn, of Ukrainian agricultural producer, who pays for everything and creates conditions for dynamical market development. There are examples, which also deserve a special attention. Last two years events at Russian agricultural machinery market, by opinion of many experts and market participants, limit Russian agrarian in his choice. Due to fees introduction for combines harvesters import in 27.5% with further changing of this measure on quotes some Russian agricultural machinery manufacturers could increase production and shipping volumes. In the same time it significantly limited possibilities for further development of Russian progressive agricultural enterprises, which in result of limited actions had to delay purchasing of new modern agricultural machinery for following years or to pay higher price, and that meant to decrease procurement volumes and to slow down their development temp. Besides that, as a result of taken measures Russian agricultural machinery market became less forecasted for investments of strategic partners from the EU and the U.S. that slowed the development of dealer and service infrastructure for agricultural machinery Hi-Tech service. Will the experience of the CIS countries on market regulation be considered?
- During last ten years new manufacturing powers were built mainly in China, Eastern Europe and Russia. In China plants are built because of enormous and permanently growing market. On results of the 2013 volume of Chinese agricultural machinery market in terms of money was, according to different experts’ estimations, more than ˆ 18 billion. Ukrainian agricultural machinery market in 2013 was less than ˆ 1 billion. About half a million of tractors are sold annually in China, while in Ukraine – not more than ten thousands. Now there are factories of all greatest world agricultural machinery manufacturers in China.
Russian agricultural machinery market by its volume is not able to compare with Chinese or EU markets, but nevertheless its annual turnover is approximately ˆ 3 billion. Factories in Russia are being built thanks to market regulation by a way of customs limits implementation for imported agricultural machinery, and also thanks to significant state support of local agricultural machinery manufacturers. But for today manufacture in Russia in overwhelming majority is just assembly, i.e. agricultural machinery are imported disassembled and are being assembled in Russian enterprises by using a little part of spare parts by domestic production. These manufacturing projects are artificial, and in a case of state grants reduction they will disappear as quickly as appeared.
That is why due to absence of systematic state support Ukrainian agricultural machinery manufacturers and comparative little volume of Ukrainian market, Chinese and Russian variants of agricultural machinery development don’t satisfy us. I’d like to draw your attention to the markets of Eastern Europe. They are not such big, but fully are integrated in common economic space of the European Union. Therefore, manufacturer does not have any limits during agricultural machinery transfer between EU countries. And we know perfectly well that EU market is the biggest in the world. On results of the 2013 its cost increased until record level in ˆ 27 billion. Cheaper manpower and energy, in most cases the tax system is more comfortable for new manufacturers, however, lower land cost in Eastern Europe forces West-European manufacturers to build new enterprises on territories of new EU’s members. In addition European Commission will compensate partially cost of investment projects in these countries. All these advantages will allow leading brands to create new innovative enterprises in countries of Eastern Europe and to produce more competitive production.
I am sure that the way of our nearest Western neighbors fits us, and development of domestic agricultural machinery manufacture will depend on EU integration of Ukraine temps.
- Therefore, let make conclusions of our conversation. Ukrainian agricultural machinery market has two strategic goals: the first – modernization of domestic agriculture at the expense of hi-tech agricultural machinery import, simplify of its turnover at the expense of European trade rules implementation, that already today will influence positively for production competitiveness increase of fundamental Ukrainian economy sector. The second – to create conditions for investments into new hi-tech manufactures with participation of world agricultural manufacture leaders, that will allow to create modern, innovative, export-orientated agricultural machinery manufacture.
- You are absolutely right. Importers now are legislators of agricultural fashion and are providers of the most modern technologies. Further conversion to a new stage of the partnership with Western brands depends on successful development of the dealer and the service infrastructures. But the most important thing for all market participants – it is a stable Ukraine economy and agriculture development. There are no necessary conditions for big manufacture programs of world agricultural manufacturers Great Five. Ukrainian agricultural machinery market is very small by its volume yet, and energy saturation level of agricultural enterprises is too low. I will give a simple example, quantity of tilled soil in Ukraine is equal to quantity of tilled soil in France and Germany all together, and Ukrainian agricultural machinery market volume is practically in 10 times less than in these two countries.
In the same time it points to a great potential of Ukrainian agricultural machinery market, which will play an important role in the case of domestic agriculture modernization, and also will create in Ukraine conditions for innovative agricultural machinery manufacture development with participation of world-known brands.
- Let me to thank You for the very interesting conversation. I’d like to wish you success in Your beginnings and in work with All-Ukrainian Agricultural Board. I hope we will be able to spotlight the Board work in future, to deliver operatively to our readership information about main events on the market, and also to be useful for You as independent expert at the agricultural machinery market.
- Thank You for interesting and professional questions. I’ll always be glad to answer all Your questions. I’m sure that Ukrainian agriculture is doomed to success, and I hope for early peace in our country.
The interview took Vitalii Mietolkin,
Director of the “Firm “Runo” LTD
Web-portal about agricultural machinery market www.runo-agro.com
Translated by Natalia Dragnieva