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The scheme of the walnut production in Ukraine. Part 2.

On April 30, 2020, the Ukrainian Parliament adopted the Land Law 2178-10 (in Ukrainian), paving the way for the buying and selling of agricultural lands in Ukraine, although with some limitations at the initial stage. The Land Market has become functional since July 1, 2021 solely for private individuals. The maximum ownership is limited at 100 ha per person. Legal entities will be allowed to purchase land in 2024 and the ownership limit for legal entities is set at 10 thousand hectares. FAS* Kyiv staff expect that the ability to legitimately secure land ownership could further boost interest of Ukrainian farmers in the development of orchards, including walnuts ones.

Walnut in Ukraine. Export prices for in-shell product are weak forcing industrial producers to branch out into processing and packing.
Walnut in Ukraine. Export prices for in-shell product are weak forcing industrial producers to branch out into processing and packing.

On the flip side, explosive growth of walnut production brings competition: according to industry sources, profit margins continue to slide down. In addition, export prices for in-shell product are weak forcing industrial producers to branch out into processing and packing. Producers prefer Ukrainian origin seedlings. However, due to increased demand and the inability of local seedling producers to meet the higher demand, some new seed varieties are imported from neighboring countries, like Moldova and Belarus, which feature similar growing conditions. Some growers are experimenting with imported seedling varieties to gain a competitive advantage in yield and quality.

The Ukrainian State Registry of Plant Varieties (in Ukrainian) currently lists approximately 40 different varieties of walnuts in 2021, allowing commercial growers to pick and choose varieties that are commercially sustainable in their area. Most of Ukraine’s individual walnut producers do not treat trees for diseases. However, with more commercial walnut production coming online and taking over poorly managed and aging orchards, these newly established commercial producers are reportedly paying greater attention to production technologies (beyond irrigation) to increase growing efficiencies. For example, these growers are conducting research into ideal growing areas, investing in nurseries to improve genetic stock, and applying fertilizers and pesticides to their orchards. Sorting is predominantly done manually to ensure quality and consistency of the product batches.

Walnut production in Ukraine is still mostly a labor-intensive business, with the majority of walnuts harvested by hand or rudimentary nut picking devices in family farms used by the previous generation of growers. According to the industry sources, family farms are known for unstable quality of their product, which pushes them into the low-level segment among foreign buyers. According to industry reports, commercial walnut production yields have increased as well as the quality of their product.

The majority of farmers did not initially consider installing shelling equipment at the stage when they were establishing their orchards. This was because they were relying on opinions of suppliers of walnut seedlings, who were promising unrealistically high prices for in-shell walnuts to benefit their own sales. This ended up with commercial growers competing with family farms, which naturally had lower production costs, thus could sustain lower asking prices in the in-shell walnut market. Recognizing the price spread between shelled and in-shell walnuts, the most advanced walnut producers started purchasing a wide range of equipment allowing them to shell and pack their product to avoid competition at the crowded, low-end in-shell market. The latest trend is that farmers started applying for long-term banking credits to establish vertically integrated production clusters that include an orchard, a processing facility with packaging unit, and a certified quality control lab.

Another part of the business for commercial growers is walnut wood, which is used for local furniture manufacture. Additionally, some wood is exported. In order to harvest wood, commercial walnut growers plant additional trees during orchard development, which are chopped down for lumber after a few years. Other products related to walnut value-added production are treated leaves for medicinal use and walnut (green/young nut) preserves. In recent years, Ukrainian consumers’ demand for walnut oil is increasing, primarily from EU importers. There is also some domestic demand for walnut oil as a key ingredient in the premium segment of natural cosmetic products.

* Foreign Agriculture Service, from USDA.

Source : USDA

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