Unknown Eastern Europe. How to work with the biologicals market
Specially for Bio Ag World Digest, January 2022
What do you know about Eastern Europe? If you only think of post-Soviet architecture and emerging economies, then we would hasten to add that this is also a large agricultural region with diversified exports and several million hectares of arable land.
Eastern Europe has no clear borders. It usually includes the Czech Republic, Slovakia, Bulgaria, Hungary, Poland, Romania, Moldova, Ukraine, Belarus, and Russia, and sometimes the Balkan countries are added. Primary crops who call this soil home are wheat, sunflower, corn and soy, apples, pears, plums and raspberries, potatoes and beets.
Not much is known about the biologicals market in this part of the world. Overall, the Eastern European region is growing about 5% slower than global trends, but it remains interesting for investment due to its large agricultural areas, territorial proximity to the EU and less strict regulatory policies.
The region has several major manufacturers of microbiological preparations and a high level of competition for the attention of farmers. We asked Dmytro Yakovenko, Head of International Sales at BTU-CENTER, to share his experience on what challenges manufacturers of microbial preparations face in Eastern Europe and what they pay attention to when entering new markets.
BTU-CENTER is a Ukrainian manufacturer of microbial preparations for agriculture. We are one of the 25% largest producers of biologicals in the world, the largest producer and exporter of such products in Ukraine, and a member of the IBMA. The group of companies includes its own production facilities, commercial offices in Ukraine and Germany, a R&D center “Institute of Applied Biotechnology”, and its own logistics park. The portfolio of BTU-CENTER includes 66 biostimulants, biofertilizers and biocontrol products applied on 4 million hectares; 6 biological products have the EU registration. Our products are exported to 18 countries worldwide, and their research continues in 10 more countries.
When the company registered the first biologicals in Ukraine in 2007, no one in our country knew how to combine biotechnology with intensive farming. We conducted research, talked about the strategic approach to land resources, and conducted many training events throughout the country. It is no exaggeration to say that BTU-CENTER developed the market from scratch.
For some time, even the prefix ‘bio’ itself scared off farmers, because there was a prejudice that ‘bio’ is only about organic farming. Sometimes there were also dishonest manufacturers. After once using such pseudo biopreparations, farmers did not trust other companies.
Over time, Ukrainians have become more educated and most of them know what to pay attention to when working with biological products. The level of awareness of biotechnologies in Ukraine today is one of the highest in Eastern Europe. With a total arable land area of 43.3 million hectares, Ukraine is one of the largest consumers of biofertilizers in Europe and the second largest in terms of inoculants after Russia, according to DunhamTrimmer. According to our estimates, 24% of Ukrainian agricultural enterprises already use biologicals in their farming technologies. Among them are agricultural enterprises with a land area of 200,000 hectares or more – Kernel, MHP, Epicenter K, etc.
In general, the focus of BTU-CENTER is on field crops – wheat, sunflower, corn, soya, rape etc. At the same time, we have significant experience in horticulture and vegetable crops grown both in open field and in greenhouses. We started exploring other markets to enrich our own experience, and at some point we realized that biotechnologies for cereals, technical crops, and oilseeds remain a terra incognita for the agricultural market of neighboring countries.
Since 2017, we have launched systematic export. We started with neighboring countries, where logistics seemed easier. But we almost immediately realized that working, for example, in Moldova and Belarus, means to have two separate approaches that differ dramatically.
Moldova is a country where the agro-industrial complex is the mainstay of the economy and accounts for about 11-12% of GDP. Arable land is about 1.8 million hectares. The main crops are corn, wheat, sunflower seeds, grapes, and apples and about 90% of agricultural crops are grown on rainfed land. The survival of farmers largely depends on the resistance of crops to weather conditions, which is what we are working with.
Moldova borders the EU geographically, and this is reflected in many things – a free land market, export policy, and subsidies to organic producers. They are also trying to implement many regulatory provisions with the EU.
Organic production accounts for about 1% of the country’s agricultural land and is developed almost entirely for export to the European Union. This dictates the appropriate product quality requirements, which forces farmers to look in the direction of biological preparations. It is interesting that preparations for organic farming, unlike in many countries, are certified in Moldova not by private companies, but only at the state level.
Belarus is a country with a high level of political control of the industry and a closed land market. Agriculture accounts for about 6% of GDP, and the area of arable land is about 5.6 million hectares. The structure of the agro-industrial complex is dominated by former collective farms who receive state subsidies, but are unprofitable in themselves. Their negative financial condition does not allow them to use the credit support of banks that are ready to issue loans only to solvent borrowers. Barter, i.e. exchange of goods as a payment method, is widespread in the country. Otherwise you have to agree to very large postponements from one agricultural season. In addition, the practice of 5-year plans is widespread in Belarus, when the state sets and monitors the implementation of production goals. Under this system, a farmer cannot fully use the cultivation system at their own discretion. All this does not contribute to the free conduct of business.
Of course, private enterprises exist. And this is exactly the audience with which we work in the first place, which is ready for biological products. But there are so few of them that we can say that there is almost no private property in this country.
In general, there is interest in biological products in Belarus, especially among organic producers. There are advanced collective farms, agricultural associations work effectively, thematic events are held, and scientists are very interested in us. At the same time, the prospect of economic changes in Belarus is not very encouraging, because the country is significantly dependent on the Russian sales market. Despite the plans to diversify exports, in fact, the agro-industrial complex works for Russia. But it is unlikely to be possible to move away from this for a number of political reasons for a long time.
The situation in the Balkan countries is quite different. Again, each country requires its own approach.
For example, Bulgaria has the total area of arable land is about 47% of the surface, or 3.5 million hectares. The country has hot summers and dry and cold winters. There are frequent droughts in July and August, and precipitation is usually low, with variations between regions. In addition, the problem of soil erosion is significant. Therefore, no-till technology is widespread in Bulgaria, with which we also work a lot in Ukraine and Kazakhstan.
The BTU-CENTER portfolio includes products specially developed for zero treatment systems – from starter fertilizers to preparations for the decomposition of plant residues. Moreover, due to the fact that we have our own production facilities, we can adapt existing products to certain application schemes, which is also important for Bulgarian farmers. Despite the fact that Bulgaria is part of the EU market, Bulgarians are by their mindset close to Ukrainians, so doing business in this country is understandable for us.
Serbia is the breadbasket of the Balkans. Not surprisingly, agriculture is important to its economy, accounting for about 6.5% of GDP, 21% of all employment, and 23% of exports. The area of arable land is about 60% of the country (~2.6 million hectares), which are located mainly in the North. Serbia is the third largest producer of raspberries and soybeans in Europe; the second largest producer of plums and the tenth largest producer of corn in the world.
Unlike neighboring Bulgaria, the Serbs use almost none of no-till technology. A significant part of the crops are irrigated. The difference is also the structure of farms, which are still dominated by small farms. Almost 80% of the more than 600,000 farms have less than 5 hectares. At the same time, Serbia actively supports agricultural producers both at the state and local levels. For example, at the municipal level, in addition to national subsidies, it is possible to get partial financing for projects for the construction of land irrigation systems, as well as preferential prices for the most active ones for the purchase of agricultural land.
Despite the fact that there are several local producers of biological products in the country and farmers are familiar with the approach, it is very difficult to introduce new technologies in Serbia. We have experience when, having three years of research with good results, agricultural enterprises, both with large and medium-sized land areas, do not move to the implementation.
For comparison, let’s look at Slovakia, an Eastern European EU member state. The country has 1.5 million hectares of arable land. Despite the fact that agriculture does not have a big impact on the economy (2.18% of GDP), biologicals are not something unknown here, they are part of sustainable production processes. In general, the level of agricultural technologies in Slovakia is very developed. Most biological products are imported, but there are also small local production facilities.
In Slovakia, farmers count money more than in any of our partners. This may be due to concerns about higher fertilizer prices and stricter EU bans. Therefore, Slovaks are carefully looking for alternatives.
Kazakhstan has become an interesting experience for us, although it can’t be attributed to Europe. The total area of arable land is about 25.9 million hectares. This is a country with large temperature amplitudes – daily changes reach 20-30 °C. In winter, the temperature can drop to -50 °C, so there are almost no winter crops in Kazakhstan. In summer, surface temperatures sometimes reach +70 °C.
The agricultural season in Kazakhstan is very short – from May to September, in October there may already be snow on the field. Long droughts and lack of moisture also play a role. Therefore the average yield, compared to Eastern European countries, is much lower. For example, harvesting 1 t/ha of wheat in Kazakhstan is a good result. Kazakh farmers do not like to invest a lot in crops – they try to reduce the amount of fertilizers, use low seeding rates – because they are afraid of being left without profit or even suffer losses. Given this climatic reality, we, as manufacturers, faced the task of carefully adapting existing technologies to the natural conditions of Kazakhstan. Therefore, we need to conduct more specific research and find new approaches.
When I first came to Kazakhstan, I was very impressed with the area of 800 hectares of Kazakh fields. You can drive 200 km and not see any signs of civilization. This is not the case in any European country! Huge areas of fields require appropriate technical support. Usually, a powerful technique with a wide covering is used for cultivating.
To sum up, there is no universal model for working with the Eastern European market. Each country has its own characteristics – political, legislative, natural and climatic, mindset. Therefore, we must adapt, research and test our technologies every time.
But what is always appreciated is the support of the manufacturer and a partnership built on trust. At BTU-CENTER, we have made it a rule to provide full agronomic support to our partners, so our consulting office employs about 50 professional agronomists-practitioners, including those who specialize in entomology and phytopathology, soil health, and have a scientific degree. All this allows us to quickly respond to requests from foreign partners from everywhere, which they really appreciate.
Taking into account our considerable experience in Ukraine, we have a practice of field inspections, joint research, online and offline training seminars, and online courses. All this builds trust in our experts and helps us stay on the same page with our partners.
Also, a lot depends on the partners themselves. We try to choose like-minded people with whom we share common values – contribution to the health of humanity, focus on the needs of farmers and decency in doing business. It is important for us to involve our partners in marketing. For example, our Moldovan partners WeeTrade conduct a lot of research in their own fields, have their own team of experts and help develop the brand. We prefer to cooperate with local experts who best understand their market, its specifics and conditions.
We are open to new partnerships and are happy to share our expertise in the field of microbial preparations for the agro-industrial complex.