Commercial apple production in Russia

A team of analysts from Vostock Capital conducted the analysis of the apple growing industry in Russia. The report on the results of the research “Commercial Apple Production” has been prepared based on available official data rendered by the Ministry of Agriculture, analysis of performance of the producing companies and recent developments in the industry. The report comprises an overview of the apple growing industry status and trends, evaluation of pending challenges, overview of the potential and major investment projects in the Russian Federation. Below are some statements of the report.

Appels

Present-Day Status and Development Outlooks of the Industry

The Russian industry of commercial apple production has demonstrated a significant growth recently. However, the potential of apple growing has not been utilized to the full extend. Russia has huge land resources suitable for apples growing as well as unsatisfied demand for the product in the domestic market. Despite all the obstacles in 2018, the industry demonstrated a sufficient growth ratio. Gross apples output increased by approximately 100k tonnes. Due to the various projects on establishing orchards, total area of apples plantations expanded correspondingly.

An outstanding gain of perennial plantations was achieved in the Republic of Kabardino-Balkaria. For the last four years the area of perennial apple orchards in the region increased by 1.5 times and reached 19.8 ha by the end of 2018. 10.8k ha of the total expansion comprised intensive orchards.

Commercial apple growers receive state support stimulating the development. The Government provides preferential loans and 20% reimbursement of outlays for the construction of nurseries to grow quality planting stocks. Besides, there is a 20% subsidy of expenses for a fruit storage facility.

Challenges and Obstacles of the Industry

One of the key problems of the industry is import. The country impacts not only apples but also technology like machinery, tools, drip irrigation units and equipment for refrigerators. Besides most plants crop protection means are imported as well. The situation reveals plenty of opportunities for import substitution which will have positive influence on the reduction of costs provoked by the currency rate.

Other imported goods are planting stocks. The existing nursery capacity is not enough to saturate all fruit bearing and planned intensive orchards. Nevertheless, some experts believe, not all the foreign suppliers offer quality products. As a result, they consider domestic nurseries construction to be the key aspect of modern apple horticulture. Domestic nursery-gardening capacities will enable to grow quality planting stocks corresponding to all the requirements of an intensive apple orchard in Russia.

According to analysts, new investment projects on intensive nurseries add to the mitigation of the import substitution problem, as they increase production volume and market saturation with the domestic product. Owing to the orchards area expansion, the import of apples to the Russian market is gradually decreasing. At the beginning of the season 2018-2019 apple import fell by 9% in comparison with the same period of the previous season.

One more challenge of the commercial apple growers in Russia is the gap quality of personnel. Experts  see the solution in proper education material and technical resources for specialists training and development of a state programme which can boost the attractiveness of work in the agricultural industry.

Intensive Orchard as Industry Growth Driver

Commercial apples production analysis revealed the prevalence of intensive orchards in the countries leaders of the industry. Existing intensive orchards in Russia have already proved their efficiency and productivity.

However existing capacities are not enough to saturate the domestic market, that is why the potential for intensive apple horticulture investments remains high.

Intensive orchards are so attractive because of the rapid harvest: maximum yield can be gathered already on the third year. While it takes traditional orchards several years to reach their full capacity. Gross output of intensive orchards is bigger as well due to the density of the trees planting.

Average yield of an intensive orchard comprises up to 60 tonnes/ha, the same parameter for a traditional garden equals 12 tonnes/ha.

More and more world market leaders are concentrating on the planting stocks for intensive gardens.

The following regions in Russia are considered the most favorable for investing in apple orchards including intensive ones: the Kursk region, the Belgorod region and the Voronezh region.

Besides analysts lay the emphasis on: the Tambov and Lipetsk regions, the Republic of Kabardino-Balkaria, the Republic of Ingushetia, the South of the Krasnodar region and a part of the Stavropol region.

The Tula and Ryazan regions are suitable for winter-hardy varieties growing especially owing to the developed logistic infrastructure of the regions.

For more information including the analysis of the consumers’ demand, forecast dynamics and market structure in 2019-2025 and major investment projects of the industry,  please refer to the report:  https://drive.google.com/file/d/1kune9JzqghJd4BRkCqy_vjNF7kRTPI4S/view?usp=sharing