More than 70 percent of labor-intensive agricultural products that are consumed by the population in large quantities on a daily basis – potato, fruit, vegetable, milk, and meat – are produced by individual homesteads (4,700,000 IH) and farms (42,400 farms). Many can be classified as subsistence units, farming on land plots less than a hectare and producing primarily for their own needs. Others, producing on larger land plots from one to five hectares or growing fresh vegetables under covered surfaces of at least 2,000 m2 are marginally commercial but need access to credit and formal product market facilities to develop long-term financial viability. A recent study of small-grower fresh produce marketing in Lviv indicated that on average, village level growers consume 22% of total vegetables produced, sell 28%, but lose 50% because of wastage caused by poor postharvest handling technologies. By reducing wastage, it was estimated that each 1% increase in marketable product sales could add some 11 UAH million to village incomes. In addition to producers with limited land under cultivation, the AgroInvest target population includes SMP growers of fresh fruits and vegetables, field crops including grains and oilseeds, milk and livestock with annual gross sales of $500,000 or less. The larger-scale growers face product quality and market access problems similar to those faced by smaller growers but on a larger scale.
To address fresh fruit and vegetable grower product quality constraints caused by poor harvest and postharvest techniques, and improving incomes by increasing marketable sales – the GOU is implementing a national program to construct a network of “Wholesale Markets of Agricultural Products” (WMAP) that includes construction of storage and produce packing facilities in production areas and at the new regional wholesale markets. The role of this program in expanding market access of small-scale fresh produce growers is addressed in the Component 3.2 Market Infrastructure Strategy discussion. The MAPF supported grain warehouse receipts program addresses similar constraints faced by field crop growers. In both cases, by organizing SMP growers into viable Producer Organizations – including service cooperatives or producer marketing associations – they are able to access product markets by adopting bulk marketing strategies, foster production of competitive products, mitigate market price fluctuation risks, and access new markets.
A second constraint limiting commercial viability of SMP growers of all agricultural products is lack of access to short, medium, and long-term credit sources. As clearly shown by the AgroInvest credit constraints analysis, the overriding constraint faced by most SMP growers is the lack of a documented historical cash flow records to substantiate credit payback ability to loan review officials. Again, Producer Organizations provide a mechanism through which individual growers can improve their accounting and overall record keeping skills needed to develop such records, reduce input costs through group purchases and gain access to credit sources that are not available if applications are made at an individual level.
The Component 3.1 PO Strategy builds on lessons learned from some 15 years of experience in forming Grower Service Cooperatives in Ukraine and from more recent experience with use of legal input and marketing associations that directly link SMP growers to input suppliers, including bank and non-bank lending organizations, and to various product market outlets.