Prospects of the Market of Organic Products in Ukraine. Legal Aspects

Ukraine is a country with the largest reserves of high-quality fertile land, therefore the development of the agro-industrial sector of the economy is significant, and the percentage of agricultural products in general GNP is quite high. At the same time, in recent years not only traditional market of agricultural products, but also market of organic agricultural products has been growing. Starting from January 2014, with the Law of Ukraine “On the production and trafficking of organic products and raw materials” (hereinafter – the Law) common rules were established on this market.

The increase of organic products to 10% of the total turnover of the gross output of agriculture and introduction of agri-environmental standards and norms of European Union in national legislation (including the field of organic products) was a part of the program for Ukraine’s rapprochement with the European Union, and therefore many norms of the Ukrainian Law quote, almost word by word, the relevant EU directives. A set of international food standards of the WHO was also took into account.
After the Law came into force, the Government of Ukraine have developed the necessary national regulations and rules, technical regulations, prepared documentation for zoning areas with appropriate agri-environmental indicators, orders of evaluation of these zones, bodies of the organic product certification were established, inspection bodies in the field, etc. Thus, at present in Ukraine there is a system of production, certification and control of organic products, and the only thing that somehow impedes the development of this market is the low solvency of the population, because organic products sometimes are much more expensive products manufactured according to standard agricultural technologies.

Based on the foregoing, the market of organic agricultural products can be extremely interesting for potential investors in the establishment of enterprises in Ukraine, as well as retailers, because its secret is that the demand for organic products is growing in the EU. In general, in the economically developed countries of the European Union (Germany, France, Belgium, etc.) or in Switzerland, at least 15-20% of consumers are willing to pay more for organic products or products without GMOs. But the specificity of the organic products cultivation is that there is very high proportion of manual and mechanized labor in the costs, and the productivity of the cultivation of some of these products is significantly lower than existing agro-technologies have. It leads to a significant increase in the price of organic products. Therefore, it can be reasonable transfer some production of organic products in Ukraine or place the orders for the production on the Ukrainian farms by retailers.

We can not say that business in Europe does not think about placing orders for organic products in Ukraine, but it is a one-sided partnership. At the moment, EU countries experiencing a shortage of organic protein crops for the subsequent production of feed for livestock grown by organic techniques, so the major orders in Ukraine relate to soybean or corn. However, the spectrum of cooperation could be much broader. It is poultry products, vegetables, fruit (fruits and berries, juices and concentrates). And “organic” business in Ukraine is interested in the experience of Western countries, the seed material, etc., so cooperation could be extremely beneficial for both parties.

When you enter Ukrainian market with organic seed production, or if you wish to establish business with Ukrainian company-producers, entrepreneurs from Europe are often faced with difficulties, and these difficulties frighten Europeans. Not always work environment or running business in Ukraine understood by investors and other interested parties. However, a qualified lawyer will help to neutralize the negative aspects and will allow to run a profitable business.

Author: Kydalov Igor