How will the Association of Sugar Producers of Ukraine (hereafter "Ukrsugar") be reformed? What can change the minimum prices on sugar and why producers aim at getting a status of self-regulating organizations, - told the Head of Ukrsugar Andrii Dykun.
Recently the Ukrsugar has changed its Head – eternal for many years Mykola Yarchuk has resigned this post, which soon was taken by Andrii Dykun, the former President of the Association of Milk Producers and Deputy Head of the Ministry of Agrarian Policy and Food in 2014. Why such rotation has happened and what awaits one of the powerful branches - in the interview of Agravery.com.
You were appointed as the Head of the Ukrsugar after it had been headed for many years by Mykola Yarchuk. What does this change mean for the Association?
- Currently, I would not speak about radical changes. Mykola Yarchuk has done a lot, a strong team of experts work in the Association. Now we need only to make it more modern and change the approach to work into more marketing. However, we offered Mr. Yarchuk to stay, but he refused.
What is the first you have to do in this post?
- We have to analyze the previous work and to establish a fundamental program of development of the national sugar branch. That is why, colleagues and I actively study the legislation of Ukraine, Europe and other advanced countries, which work in sugar branch. We have been searching the internal reserves we could use, thinking about what can be improved, and what – optimized. So, we have been analyzing all the processes existing in the sugar production: from the field to the realization of the final product. We still have enough to strive for, because the average crop yield of sugar beets in Ukraine is lower than in Europe, and energy costs for the production of 1 ton of sugar are higher. Therefore, high cost makes a product less competitive.
What are the main tasks the Board of Directors set to you?
- I will be able to answer this question only after the program of reforms is approved at the meeting of the Board of Directors in the beginning of November. But we have to accomplish three tasks: to develop the common rules for all enterprises, provide sugar production on the external markets and to make the Ukrsugar a self-regulating organization.
The first one: in the past three years the branch constantly fluctuates – one day prices rise, another day – fall. There are laws which must regulate it, but no one adhere to them. That is why, and this is a discretionary decision of all the players of the branch, common rules are needed, according to which the enterprises with one or several plants will work. All of them want to work and earn money. So it is necessary the rules of the game are to be easy and understandable not only for sugar producers, but also for the society in general, and legislated. When everyone understands how the price formation happens, there will not be any speculations that sugar is a social product, which price must constantly be controlled.
The next task is the search of market outlets. At present, every enterprise does it independently.
Recently it has been said that Ukraine can export 1 mln tons of sugar to China.
- I consider it to be a little bit unreal: there is sugar made out of sugarcane, and it is more competitive on the market. Sugarcane grows 6 years in one and the same place, and Brazil can make sugar during 10 months, but not during a quarter as other plants. That is why the prime cost of the Ukrainian sugar is much higher.
However, we should still look for market outputs. And we attempt to find them in Europe and Near East. Because if we produce a lot of sugar, we should sell it. To rely only on the internal market means to restrict the development of the branch. If the production increases, the price will fall, a lot of plants will not start the season next year, the prices will rise again and in a year the production will increase – and we will have such wavering all the time.
The third task of the Board of Directors is to become a self-regulating organization. Our 100% representation allows us to claim this status after the corresponding law is adopted, because all sugar plants are presented in the Association. We can distribute quotas, do analytical investigations, make laws. This must be done by the Association, not officials.
For instance, let us consider the issue of sugar import. Ukraine is a member of the World Trade Organization and can yearly import 260 tsnd. tones of sugar from abroad. The question is who is going to do this and in what form will it be imported. The one thing is ready sugar sand, quite another – raw sugar, which must be manufactured. In my opinion, all this must be agreed by the Association. It also must regulate sugar substitutes’ import, because their boom in recent years is a considerable problem.
Basically, where there are officials, there is corruption. And in the Association all the members of the branch are represented, and the rules of democracy work. We do not have something like: the more the enterprise, the more the rights. I had personally witnessed it before I became the Head of the Association. I attended the Board of Directors’ meeting and saw how the quorum worked.
Even Astarta, the leader with a considerable margin, does not have the primacy?
Astarta, like other members of the Association gets a say. Yes, they are members of the Board of Directors, but there are also other enterprises. It is pleasant, because there are no discrepancies.
Why was it you who were appointed? You had not been noticed in sugar branch before.
- In fact, I was involved in sugar branch not having any relation to the Association of Milk Producers. I worked in the company where I studied this issue. I visited sugar plants of India, China and a number of other countries.
My first acquaintance with the Ukrsugar happened when I worked as a Deputy Head of the Ministry of Agrarian Policy and Food and something pushed me to import raw sugar in Ukraine. I managed this direction and it was obvious for me: if an internal producer had enough already problems, he would not get through when a great quantity of sugar would be imported. I managed to get my message to the Cabinet of Ministers. The delegation from the Ukrsugar and I addressed the Ministry of Economy, where we explained the situation. Besides, I work with different branch associations, some of them I created myself. So I have solid experience in this sphere. That is why the Board of Directors invited me to the general meeting, where I talked to all the members of the Association, found out their thoughts about the development of the branch. Then, during the next meeting I presented my vision. Thus, I have been appointed as the Head.
They say that Victor Ivanchyk, the owner of Astarta, invited you.
- I had known a lot of people from the sugar branch before the Ukrsugar. Historically, a number of sugar plant owners have milk farms. So we communicated with Mr. Ivanchyk in the framework of the Association of Milk Producers.
Recently, we have written about the problems with the declaration of prices. Producers claim that they cannot reach price adjustment. Has this problem been solved? What are the key problems in this branch?
- Yes, for some period of time the market has been destabilized, but I think that in the nearest future the problem will be solved. Generally, the declaration of prices is nonsense, not existing anywhere else in the world. Sugar is a socially important product, the price for which cannot rise by plants more than for 1% per month. Such practice was introduced in 1996 as a way of control the price rise. The State Inspection for Price Control of Ukraine had to adjust prices. But it was eliminated during the creation of the State Service on Food Safety and Consumers Rights Protection (Service), headed by Serhiy Glushchenko. But as far as the Service does not work in full force, the Inspection technically performs its duties. But the truth is the following: plant representatives came to inspectors who simply accepted documents. People did not know what to do, because according to the law the prices cannot rise, and no one invents in percentage, taking into account inflation and depreciation.
What other problems exist?
- Periodic desire to set minimum prices. They are often talked about just before the elections. This time is not an exception. But one should not pass social problems, handled by the Ministry of Social Policy, on business. Business must develop and make profit. In this case the state will also have money.
If the Ukrsugar gets a status of self-regulating organizations, the only possibility for the state to regulate prices is interventions.
- This is as it should be. The Agrarian Fund has to purchase sugar when it is cheap, and sell when it gets expensive, and support at first a producer, and then a customer. The same was with flour, when bread was cheap. But in recent years, the Agrarian Fund has not purchased anything.
Last year the producers of sugar had some problems with gas, because NAFTOGAZ did not guarantee deliveries until recently. This year the majority have been working with private traders. Was the transition smooth?
- Not exactly. Things used to be clear - there was NAFTOGAZ, all the companies purchased from, and the Ministry of Agrarian Policy, which approved the lists of these companies.
This year the plants themselves had to sign gas supply agreements and many have concluded agreements with rail traders.
In other words, a company promised lower prices, signed an agreement, and then it turned out that it simply did not have gas. So, the company that promised to supply gas did not have a limit on its export. Almost the third of the plants had difficulties. Nevertheless, the issues have been sorted out. The Ministry of Fuel and Energy (MinTopEnergo) has responded quickly and made a list, whom to work with and whom - not. Therefore, all the plants that were planning to launch, have started to operate. I think next year we will be more thorough in approaching this issue, discuss all the points with the Ministry before the beginning of the season. It should also be kept in mind that each year a growing number of plants shift to alternative fuel. This year already 11 have done it. If we had a green tariff, there would be more transitions, and it what would help companies to lower production cost of sugar and make its production more competitive.
Translated by Poliglotus Language Company