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Walnut Garden – a Long-term Investment

19.08.2018 Analytics

Gardening is a purely European business by mentality as it means long-term investments and a completely transparent process. Walnut is a financial pearl of this industry. A walnut garden of only 1 hectare yields more than 1.2 million UAH per year.

A walnut garden is an investment in the future and long-term well-being, as one tree lives around 400 years and its yield is constantly increasing up to 60 years.

Walnut in Ukraine

Ukrainians have been actively planting walnuts during the last 15 years.

Ukraine is lucky with climate and soils since only 7% of the world’s land is favorable for cultivating walnut trees. According to the statistics, our country has almost 500 thousand hectares of free land suitable for growing walnut trees.

This business area has been actively developing during the last decade, nevertheless, Ukraine has already taken the third place as a world’s walnut exporter.

The annual harvest has reached 113 thousand tons lately, and if we take into account undeclared harvests, the numbers can reach even 150 thousand tons.

Therefore, we confidently occupy the fifth place in the world in the gross collection of this culture.

As for the consumption of walnut in Ukraine, our citizens consume only 0.5 – 1kg annually regardless of the average rate of 3kg per year.

Due to this, the walnut industry needs to grow almost twice – by 25 thousand hectares – in order to meet both domestic and external demand.

The area of Ukrainian walnut trees gardens is 16.3 thousand hectares. Note, walnut was growing on 40 thousand hectares in 1995.

Another mistake of Ukrainian walnut breeders is an insufficient processing level. It is possible to produce nut butter, jam, tinctures, medicines, but this field of activity is in its infancy today.

Another problem gardeners face is the lack of acclimatized seedlings. Part of the planting material is imported from Poland, Moldova, Italy, France. No one knows how these “foreigners” will feel in our country. No one knows whether they will be able to withstand lasting frosts, whether they will bear fruit actively and for how long they will live.

The Main Players are a Usual Anomaly

The walnut industry rules in Ukraine don’t differ from the rules of doing business in other sectors, they are semi-mafioso. All cash flows are controlled by oligarchs who influence both private structures and all power structures of the highest level.

However, there are silver linings in this sad story. The experience shows that ordinary citizens can also conduct business if it is not very large. In particular, land tyrants are tolerant towards existing 10-15 hectares gardens. However, you will have to sell your crop to their structures at a price by 5 times lower than their selling price.

Most of such companies have a base company that manufactures the product and a selling firm for exporting it in order to bring out their money without any problems. So, there are no exporting companies which exist for more than a year. Such a company disappears without paying any taxes after receiving the first profit. Another company with a new name takes its place. For instance, according to international analysts, 30 thousand tons of walnut were illegally sold to Turkey during the last marketing year. A transporting convoy with such cargo would stretch for 30 kilometers. It appears that such great volumes can also become invisible if being covered with dollar bills.

Firms that will be named below belong to wealthy people. They work for power structures or can be associated with senior officials through family relationships. For example, there is a deputy of 5, 6, 7 convocations, whose son used to head the Customs Service of Ukraine; his niece was a deputy of the Supreme Council. He is also a first-rate official who used to work for the administration of V.Yushchenko, an acting deputy, a member of the parliamentary group headed by one of the main controllers of walnut smuggling…

Ukraine has imported 250 thousand walnut seedlings during the last marketing year. According to the customs, the “Ukrainian Walnut” company bought the largest amount of trees – 129.8 thousand pcs, followed by “Global Invest” with 59 thousand pcs, “Alcor C, “Alcor-Service” with 20.3 thousand pcs, “Zhashkiv Equestrian Sports School” – 10 thousand pcs, “YAFK-Viton” – 9.2 thousand pcs, “Krokus Promservice” – 8.7 thousand pcs, “First fruit and vegetable company” – 4.9 thousand units, “Svitanok Agrofirm” – 2.9 thousand pcs, “Orex Ukraine” “- 2.8 thousand pcs.

In order not to make this negative topic an obstacle to the way of your mental initiatives, remember the History of empires. Solomon said that some oligarchs are just vanity on its way.

Plant trees. By the time they begin to bear fruit, the Ukrainian market will become transparent, and market players will work according to European rules.

Export

The walnut deficit in the EU market reaches 100 thousand tons and the needs are growing further. While observing the external and internal demand, entrepreneurs can double the walnut production.

The main purchasers of walnut in Europe are France – 1523 tons, Greece – 539 tons, Hungary – 461 tons, Austria – 320 tons.

As for the Asian direction, exports are directed to Iraq – 1981 tons, Turkey – 793 tons, Iran – 540 tons, and Georgia – 452 tons.

As for the CIS countries, Ukrainian walnuts were bought by Belarus – 1535 tons, and Azerbaijan – 1407 tons, during the last year.

The total volume of Ukrainian exports for last year appeared to be 75% of the whole harvest.

The World Walnut Market

Foreign experts forecast that the 2017-2018 marketing year will end with a decline in the world walnut production of 2 million tons (with shells).

The main walnut producers are China – 1 million 60 tons, and the USA – 620 thousand tons in the last marketing year. Their share in the world walnut production is 76.8%. Although, the United States produced 450 thousand tons, and China – 720 thousand tons five years ago.

The largest share of walnut exports is taken by the USA – almost 63% or 475 thousand tons.

The second largest exporter of walnuts is Chile – 15.6% or 118 thousand tons.

The EU countries are the largest importers of walnut. They purchase almost 260 thousand tons of walnuts in foreign markets.

Turkey imports 110 thousand tons. Despite the huge production of its own walnut, China purchases around thousand tons of foreign walnut. Japan imports 50 thousand tons and South Korea – 35 thousand tons.

Calculations

Is producing walnut profitable? People specify numbers that are by X times greater than the profit from any other agro-culture (except poppy). That’s why it’s interesting to do some calculations. Surely, there can be assumptions and deviations, but they will be not more than 10-15%.

So, let’s take 4 thousand kilograms per hectare as the average harvest of a young garden. Then we take the percentage of pure walnut, which is 50% after cleaning. Thus, we get 2 thousand kilos of pure nuts from 4 thousand kilos. We multiply this amount by the average selling price – 150 UAH per kilo. We get 300 thousand UAH. We take away 10 thousand UAH for expenses and 4-5 thousand UAH for other costs. This way, we get 290 thousand UAH per hectare.

These calculations are fair for young gardens. One hectare of walnut trees can bring up to 10 tons in 20 years, that means almost 750 thousand UAH of profit per hectare.

Note that these calculations are fair for a garden of 120 trees, although some gardens contain up to 200-250 trees. With such a density your harvest will amount to 8 tons of walnut from 1 hectare and the profit will exceed 1.2 million UAH.

Pay attention to the fact that the calculations are made according to the current wholesale prices, and this will not last forever.

The European wholesale price of walnuts is 11 EUR per kilo, the retail price is 25 EUR per kilo. Consequently, a European manufacturer receives almost 3 million UAH per hectare in case of wholesale sales (8000 kg multiplied by 11 EUR, which equals 88 thousand EUR or 2 million 816 thousand UAH) from a garden of 240 trees.

Expenses

They are about 10 thousand UAH per hectare. This is pretty much the same as the costs of cultivating grain crops. The average harvest of grain in Ukraine is 4.5 tons per hectare, and the average price per ton is 5 thousand UAH.

Dream

We have already mentioned that there are about 500 thousand hectares of free Ukrainian land suitable for growing walnut. If you turn it into a walnut garden, you will be able to receive 5 million tons of walnut each year, which is by 5 times more than the record of China. 2 million tons of walnut cores will remain after clearing. It will be around 300 000 000 000 UAH – half of the budget of Ukraine, or the entire external debt of the country.

Pay attention!

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