15.11.2018 18:39

Digitization in Agribusiness

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15.11.2018 18:39

The Ukrainian Agrarian Confederation (UAC) always tries to be in current trends that appear in agribusiness.

Leonid Kozachenko, the President of UAC, mentions that nowadays everybody is talking about digitization. The term "digital farming" appeared only 5 years ago, but everything around us will be digitized very soon. Know-how will impact the further development of agriculture, which is the leading industry, and will continue to play an important role as an instrument of Ukraine's influence on global politics. Our state, if it develops digitization in agribusiness, can become a benchmark. For the first time I heard about precision farming in Texas in 1993. Instead, this concept appeared here only after 5 years passed. Due to using of software products, digital technologies can cover a wide range of processes in agriculture. The most effective digitization is being implemented at the last stage of the optimization of the process, which focuses on price quotes and searching for the end user without agents. These new technologies should strengthen the potential of our state.

The discussion around digital technologies had been lasting at the round table "Digitization in Agribusiness" for more than three hours. During the first panel discussion the president of Ukrainian Grain Association Mykola Gorbachev, Deputy General Director of Agrarian Information and Technology Innovations of the Agriholding "Ukrlandfarming" Volodymyr Babiy, Board Chairman of AgTech Yuriy Petruk, Director of AgriLab Yaroslav Boyko, Head of the Innovations Department of the Agriholding "Myronivsky Hliboproduct" Andriy Kiianenko, Director of PLT Liudmyla Vasilenko and head of Syngenta's CRM and digital marketing team Oleksiy Dolgodushev discussed the development of digital agriculture, which should become a powerful tool for improving efficiency in agribusiness. It was about the development of the digital wave in the agroindustrial complex, the cost of implementing of digital technologies, digital as a real tool for the profitability of agribusiness, digital crop production and livestock.

The driver in modern trade of agricultural products is trading platforms, and the digital-trend more and more embraces the "producer-consumer" relationship. Due to technologies’ ability positively influence the efficiency, cost and quality of products, services or activities, the Concept of the development of the digital economy and society of Ukraine for 2018-2020 defines digitization as an effective mechanism of economic growth. Thus, the second panel discussion of the round table was devoted to Digital Trading & Logistics. Speakers - Co-founder of Agroxi Ukraine Andrew Dresviannikov, representative of JV «Nibulon» Serhiy Burkovskyi, deputy director of TEP «Vertical» Andriy Vorontsov, director of Logitex Olena Berestetska, expert of Spike Invest Solutions Andriy Novoselov, CEO of Grain Track Dmytro Mykhalchuk and head of the secretariat of Rada of entrepreneurs under the Cabinet of Ministers of Ukraine Andriy Zablovskiy responded to the most pressing issues facing the agroindustrial complex. Particularly, which tools determine the prices on the domestic and foreign markets, in what way the cost of logistics will change, how the long-term storage and changes in the structure of storehouse business will influence the producer, what the ways of optimization of the cost of seeds and fertilizers should be.

Scale and pace of digital transformations will determine quality and speed of agribusiness growth in general, as well as dynamism of production and trade. Today e-commerce has already been able to provide a wide range of smart services for business, that allow sign agreements at accelerated scenario. The trade becomes dynamical, fast and reliable through using principles of block chain.

Today, the world's largest online trading platforms are Amazon and Alibaba. At the beginning of 2018, their market capitalization was estimated at 427 and 264.9 bln dollars. Through Amazon it is supplied goods to more than 100 countries, Alibaba buyers and sellers are located in more than 200 countries. The share of Amazon is about 3% of the total retail sales of the United States, while Alibaba - about 11% of China's total retail sales. According to forecasts, by 2020, the capacity of the US e-commerce market will increase to more than 630 billion dollars, and Chinese - 1.7 trillion dollars. In Ukraine, B2C and B2B segments are represented by the international B2B-based Internet Trade Center - AllBiz, which focuses on promoting products and services in the domestic and foreign markets of different countries (with offices in 13 countries) in 26 languages. One of the largest online businesses in our country is OLX, with a database of over 10 million ads. This service is among top-10 the most visited trading platforms in the world. With the rapid growth of e-commerce and the globalization of the economy, along with the B2C and B2B segments, one should expect the development of the M2C segment (Manufacturer to Consumer), when the manufacture of the product with its subsequent delivery to the end user can be ordered anywhere in the world.

If we talk about agribusiness, it is also created online platforms that offer deals with their instant confirmation, searching for the best price proposals and potential buyers, automatic checking of contractors and warehouse documents in Ukraine. In addition, there are already a number of logistics and bidding platforms and applications like Logitex, Aliro Trade, APS Smart, Lardi-Trans, LogistPro, etc. For example, AGROXY is an online platform where trading takes place between verified companies by duly authorized company representatives. It enables legally binding contracts backed by warehouse receipts and bank guarantees. The platform has a number of free services that can be useful to farmers including an interactive map of grain/agro storage facilities, an online logistics' cost calculation, agro price index etc.

However, the development of digital-trading in agrarian sector of Ukraine has a number of opened issues: providing of trust between contractors, guaranteeing and insurance of deliveries, and access to foreign markets. In Ukraine the banking system is only beginning to "live" in the agrarian business and provide loans for agro-projects. The level of trust of middle and small producers to insuring companies is not so high. But those first steps that are being taken today for the development of digital-trading in Ukraine will allow the Ukrainian manufacturer to become more free in choosing the final buyer in future, regardless of where in the world he will be.

Natalia Zarytska, Analytical Department of UAC

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