A pilot initiative in Ukraine to more efficiently transport fruit captured the imagination of the public. Given the pilot's potential to change Ukraine's market system, the excitement may be justified.

Rarely does international development inspire memes but in Ukraine in July, a barge full of watermelons did just that.

After the Ukrainian prime minister excitedly announced on Facebook that a shipment of watermelons (kavun in Ukrainian) was traveling from the Kherson region to Kyiv for the first time in 14 years, funny versions of the enthusiastic post went viral as Ukrainians took to Twitter to create good-humored parody accounts and memes. Citizens across Ukraine traced the ship’s movements online and news organizations provided coverage, publishing articles to examine how watermelons became the most popular story of the year.

Twitter account @kavun_z_barzhi

While the Ukrainian public may have found the prime minister’s announcement overly enthusiastic, there was a good reason for his excitement: this barge full of watermelons has the potential to change Ukraine’s agriculture market system. The shipment was a pilot that the USAID Ukraine Agriculture and Rural Development Support (ARDS) Program facilitated to test if transporting produce by river would prove cheaper and more effective than ground shipments, which may save the government and agriculture industry many millions of dollars a year.

What is the background behind the barge?

The ARDS Program supports broad-based, resilient economic growth through more inclusive, competitive, and better-governed agriculture to provide attractive livelihoods in rural Ukraine. One of ARDS’ priorities in its first year has been to facilitate the development of alternative logistics for the fruit and vegetable supply chains in the Kherson region of southern Ukraine. The effort aims to link Kherson-based agribusinesses, farmers, and their products to large trading networks in Kyiv and eventually Europe through Belarus. The program is supporting its private sector partners to test a new market infrastructure approach, using waterways instead of roads to transport watermelons.

Why focus on transport and the watermelon supply chain?

In Ukraine, due to a lack of alternative modes of transport, prices for road transport of fruit and vegetable products increase by two to two and half times in the summer high season. Taking a market systems approach to these issues, ARDS identified systemic challenges in a sample supply chain, watermelon, in the Kherson region. The program selected watermelon given its market demand across Ukraine during the summer months and road transport issues because watermelon is particularly difficult to transport due to their bulk and potential for damage. Road transport logistics challenges and pick-up delays result in roughly 30 percent of the watermelon harvest remaining in the field. Another 10 to 13 percent of the product undergoes physical damage during transport, especially due to the lack of standards for packaging and transport of watermelon by truck.

What was the plan and how did it go?

The ARDS team supported watermelon supply chain actors to work together to address shipping costs, perishability, and packaging standards, and design a new model of supplying watermelon from the region to large trading networks using riverways. To test the model, ARDS’ partners (the Kyiv-based Sil’po retail supermarket chain; Nibulon, a large agribusiness operating a significant cargo fleet on the Dnipro River; and 28 small- and medium-sized farms operating in Kherson region) organized a test shipment from Kherson to a Nibulon terminal near Kyiv by barge via the Dnipro River. The pilot aimed to not just test and improve watermelon supply chain functioning, but eventually other fruit and vegetable supply chains as well.

On July 30, 2017, a barge loaded with 250 tons of watermelon harvested by farms in the region were shipped by Nibulon from the Hola Prystan river terminal to a river terminal near Kyiv, attracting the attention of the media and average citizens as Ukraine followed its progress. The watermelon test shipment arrived in Kyiv on August 4, 2017, to a dock full of amused press.

What were the findings?

ARDS analyzed how the pilot worked, including assessing interactions between partners, application of modern logistics and packaging standards, costs, and transport time. Reviewing the test shipment findings has been an opportunity to work out logistics and packaging, calculate value and time, and establish effective collaboration between the stakeholders. The pilot:

  • Reinforced strong market linkages between Nibulon, Sil’po, and farmers in the region
  • Reduced costs for logistics from the Kherson region by 25 percent
  • Proved that the region can supply quality products to retail networks throughout Ukraine and potentially Europe through Belarus
  • Offered lessons learned to apply to other fruit and vegetable products in the region
  • Led to Nibulon’s recent announcement that it will almost completely redirect its cargo to water transport in the coming years. Nibulon plans to link river terminals with agricultural producers within a radius of 80 to 100 kilometeres using their modern truck fleet to transport production from farm gate to river terminal.

After findings are fully discussed by the partners, the supply chain will be improved and the next barge of watermelons shipped. If the next shipment proves successful, the pilot will be broadened to new commodities and more partners will be involved.

What are the policy and enabling environment implications for the market system?

In the early 1990s, Ukraine’s rivers carried about 60 million tons of cargo annually. But the national transport company all but disappeared and the Ukrainian Danube Navigation Society fell on hard times. Now, the Dnipro River carries a meager 5 to 7 million tons annually, about two percent of all transported goods.

According to conservative estimates from the Ministry of Infrastructure, moving 1 million tons of cargo from the roads to the rivers will save the country 800 million Ukrainian hryvnia annually in road repair costs, equivalent to $31 million. Aside from river transportation being the cheapest mode for agricultural products, it will spark regional development along the river network, create jobs, and launch cargo and passenger shipbuilding. At least three foreign companies are prepared to invest in the river transport sector if the appropriate legal groundwork is put in place. In 2015, the Ministry of Infrastructure drafted and presented  a series of bills to Ukraine’s parliament intended to jump-start river transport. The innovations in the bills include a single, small river tax; removal of all limitations on river logistics; and transparent competition rules. The Ukrainian Sea Port Administration recently repaired a series of passenger boats and docks, while the Ministry of Infrastructure held negotiations with the European Commission on including the Dnipro in the European Rivers Network and lobbying for cargo transport along the Dnipro-Black Sea-Danube route. During the second half of August 2017, the Ministry of Infrastructure plans on presenting these initiatives to the government as part of the 2030 Transportation Strategy.