Major topics of the Congress, which took place on Oct. 15-16:
* Macroeconomic situation in Ukraine and its impact on the further development of agricultural business;
* World agrarian market: impact factors, demand making;
* World grain trade: international experience and opportunities for Ukraine;
* Prospective markets for Ukrainian agricultural commodities: demand and trade features in 2014/15; and
* Condition of the infrastructure of Ukraine as the limiting factor for development of the agrarian market
Dialogue between agribusiness and government
To date, establishment of effective dialogue between agribusiness and government is still the main purpose of the agricultural sector in Ukraine.
So, the representatives of the agrarian business of Ukraine jointly with the Ministry of Agrarian Policy and Food of Ukraine, the Agrarian committee of the Verkhovna Rada of Ukraine, the Ministry of Economy and Development of Ukraine, and representatives of the Food and Agriculture Organization of the United Nations (FAO), and the European Bank for Reconstruction and Development (EBRD), sectoral agrarian associations of the international organizations, have analyzed work of the government during the recent year, and specified the future development of the agricultural sector of Ukraine.
Remarks:
The Ministry of Agrarian Policy and Food of Ukraine and the Agrarian committee of the Verkhovna Rada of Ukraine show interaction with business and have implemented real changes: the internal veterinary certification is cancelled and quarantine-veterinary department is reformed (internal quarantine certificate is cancelled).
Financing/Investments
Investment raising to all agricultural sectors, including agricultural commodities production, food industry, animal husbandry, etc., is still the important issue for Ukraine. Within frames of the panel discussions on investment opportunities in agribusiness, the Congress participants discussed the role of Ukraine on the global food market, estimated the investment volumes attracted in 2014-2015 period, as well as willingness of foreign investors to invest in Ukraine.
Ukrainian agrarians expect more active provision of alternative sources of financing for purchasing of the necessary resources, especially material and technical resources.
The International Finance Corporation (IFC), the European Bank for Reconstruction and Development, Swiss Corporation, Baker Tilly, Ernst & Young and other law firms, have joined to support in developing of the financial instrument in Ukraine.
Remarks:
During his speech the councilor to the Board for Agriculture at Crédit Agricole Вank, Jean-Jacques Hervé, expects that in 1-2 years, Crédit Agricole Вank will work in Ukraine at the minimum investment level because, first of all, banks need to be sure that the company`s management is stable and it is quite difficult to calculate the risks of investing in the agrarian sector of Ukraine. So he concluded that despite the potential of the Ukrainian agricultural sector, financial donors prefer investing in the industry in rather cautious way.
But:
At the same time, until the end of 2015, the loan portfolio of the European Bank for Reconstruction and Development to the agricultural sector of Ukraine will possibly increase to 850 million euros, as declared by the European Bank of Reconstruction and Development director for Ukraine, Sevki Acuner during his speech at the Ukrainian Agrarian Congress. To date, the index totals 700 million euros.
As for the prospective directions of investment in the Ukrainian agricultural business, the speaker highlighted the importance to establish energy efficient technologies.
According to him, such technologies will contribute to development of the agro-industrial complex and the economy. In addition to financing agricultural producers, the EBRD also heavily invested in development of agricultural logistics.
In January-September of 2015, in Ukraine the average selling prices of agricultural enterprises for agricultural commodities increased by 54.3% compared with the same period of 2014, declared the press-service of the State Statistics Service of Ukraine. In particular, in the reporting period the average prices for commodities of plant growing industry grew by 67.6% compared with 2014, and the prices for livestock commodities – up 43.3%. In September 2015, the average selling prices for agricultural products decreased by 7.2% compared with the previous month, in particular the prices for plant growing commodities – down 8.1%, and livestock commodities – down 4.1%.
Remarks:
In 2014, one third of foreign currency earnings were received from agricultural sector. At present the agriculture plays vital role in GDP of the country. The Ministry of Agrarian Policy understands this and works on improving the climate for investments. Still the Verkhovna Rada adopts the laws very slowly and delays the process of making changes.
The U.S.-Ukraine Business Council estimated the potential of investments to the port infrastructure of Ukraine at $100 million declared the organization’s president.
According to him, raising the specified volume of investments will increase grain export capacities of the Ukrainian sea ports. At the same time, the Ukrainian government should focus not only on development of the grain export market, but also the exports of grain by-products, in particular flour.
Remarks:
The complex reforms are required for the whole cycle starting from grain production, handling (drying, removal of foreign matters) and processing (making of flour, oil, seed cake, extraction cake, etc.) to logistic (linear granary, port elevator, river transport, auto and railway transport). Modernization is needed as transportation costs by 30% higher in Ukraine than, for example, in the USA or Germany, which make the product price higher. So among the elements of the infrastructure which shall be brought up to a new level are : 1) transport infrastructure and 2) infrastructure for storage of the products.
Agrarian receipts
The Ministry of Agrarian Policy officially launched the project for establishment of agrarian receipts in Cherkassy, Kharkiv and Vinnitsa oblasts, declared the Deputy Minister on European Integration at Ministry of Agrarian Policy and Food of Ukraine, Vladyslava Rutytska during her speech. Usage of agrarian receipts in Kharkiv, Cherkasy and Vinnitsa oblasts almost quadrupled the areas of agricultural land, which future harvest would potentially become the subject of a pledge under agrarian receipts.
Remarks:
It is to be studied by investors the possibility to work with grain cargos through agrarian receipts as this is a guarantee instrument for investors to get the harvest even in bad harvest year or fail year.
Land privatization
Land fund of Ukraine is characterized by rich land resources. Thus, gross output leads the following agricultural plants into top world’s positions (data provided by World Bank):
1st place in the world – sunflower production
7th place in the world – barley production
8th place in the world – corn production
10th place in the world – wheat production
Remarks:
Market for land is not opened yet in Ukraine. The laws are not adopted. There are two major problems: 1) not all lands are registered and given cadastral numbers and 2) lands have no exact defined boundaries. No understanding as to what land owners should do after selling their lands (main purpose is to avoid unemployment). There are no mechanisms of land price estimation. There is no conclusion made as to land sale or giving it for long-term rent so that to avoid buying it by foreigners only. If we want private farms like in Europe, there should be less credit interest rates offered to farmers. This all needs to be reformed and decision is to be made not only by the Ministry of Agrarian Policy and Food of Ukraine, but other ministries are to be involved too. But still there is an assumption that priority for buying the land will be given to all those who rent land at the moment.
Julia Paul, a native of Donetsk, is the commerce manager for the ISTIL Group, which is owned by Kyiv Post publisher Mohammad Zahoor.
