In 2020, cereal production in Ukraine totaled 65.4 million tons of grain and leguminous crops from the area of 15.3 million hectares, 12.9% down from 75.1 million tons in 2019 from the area of 14.8 million hectares, according to the Ministry of Economy.
Unfavorable weather conditions, in particular drought, primarily in the southern regions of the country, were the main reasons behind the production decline. Low yield was compensated by the price increase in the global markets. For example, the FAO Cereal Price Index averaged 125.7 points in February 2021, up 26.5% from February 2020.
Growth of prices for cereals compensated for the yield decrease, and provided additional profit to those farmers, who did not suffer from drought. At that, the impact of COVID-19 on the agrarian enterprises is estimated by the experts as minimal.
Nonetheless, the volume of capital investment in agriculture in 2020 dropped almost 50%, to Hr 36 million, according to the National Scientific Center “Institute of Agrarian Economics”. On the one hand, economic issues of the agrarian producers had an impact on the situation, while on the other hand, agrarian producers were saving money in anticipation of the land market opening.
In 2020, JSC Ukreximbank continued to actively support the sector, both in the corporate segment, which is the key segment for the bank, and in the dynamically growing segment of small and medium enterprises, including through participation in the government programs of financial support of the agroindustrial complex, 5-7-9 Program, and also acting as an agent and lending bank within the framework of the government guarantee program on portfolio basis.
The bank offers its clients working capital financing (financing of the agricultural cycle), as well as loans for the implementation of investment projects (acquisition of agricultural machinery, equipment for silos, port terminals, construction of the river fleet, etc.), including within the joint programs with IBRD, EBRD, EIB, and also through leasing.
Working capital financing is provided for the term of 12-18 months, taking into account the production cycle of the borrowers; investment loans are issued for 3-5 years (depending on the project investment return period). The use of the full range of trade finance transactions is one of the strong suits of the banks: avalizing commodity promissory notes, providing guarantees, letters of credit, factoring, etc.
In addition to the full range of the services, taking into account gained experience, the bank offers agrarian exporting companies such exclusive products as post-export financing services (negotiation), which allows for receiving earnings early, after product shipment, by providing Ukreximbank with documents on the letter of credit.
The Ministry of Economy forecasts that the 2021 gross cereal production will return to the level of the record-high 2019 – 75 million from the area of 15.7 million hectares, and, accordingly, grain exports volumes will also increase. Expanding their business, the agrarian producers of the country can always count on the support of a reliable financial partner – state-owned Ukreximbank.
