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Apr 5

Ukraine: Good cereals, great soil

Posted on Apr 5 By: Trevor Bacque

A typical tractor, the Belarus 1025, with 110 horsepower and the ability to pull a small seeder, sprayer or fertilizer spreader.  Credit: Trevor Bacque
While the crops in Ukraine are coming up strong, it’s what’s below the surface that counts. With 30 per cent of the world’s nutrient-heavy black soil, Ukraine is an agricultural country on the rise with the numbers prove it.

In late August, Ukraine’s Agrarian Policy and Food Minister Mykola Prysyazhnyuk announced the country expects to harvest 21.5 million tonnes of wheat this year, up from 15.8 million in 2012. They’re also staring down a record corn harvest of an estimated 26 to 29 million tonnes. In addition, RMI Analytics estimated Ukrainian barley production at 8.1 million tonnes this year.

By comparison, Statistics Canada’s July crop report had Canada penciled in for 30.6 million tonnes of wheat and 8.8 million tonnes of barley, including 9.4 million tonnes of wheat and 4.8 million tonnes of barley coming from Alberta. Analysts predict the European country will surpass 50 million tonnes in grain and corn production this year—impressive numbers considering Ukraine is smaller in land area than Alberta.

All these numbers add up for many looking to capitalize on Ukraine’s ag sector, which makes up about 10 per cent of the country’s gross domestic product (GDP).

“Agriculture is the number one potential for the country,” said Nigel Thwaites, a partner with AgriYield based out of Kiev.

Thwaites, who is originally from Warwick, England, sees potential in Ukrainian agricultural practices joining the 21st century.

“There is still a long way to go in growing better crops, husbandry and genetics, as well as fertilizers and chemicals,” he said. “The opportunity is modernization. Yield growth is the immediate win and, coupled with a great export location, there is a good opportunity to drive profit.”

However, Thwaites said some of that profit is being left on the table due to issues surrounding poor genetics and sticky laws that prohibit outside varieties for cereals such as wheat and barley. Despite high volumes, cereal quality is lacking due to less-than-stellar national breeding programs, said Thwaites. As well, much of the agricultural focus has recently shifted toward corn, rapeseed and sunflower—Ukraine is the world’s largest exporter of sunflower oil.

Wheat should be a profit centre alongside corn and sunflower,” said Thwaites.

A typical tractor, the Belarus 1025, with 110 horsepower and the ability to pull a small seeder, sprayer or fertilizer spreader. Credit: Trevor Bacque
Genetic issues aside, land and soil quality make Ukraine hard to ignore. While prices vary and it’s tough to track average values, quality land can typically command anywhere between $600 and $3,000 per hectare (2.47 acres).

“It depends on the area, its rainfall, irrigation potential, heat units and soil,” said Jason Crumly, a Nebraska farmer now living in Lviv.

Crumly grew up on a mixed farm and came to Ukraine eight years ago to temporarily establish feedlots. He hasn’t found his way stateside again, and is now working as Ukraine’s country manager for Winnipeg-based Ag Growth International.

“I don’t know if I could ever go back home,” he said. “It’s so predictable there, the work never changes. Here, you never know what’s going to happen and that’s kind of what makes it enjoyable.

“Margins have a much larger range here, but so do the risks,” he said. “This is why I think a lot of farming is low input here because, with rental value at one-tenth of the U.S., the risk becomes the amount of inputs you put in since it does not take as much to cover your rental costs.”

Part of the risk in Ukraine includes unpredictability in its labour pool. This remains problematic for some, including Michael Lee—a Liverpool, England, native who manages a private farming operation for a European investment consortium.

I’ve never seen such trouble in a workforce,” said Lee, who is also an agronomist and former ag professor. He said his “mid-size” farming operation of about 47,000 acres across three sites employs locals, but he still has difficulty locating and retaining workers.

Despite this, the country’s agricultural scene is on the uptick and businesses will continue to try in the constantly changing industry.

“A lot of money has been invested in storage in the last two years,” said Thwaites. “New ports are also under construction, so things are slowly gearing up.”

“We are seeing tramlines and more uniform crops,” said Lee. “More land is being farmed and more suppliers are available, supplying an increasing range of services and inputs.”

I’ve never seen such trouble in

  • 10 per cent of Ukraine’s gross domestic product is from its agriculture
  • Agriculture employs 5.6 out of every 100 Ukrainians
  • Ukraine contains 30 per cent of the world’s black soil; 65 per cent of Europe’s black soil. Common crops include wheat, barley, sunflower, rapeseed, corn, soya, and sugarbeets.
  • It is the world’s top sunflower oil exporter
  • In 2011, Ukrainian food exports reached $12 billion U.S.

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