06/2017
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13 U K R A I N E Agriculture Bulletin EU import quotas at 100% for several Ukrainian products Ukrainian farmers actively use index insurance program Ukrainian milk production declining UAH 37 billion for investment projects in Q1 2017
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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4)
44 EU directives on agrarian policy need implemented ................................................................. 2 EU import quotas at 100% for several Ukrainian products ............................................................. 2 Agricultural education program kicks off ........................................................................................ 2 New rules for the leasing of state-owned farmland........................................................................ 3
Foreign Aid ................................................................................................................. 3 5) 6)
USAID funding for new milk monitoring laboratory ........................................................................ 3 Ukrainian farmers actively use index insurance program ............................................................... 3
Private Sector.............................................................................................................. 4 7) 8) 9) 10) 11) 12) 13)
International Field Days Ukraine 2017 exhibition held ................................................................... 4 Ukrainian milk production declining ............................................................................................... 4 Ukraine’s organic sector set to take off .......................................................................................... 4 UAH 37 billion for investment projects in Q1 2017......................................................................... 5 Ukraine sees agricultural production decline .................................................................................. 5 Agrarian Fund to issue registered bonds......................................................................................... 5 Ukraine fourth-largest mushroom producer in Europe .................................................................. 6
Note: The Agriculture Bulletin presents a monthly roundup of headlines and news stories related to Ukraine’s agricultural sector. This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company with a long history of working in Eastern Europe, Central, South and South East Asia and North Africa. Read more »
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BFC Agriculture Bulletin
State Initiatives 1)
44 EU directives on agrarian policy need implemented
July 3rd, 2017, https://www.ukrinform.net/rubric-economics/2258527-ukraine
According to the framework of Ukraine’s integration into the European Union (EU), Ukraine needs to implement 44 European directives and regulations in the field of agricultural policy by the end of this year. Deputy Agriculture Minister Olga Trofimtseva noted the importance of continuing joint work with the EU, especially in phytosanitary and veterinary regulations and forestry and fishing industries policies. The Deputy Minister also pointed out that the trade turnover between Ukraine and the EU for the first four months of 2017 was USD 2.450 billion, USD 1.753 billion of which was from exported Ukrainian agricultural products.
2)
EU import quotas at 100% for several Ukrainian products
June 23rd, 2017, http://en.interfax.com.ua/news/economic/431089.html
As of June 9, 2017, Ukraine has used 100% of its tariff quotas on the supply of honey, corn, sugar, barley cereal, wheat, preserved tomatoes and grape and apple juices to the European Union (EU). In addition, Ukraine’s tariff quota on malt to the EU is at 97.69%; barley is at 91.5%; butter and poultry are at 50% each; oats are at 28.44%; starch is at 23.18%; milk powder is at 13.64%; and eggs are at 7.25%. In September 2016, the European Commission proposed increasing the annual tariff rate quotas for some goods from Ukraine: maize by 650,000 tons, wheat by 100,000 tons, barley by 350,000 tons, cereal and processed grain by 7,800 tons, oats by 4,000 tons, honey by 3,000 tons, grape juice by 500 tons and preserved tomatoes by 5,000 tons. The European Parliament supported the proposal of the European Commission to increase tariff quotas for honey, corn, barley, oats, cereals and processed grain, grape juice from Ukraine but did not support raising the quotas on for Ukrainian wheat, tomatoes and urea. According to the Ukraine-EU Association Agreement, Ukraine can supply 36 goods to the EU without tariffs as long as they are within the limits of the approved volumes of tariff quotas.
3)
Agricultural education program kicks off
June 22nd, 2017, http://agroportal.ua/news/ukraina/v-ukraine-anonsirovali-sozdanie-agrarnykh-obrazovatelnykh-klasterov/
As agricultural businesses become more and more technologically advanced and the need for qualified agricultural specialists with unique skills and abilities grows in Ukraine, it is becoming increasingly necessary for innovative educational training channels to be established. In response to this need, the pilot ‘Agro-technical and Technological Center for New Expertise in Ukraine’ program has been launched. The program provides a special system of training which includes professional trainings combined with practical trainings and internships within agricultural companies. The program also plans to involve veterans of the anti-terrorism operation and internally displaced persons. Speaking at the presentation of the program, Deputy Agriculture Minister Olga Trofimtseva noted that such programs will have great success, especially if done in cooperation with Ukrainian educational institutions and agrarian companies. She added that new standards of professional education, close cooperation between science and business and a greater orientation to new agribusiness technologies are all in line with Ukraine’s vision to become a global agricultural hub. Page 2
BFC Agriculture Bulletin
4)
New rules for the leasing of state-owned farmland
June 7th, 2017, http://en.interfax.com.ua/news/economic/426822.html
The Cabinet of Ministers has adopted a resolution regarding the leasing of state-owned agricultural land. According to the resolution, the leasing of state-owned farmland will be made available by auction for a period of up to seven years, with the auction price starting at not less than 8% of the appraised value of the land. The resolution also calls for the auctioning off of previously leased land plots, liquidating the scheme under which land was divided up into two-hectare plots and given freely as personal farm plots. The resolution will also limit freely-given land to 25% of the land leased at auction, with participants in the anti-terrorism operation receiving priority for freely-given land. Moreover, all previously signed agreements will be brought into compliance with the new rules. The new measures are expected to increase income for local budgets by UAH 1 billion by the end of 2018. Prior to the resolution, there were no coherent procedures, leading to unlawful and unethical activities. So far, 62 heads of regional and district administrations have been fired, and 53 officials have been arrested, including 21 for bribery. The majority of previously concluded agreements were for a maximum 49-year term and with a minimal 3% rate. Prior to 2013, regional district offices concluded 40,000 rental agreements with rates less than 3% on a total of 300,000 hectares.
Foreign Aid 5)
USAID funding for new milk monitoring laboratory
July 3rd, 2017, http://agroportal.ua/news/zhivotnovodstvo/apm-poluchila-ot-usaid-grant-na-sozdanie-sovremennoi-laboratorii/
The ‘Support for Agriculture and Rural Development’ program of the United States Agency for International Development (USAID) is providing UAH 2.6 million in grant assistance to Ukraine’s Association of Milk Producers. The grant funds will be combined with funds from the association’s budget and individual investors for the construction of a new laboratory that will monitor the fat, protein and urea content of milk from individual cows as well as the number and type of pathogens. USAID experts will also conduct consulting support for the project in order to properly select the necessary equipment and choose energy-efficient building materials for the laboratory premises.
6)
Ukrainian farmers actively use index insurance program
June 25th, 2017, http://ubr.ua/market/agricultural-market/ukrainskie-ahrarii-aktivno-polzujutsja-indeksnym-strakhovaniem3846384
Since May 2016, the ‘Development of Financing of the Agricultural Sector in Europe and Central Asia’ project of the International Finance Corporation (IFC) has been implementing an index insurance program for Ukrainian farmers. The pilot project garnered interest from four times more farmers than was initially planned. Because of the success of the project so far, IFC has decided to extend it to cover six more regions in Ukraine (Donetsk, Lugansk, Zaporizhzhya, Odessa, Kherson and Nikolaevskaya). The total amount of payments under the project has amounted to UAH 2.1 million.
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BFC Agriculture Bulletin
Private Sector 7)
International Field Days Ukraine 2017 exhibition held
July 3rd, 2017, http://agroportal.ua/publishing/sobytiya/evropa-v-doslidnitskom/
A new format for agricultural exhibitions was on display at International Field Days Ukraine 2017. Presented by the German Agricultural Society, the three-day event showcased 120 samples of modern agricultural technology from both domestic and foreign manufacturers. The difference between this exhibition and a traditional one is that participants to the exhibition had a chance to visit more than 30 demonstration sites, each using different varieties and hybrids of various cultures, plant protection and nutrition products. Participants were also given the chance to talk to manufacturers, retailers and scientists to gain a more holistic understanding of the new technologies and products on show. Visitors and presenters at the exhibition found this new format to be beneficial and hope that it will catch on in Ukraine. Next year, organizers plan on expanding the products on display to include different protection systems and a wider range of crops.
8)
Ukrainian milk production declining
June 25th, 2017, http://vremya.eu/novosti/novosti-selskogo-hozjaistva/chto-proishodit-s-proizvodstvom-moloka-v.html
Ukraine’s dairy sector saw a 1% year-on-year decline in the production of milk in the first five months of 2017, and milk production has declined in two-thirds of Ukraine’s regions. In fact, milk production in the last 20 years has dropped from more than 18 million tons per year to an annual production of around 11 million tons. Furthermore, even though Ukraine has large-scale natural resources for milk production, 205 tons of milk were imported in January-April 2017, worth USD 343,000. This has been caused by a number of ill-considered policies such as the abolishment of preferential taxation for farmers, increased property tax rates and limited export opportunities to the European Union (EU) due to low quotas for duty-free imports of milk into the EU. In addition, Ukraine mainly exports raw materials and not final products, significantly reducing income potential. Moreover, a lack of state support for smaller dairy farmers means that only 30% of Ukrainian milk meets EU quality and safety requirements.
9)
Ukraine’s organic sector set to take off
June 23rd, 2017, https://www.kyivpost.com/business/organic-food-sector-ukraine-set-take-off.html
While organic agricultural production remains underdeveloped in Ukraine, interest and demand are growing. Ukrainian producers have made inroads into the market, and the government appears to have finally taken notice and put organics on its radar of priorities. In 2016, there were 390 organic farms and 421,200 hectares of organic farmland in Ukraine, with more and more producers applying for organic certification. Despite the potential, there are still barriers hindering organic sector growth. Ukraine does not currently have a law governing organics, leaving the door open for confusion among consumers and fraud among producers. While most organic producers focus on exports and seek European Union (EU) certification, domestic producers frequently make misleading or outright false claims by branding products as “natural”, “eco” or “bio” in an effort to increase profits. Another problem is that transitioning from conventional to organic production can take up to three years and generally requires upfront investments. During the transition period, profitability can fall, placing stress on small- and mediumPage 4
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sized businesses. Although some government programs have been introduced to support companies during this transition period, many farmers are unaware of their existence. Distribution is also a challenge, especially for small producers, as organic produce spoils more quickly and requires more efficient logistical arrangements. With more attention on the sector, however, solutions to the existing barriers are starting to present themselves. For starters, many organic farmers have started forming organic associations to combine forces to overcome supply and distribution issues. Additionally, the government has stepped up support by including developing organics as part of its ‘three-plus-five’ goals for agricultural reform and has created a regulatory framework that is currently under consideration in Parliament. The government is also cooperating with organic associations to create educational materials aimed at consumers and will soon have a database of organic producers operating in Ukraine to better regulate the market.
10) UAH 37 billion for investment projects in Q1 2017 June 21st, 2017, http://en.interfax.com.ua/news/economic/430529.html
The total cost of investment projects in the agro-industrial sector of Ukraine reached UAH 37 billion in January-March 2017. As of April 1, 2017, 304 investment projects were being implemented in the Ukrainian agricultural sector, 45% of which were involved in Ukrainian cattle breeding. The regions with the largest numbers of projects are: Lviv (37), Vinnytsia (32), Kherson (32), Poltava (31) and Cherkasy (27). The regions with the most funding for projects are: Vinnytsia (UAH 19.8 billion), Odesa (UAH 2.7 billion), Sumy (UAH 2.3 billion), Kyiv (UAH 2 billion) and Cherkasy (UAH 2 billion).
11) Ukraine sees agricultural production decline June 19th, 2017, https://www.unian.info/economics/1982709-ukraine-sees-agricultural-production-decline-in-five-months.html
Ukraine saw a year-on-year 0.9% decline in agricultural production in January-May 2017. In particular, agri-businesses reduced output by 1%, while private farm production was down 0.8%. It should be noted that these figures do not take into account data from the occupied territory of the Autonomous Republic of Crimea, Sevastopol or the zone of anti-terrorist operations in eastern Ukraine. Agricultural production in Ukraine grew 6.1% year-on-year in 2016. The output of agricultural enterprises in 2016 was up 9.8% over 2015, while private farms boosted production by 1.5% in 2016.
12) Agrarian Fund to issue registered bonds June 19th, 2017, https://www.ukrinform.net/rubric-economics/2249883-agrarian-fund-to-issue-registered-bonds-worth-uah-5bln.html
Agrarian Fund PJSC intends to issue registered bonds worth UAH 5 billion as well as attract short-term credits in the amount of UAH 1.7 billion. These funds are planned to be used to increase support to agrarian producers and, as a result, increase the volume of Agrarian Fund purchases and sales. The Agrarian Fund added that the company’s circulating assets in 2017 total about UAH 3 billion, the structure of which is constantly changing depending on the time of year.
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13) Ukraine fourth-largest mushroom producer in Europe June 8th, 2017, https://www.ukrinform.net/rubric-economics/2243521-ukraine-ranked-fourth-among-european-mushroomproducing-countries.html
Ukraine is the fourth-ranked European country in terms of mushroom production after France, Italy and Spain. At the same time, Ukraine has a much cheaper raw material base than the top three mushroomproducing European countries. Straw and husk are sold at a rather low price in the country, and all seed producers in Ukraine have the needed experience to produce good quality mycelium. This means that mushroom production in Ukraine has great potential to expand. On average, Ukrainians consume 1.8 kilograms of mushrooms per year per person.
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