12/2016
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7 UKRAINE Agriculture Bulletin State‐Owned Shares in Agricultural Companies Up for Sale Ukraine, Belarus Agree to Expand Cooperation EBRD and FAO Provide Sustainable Farming Training Agricultural Exports Nearing USD 12 Billion
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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6)
2017 National Budget Backs Agriculture with UAH 5.5 Billion ........................................................ 2 State‐Owned Shares in Agricultural Companies Up for Sale ........................................................... 2 Ukraine, Kenya Discuss Increasing Agricultural Trade .................................................................... 2 Ukraine, Japan Look to Expand Cooperation .................................................................................. 2 Initiative to Reimburse 30% of Agricultural Machinery Cost .......................................................... 3 Ukraine, Belarus Agree to Expand Cooperation .............................................................................. 3
Foreign Aid ................................................................................................................. 4 7)
EBRD and FAO Provide Sustainable Farming Training ..................................................................... 4
Private Sector .............................................................................................................. 4 8) 9) 10) 11) 12) 13) 14)
Contrasting Weather Will Not Affect Winter Cereals ..................................................................... 4 Ukrainian Wheat Successful in Asian Markets ................................................................................ 4 Ukraine’s Agricultural Footprint Increases in EU Markets .............................................................. 4 Agricultural Year in Review .............................................................................................................. 5 Agricultural Exports Nearing USD 12 Billion .................................................................................... 5 Ukraine’s Potential as an Agri‐Tech Leader ..................................................................................... 6 New Agricultural Insurance Program .............................................................................................. 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)
2017 National Budget Backs Agriculture with UAH 5.5 Billion
December 22nd, 2016, http://en.interfax.com.ua/news/economic/392392.html
Ukraine’s national budget is providing approximately UAH 5.5 billion in support for agriculture in 2017. Among the initiatives supported by the national budget are: UAH 4 billion for the subsidy program to agricultural producers, UAH 500 million for agricultural machine building and UAH 700 million for the fund securing credits in the agro‐industrial sector. In addition, some funds earmarked for agriculture have shifted in purpose. UAH 40 million from supporting cattle breeding has been transferred to the fishing industry, and UAH 30 million more has been earmarked for selective fish breeding. UAH 56.8 million was also added for anti‐epizootic measures. In addition, the special VAT regime for agriculture will be cancelled as of 2017. The budget also calls for increasing financing to farmers through utilization of UAH 1.08 billion from revenue seized from the assets of corrupt persons.
2)
State‐Owned Shares in Agricultural Companies Up for Sale
December 19th, 2016, http://www.blackseagrain.net/novosti/ukraine‐major‐state‐owned‐agricultural‐companies‐put‐up‐for‐ sale
The State Property Fund (SPF) has decided to privatize state‐owned stakes in two companies: OJSC Agrarian Fund and OJSC State Food Grain Corporation of Ukraine. In January, the Ministry of Agriculture will transfer functional control of the two companies’ shares to the SPF in order for them to be prepared for sale later in 2017.
3)
Ukraine, Kenya Discuss Increasing Agricultural Trade
December 13th, 2016, http://www.ukrinform.net/rubric‐economics/2138666‐kenya‐ukraine‐interested‐in‐increasing‐trade‐in‐ agricultural‐products.html
During the visit of a Ukrainian delegation to Kenya, Ukraine expressed interest in increasing the imports of coffee, tea, exotic fruits and nuts from Kenya, and Kenya, in turn, expressed its interest in supplies of Ukrainian grain, flour, apples, juice concentrates, seeds and feeds, and fish farming. The sides also discussed the possibility of exporting products of animal origin from Ukraine to Kenya. The Ukrainian delegation was headed by Deputy Ministers Natalia Mykolska and Olga Trofimtseva of the Ministry of Economic Development and Trade and the Ministry of Agriculture, respectively.
4)
Ukraine, Japan Look to Expand Cooperation
December 9th, 2016, http://minagro.gov.ua/en/node/22803
Deputy Ministers Natalia Mykolska and Olga Trofimtseva of the Ministry of Economic Development and Trade and the Ministry of Agriculture, respectively, met with Mr. Koji Yonetani, executive vice president of the Japanese External Trade Organization (JETrO) to discuss opportunities for trade, economic and investment cooperation between Japanese and Ukrainian companies. Page 2
BFC Agriculture Bulletin
There is significant potential for increasing the volume of bilateral trade in agriculture since there are many niche markets for Ukrainian products in Japan. In addition, there are advantages for Japanese companies to invest in the Ukrainian agricultural sector, especially in such areas as farm machinery for small farmers, infrastructure and logistics development, processing and equipment for veterinary laboratories. There are also two events scheduled in 2017 to help enhance cooperation between businesses in the two countries: (1) the Japanese Business Mission to Ukraine in March and (2) FoodEx Japan 2017, where Ukrainian agricultural producers will receive preferential participation terms. JETrO is an independent administrative body supported by the Japanese Ministry of Economy and Trade. It was established to promote trade and economic cooperation with other countries.
5)
Initiative to Reimburse 30% of Agricultural Machinery Cost
December 9th, 2016, http://en.interfax.com.ua/news/economic/389675.html
Agriculture Minister Taras Kutovyi announced his Ministry’s support for an initiative that would reimburse 30% of the purchase cost of Ukrainian‐made agricultural machinery. If implemented, the UAH 500 million program would aim to help boost economic growth of manufacturers of agricultural equipment who reach a localization level of at least 50% and encourage other manufacturers to increase localization levels of their products.
6)
Ukraine, Belarus Agree to Expand Cooperation
December 8th, 2016, http://minagro.gov.ua/node/22769
At the 24th meeting of the Intergovernmental Belarusian‐Ukrainian Joint Commission on Trade and Economic Cooperation, parties agreed to increase the export and import trade potential in agricultural production and to focus on cooperative projects in agriculture, a strategically import sector for both countries. The parties decided to give more focus to comprehensive cooperation in several areas, including veterinary and phytosanitary surveillance, the seed sector, livestock, agricultural microbiology, the fish industry, scientific research and technical cooperation projects in agricultural construction and land reclamation. In addition, there will be more regular and active cooperation between the State Service on Food Safety and Consumer Protection of Ukraine and the relevant veterinary services of Belarus, significantly reducing the regulatory and controlling barriers in mutual trade and helping increase the presence of agricultural and food products. Through the first nine months of 2016, the turnover between Ukraine and Belarus amounted to USD 297.9 million, an increase of USD 9.2 million over the same period in 2015. Exports amounted to USD 273.5 million while imports nearly tripled to USD 22.4 million.
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BFC Agriculture Bulletin
Foreign Aid 7)
EBRD and FAO Provide Sustainable Farming Training
December 15th, 2016, http://www.ebrd.com/news/video/supporting‐ukraines‐farmers‐and‐global‐food‐security‐.html
The European Bank for Reconstruction and Development (EBRD) and the Food and Agriculture Organization (FAO) of the United Nations (UN) teamed up with private sector companies and academic experts to spread knowledge on sustainable farming in Ukraine. The technical cooperation project focused on providing training for grain farmers in both theory (via classes at Sumy National Agrarian University) and practice (field visits to experimental farms, seed companies and research institutes). Financing for the project was provided by the Central European Initiative.
Private Sector 8)
Contrasting Weather Will Not Affect Winter Cereals
January 4th, 2017, http://www.unian.info/economics/1710812‐ukraines‐winter‐cereals‐face‐no‐threat‐to‐their‐survival.html
Contrasting weather at the end of December 2016 led to alternating freezing and thawing across much of the area where Ukrainian winter cereals are planted. With air temperatures ranging from ‐11 to +4 degrees Celsius and snow coverage on many areas of up to 4 centimeters, winter crops remained dormant as the New Year came. There is, however, no cause for alarm as an analysis of sugars revealed that cereals sown at the proper time, and even those sown later, are sufficient to allow winter cereals to survive without issues.
9)
Ukrainian Wheat Successful in Asian Markets
December 30th, 2016, http://www.ukrinform.net/rubric‐economics/2149065‐eu‐cuts‐wheat‐imports‐from‐ukraine‐ threefold.html
The European Union, which was ranked second in Ukraine's wheat export structure in the 2015/2016 marketing year, imported 450 thousand tons of Ukrainian wheat this year, three times less than the same period last marketing year. Despite this, Ukraine's wheat exports came to 1,382.7 thousand tons in November 2016, comparable to the amount recorded for the same period last year (1,380.4 thousand tons). Moreover, Ukraine's wheat exports have increased 7.7% over the five months of the 2016/2017 marketing year and made up 9,618.5 thousand tons in contrast to the 8,929.3 thousand tons recorded in July‐November 2015/2016. This is mostly due to India's share in Ukraine's wheat export structure continuing to grow. In particular, 10% of Ukraine's total wheat export deliveries were sent to the Indian market. Thailand, Indonesia and South Korea also remain major importers of the Ukrainian wheat.
10) Ukraine’s Agricultural Footprint Increases in EU Markets December 29th, 2016, http://www.ukrinform.net/rubric‐economics/2148476‐minister‐kutovyi‐39‐ukrainian‐agricultural‐ enterprises‐entered‐eu‐market‐over‐past‐year.html
By the end of 2016, 277 Ukrainian agricultural enterprises were licensed to export their products into European Union (EU) markets, up from 238 in 2015. In addition, Ukraine and the EU have agreed to increase quotas for many Ukrainian agricultural products. In particular, quota increases were made for corn, wheat, honey, cereals, and processed tomatoes. Page 4
BFC Agriculture Bulletin
In announcing the gains made for Ukrainian agricultural products in EU markets, Agriculture Minister Taras Kutovyi noted that foreign markets are expected to expand even more for Ukrainian agricultural producers due to an increase in organic food production output and new legislation regarding the turnover and labeling of organic food products.
11) Agricultural Year in Review December 28th, 2016, http://www.unian.info/economics/1700842‐agri‐year‐of‐records‐and‐new‐challenges.html
Agriculture, one of the key sectors of Ukraine’s economy, showed positive trends in 2016, and the sector showed 2.9% growth through the first eleven months of the year, and Ukraine’s agricultural sector set two historical records: a record grain harvest and a record volume of exports. In addition, Ukraine has increased the area of winter crops for the next year's harvest by 4% and reduced the level of inefficient sowing in autumn from 11% to 7%. Ukrainian sugar producers also exported record levels of sugar, mostly to new markets in Africa and Asia. In total, sugar exports tripled and amounted to USD 167 million in the first eleven months of the year. While grain crops and sugar exports experienced booms, the gross output of animal products decreased by 2.1%, down to UAH 70 billion. The year was particularly difficult for pork producers following the outbreak of African swine flu, which caused estimated losses of UAH 1.5 billion. Late in the year, an outbreak of avian flu also hit Ukraine, causing the European Union and Hong Kong to impose restrictions on poultry and table eggs imports from Ukraine. Looking forward to 2017, the national budget for agricultural support has been set at UAH 5.5 billion, and Ukraine has also eliminated a special VAT regime for agribusinesses, instead opting for 1% of the country’s gross agricultural production to be allocated to support domestic agriculture each year for the next five years. The Ministry of Agriculture will also prioritize efforts to ensure direct state support to small and medium agricultural farms, privatize state‐owned agribusinesses, and work towards developing organic production in addition to land reclamation projects, increasing food safety and seeking new markets for agricultural products. The most urgent task for Ukraine will be to look for ways to improve the quality of its exports. Currently, Ukraine’s main share of agricultural exports is in raw materials, which are processed and resold for higher prices in other countries. Domestic manufacturers must continue working to expand their production and presence in foreign markets. This will facilitate GDP growth and increase flows into Ukraine’s economy.
12) Agricultural Exports Nearing USD 12 Billion December 16th, 2016, http://www.ukrinform.net/rubric‐economics/2140952‐ukrainian‐agricultural‐exports‐already‐reach‐ nearly‐12‐bn‐this‐year.html
According to the State Statistics Service of Ukraine, exports of Ukrainian agricultural products from January‐October 2016 amounted to USD 11.8 billion, accounting for 40.7% of total national exports. Imports of agricultural products to Ukraine during the same period amounted to USD 3.1 billion, accounting for 9.9% of national imports. Overall, there is a positive agricultural trade balance of USD 8.7 billion. Grains (USD 4.8 billion), fats and oils of animal or vegetable origin (USD 3.1 billion) and prepared food (USD 1.8 billion) make up the largest share in the Ukrainian exports. Page 5
BFC Agriculture Bulletin
13) Ukraine’s Potential as an Agri‐Tech Leader December 9th, 2016, http://bunews.com.ua/economy/item/agri‐tech‐empire‐ukrainian‐agricultural‐wealth‐and‐it‐knowhow‐ are‐match‐made‐in‐heaven?category_id=11
USD 9.65 billion has been invested in agri‐tech startups worldwide since 2013, with over USD 4.6 billion of that invested in the past year. Ukraine is in an ideal position to champion the development of agri‐ tech solutions. Ukraine has one‐third of the world’s fertile black earth and 32 million hectares of arable land, is capable of feeding 500 million people, and has developed a reputation as a global agricultural superpower. This year alone, for instance, more than 60 million tons of grains and 17 million tons of oilseed were harvested. Moreover, Ukraine is a global leader in the export of sunflower seeds and oil, grains, corn and barley. Ukraine also has the fourth largest pool of IT experts in the world, and, despite having less than 1% of the world’s population, Ukraine boasts 6% of the world’s physicists, mathematicians and computational scientists. Working to create technology for agriculture may not sound all too stimulating, but agriculture is a lot more technologically advanced than one might expect and already incorporates a lot of technological advances. The timing and conditions are right for Ukrainian entrepreneurs and the Ukrainian government to advance and help make Ukraine the global leader in agri‐tech.
14) New Agricultural Insurance Program December 6th, 2016, http://bunews.com.ua/economy/item/ukrainian‐agricultural‐industry‐insurance‐innovation‐seeks‐to‐ boost‐breadbasket‐investment‐appeal?category_id=11
Ukraine’s agriculture sector has been one of the bright spots on their economic map. Agricultural exports have risen and Ukraine’s global market share has expanded as farmers seek new clients to replace traditional Russian buyers. Now, an innovative crop insurance program has been launched to maintain this momentum by reducing the risks faced by farmers and giving Ukrainian agribusinesses the confidence to invest in essential upgrades. The hope is that the insurance initiative will instill confidence in investors to make investments along all parts of agricultural value chains knowing that credit is less risky if production is insured against disease and natural disaster. The impact of the insurance should encourage investments not only to farms but also for much needed equipment and infrastructure upgrades. In the end, an appropriate agricultural insurance program could awaken Ukraine’s full potential and move it from being the breadbasket of Europe to the breadbasket of Europe, the Middle East, Africa and Asia. The insurance program is being launched by Credit Agricole Bank, the International Finance Corporation (IFC), Syngenta and AXA Insurance and will start by offering coverage for wheat crops.
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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content. The articles do not necessarily reflect the opinions of BFC, its staff, its associates or its partners. Copyright of articles is retained by their authors.