01/2017
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8 UKRAINE Agriculture Bulletin Ukraine has largest EU grain import quotas for 2017 Agricultural cooperative development project launching New USAID grant program for agricultural producers Kiev to host 200 companies at agricultural exhibitions
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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4)
Agropolitical Dialogue project hits 10th Anniversary ...................................................................... 2 Ukraine has largest EU grain import quotas for 2017 ..................................................................... 2 Ministry of Agriculture outlines priorities for 2017 ........................................................................ 2 Ukraine’s 2017 budget changes special VAT regime ....................................................................... 2
Foreign Aid ................................................................................................................. 3 5) 6) 7)
Agricultural cooperative development project launching .............................................................. 3 New USAID grant program for agricultural producers .................................................................... 3 EBRD funding to support retail chain expansion effort................................................................... 3
Private Sector.............................................................................................................. 4 8) 9) 10) 11) 12) 13) 14) 15)
Agricultural receipt use increasing in Ukraine................................................................................. 4 2016 agricultural exports to the EU top USD 4 billion .................................................................... 4 Kiev to host 200 companies at agricultural exhibitions .................................................................. 4 Cost of agricultural production increased in 2016 .......................................................................... 5 Grain exports to Asian countries increased in 2016........................................................................ 5 USD 500 million in Eurobonds issued by agribusiness .................................................................... 5 Free trade area with EU fruitful for agriculture .............................................................................. 5 Record volume of sunflower oil exported in 2016 .......................................................................... 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)
Agropolitical Dialogue project hits 10th Anniversary
January 20th, 2017, http://www.kmu.gov.ua/control/en/publish/article?art_id=249672622&cat_id=244314975
Agriculture Minister Taras Kutovyi met with the head of the Department for European Union Policy, International Cooperation and Fisheries of the German Ministry of Food and Agriculture, Dr. Hermann Joub, to mark the 10th anniversary of the German-Ukrainian Agropolitical Dialogue project. Long-term cooperation within the project is of particular importance for Ukraine given the German experience of reforming agriculture in Eastern Germany. At the meeting, Minister Kutovyi noted the efficiency of the work done by the Ukrainian-German Agrarian Committee and expressed Ukraine’s interest in prolonging bilateral cooperation with Germany through specific projects which focus on the agricultural sector. The Agropolitical Dialogue project is currently scheduled to continue until 2018.
2)
Ukraine has largest EU grain import quotas for 2017
January 19th, 2017, http://ubr.ua/market/agricultural-market/evrosouz-uvelichil-kvoty-na-import-ukrainskogo-zerna-464506
The European Committee has granted the largest grain import quotas to Ukraine for 2017. In particular, Ukraine was granted increases in import quotas for wheat (from 950 thousand tons to 960 thousand tons), barley (from 250 thousand tons to 270 thousand tons) and corn (from 400 thousand tons to 450 thousand tons). By comparison, similar quotas for wheat imports from the Unites States, Canada and other countries are 572 thousand tons, 39 thousand tons and 595 thousand tons, respectively. The import quotas for barley and corn imports from countries excluding Ukraine are 307 thousand tons for barley and 139 thousand tons for corn.
3)
Ministry of Agriculture outlines priorities for 2017
January 19th, 2017, https://www.unian.info/economics/1732037-ministry-of-agrarian-policy-names-main-priorities-of-its-workin-2017.html
The Ministry of Agriculture has outlined its priority directives for 2017 at a meeting of the Public Council. In 2017, the Ministry will concentrate on land reform, stimulating development of the agro-industrial complex, the quality and safety of food products and developing markets for Ukrainian organic products.
4)
Ukraine’s 2017 budget changes special VAT regime
January 12th, 2017, http://www.segodnya.ua/economics/enews/kvoty-na-eksport-ukrainskogo-meda-v-es-uzhe-ischerpanyminagropolitiki-787740.html
On December 26, 2016, President Poroshenko signed the 2017 Ukrainian state budget into law. The new budget includes two major changes regarding value added tax (VAT): the special VAT regime for agricultural companies has been cancelled and the agricultural sector will operate on standard VAT terms, with a subsidy system. The changes mark a move towards practical implementation of International Monetary Fund (IMF) recommendations to switch Ukrainian farming companies over to European mechanisms of tax administration and financial support. Although the move is seen as a positive reform, it is likely to cause short-term difficulties.
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In the period following the special VAT regime, agricultural enterprises will probably see an increase in financial expenses and could find subsidies more difficult to access, especially with subsidies more likely to support larger enterprises than smaller ones. Many agricultural enterprises will likely be insufficiently prepared for the switch, and many experts predict that this will cause a temporary increase in prices as producers raise the price of their products to compensate for growing costs. In addition, the more advantaged position of major producers to gain financial support will encourage mergers and control of the sector will become concentrated into the hands of fewer companies.
Foreign Aid 5)
Agricultural cooperative development project launching
February 3rd, 2017, http://agroportal.ua/news/ukraina/v-ukraine-gotovyat-proekt-razvitiya-kooperativov/
The European Bank for Reconstruction and Development (EBRD), the Food and Agriculture Organizations (FAO) of the United Nations and Rabobank have developed a project to provide technical assistance to existing agricultural cooperatives that have no financial support. Technical assistance within the framework of this project will include activities which provide information about best global practices for cooperative activities, train cooperative management and support business plan development for selected cooperatives seeking to attract international experts.
6)
New USAID grant program for agricultural producers
February 1st, 2017, http://ubr.ua/market/agricultural-market/usaid-otkryvaet-programmu-grantov-dlia-selhozproizvoditelei467822
The United States Agency for International Development (USAID)-funded Agricultural and Rural Development Support project (ARDS) is awarding grants to small- and medium-sized agricultural and agroindustrial enterprises, agricultural service cooperatives and agricultural industry associations. Each awarded grant is expected to directly contribute to four of the following five project goals: introduce new production technologies that increase productivity; increase the share of products sold on organized markets; introduce international quality and safety standards; attract additional investments, leasing or loans for acquiring new equipment/upgrading production facilities; and create one new job per every ten existing employees at a given company, at least half of which to be filled by women and/or members of vulnerable groups
7)
EBRD funding to support retail chain expansion effort
January 20th, 2017, http://www.ebrd.com/news/2017/ebrd-supports-expansion-of-ukrainian-food-retail-chain-rukavychka.html
The European Bank for Reconstruction and Development (EBRD) is extending a loan of UAH 135 million (approximately USD 5 million) to Rukavychka group, a major food retailer which operates 110 grocery stores in western Ukraine. The six-year loan will support Rukavychka’s investment program which envisages 42 new stores opened by the end of 2018, modernization and energy efficiency improvements in existing stores and the development of a logistics center. This will support the company in offering improved services and products to its customers while also boosting economic development more widely in the country. This project is supported by the European Union (EU) under the EU4Business Initiative, which is offering funding with longer maturities to small- and medium-sized enterprises in the Deep and Comprehensive Page 3
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Free Trade Area. The project will also benefit from an incentive grant of almost USD 200,000 extended under the EBRD Finance and Technology Transfer Center for Climate Change (FINTECC) program. The grant will cover the cost of introducing a wide range of energy efficiency measures, including installation of heat recuperation systems and biomass boilers as well as replacing existing cooling compressors and other equipment in Rukavychka’s stores.
Private Sector 8)
Agricultural receipt use increasing in Ukraine
February 3rd, 2017, http://agroportal.ua/news/vlast/global-agro-invest-oformilo-tri-agrarnye-raspiski/
Global Agro Invest, a private farming enterprise from the Poltava region, has issued three agricultural receipts in the amount of UAH 3 million. Agricultural receipts facilitate access to financial, material and technical resources, and, in recent years, demand for them has been growing. The funds for the receipts came from Agroprosperis Bank, the first and only bank in Ukraine to use agricultural receipts. Agroprosperis Bank signed 26 of the 62 agricultural receipts issued in 2016.
9)
2016 agricultural exports to the EU top USD 4 billion
February 3rd, 2017, https://www.unian.info/economics/1757916-ukraine-raises-agriexports-to-eu-to-over-4-bln-in-2016.html
In 2016, Ukrainian farmers supplied USD 4.2 billion in agricultural products to European Union (EU) markets, a 1.6% year-on-year increase. As in previous years, Ukraine continued mutual trade of agricultural products with the EU, mainly Spain, Poland, the Netherlands, Italy, Germany and France. The share of foreign trade turnover with these countries amounted to slightly less than 75% of the total agricultural trade with the EU. Ukraine exported grain crops worth USD 1.3 billion; in particular, Ukraine exported 6.7 million tons of corn and 1.3 million tons of wheat. Ukraine also exported vegetable oils worth USD 1.2 billion, oilseeds (rapeseed, soybean and sunflower) worth USD 607 million and residues and by-products worth USD 439 million. In return, the EU delivered USD 1.9 billion in agricultural products to Ukraine, a 14.4% year-onyear increase, including beverages (both alcoholic and soft drinks) worth USD 180 million, tobacco and tobacco products worth USD 115 million, cocoa and chocolate worth USD 114 million, oil seed worth USD 111 million, and corn seed worth USD 106 million. In general, Ukrainian exports of agricultural products increased 4.5% year-on-year to USD 15.5 billion. Outside of EU markets, Ukraine exported USD 7 billion to Asian countries, USD 2.4 billion to Africa, USD 1.2 billion to Commonwealth of Independent States member countries and USD 45 million to the United States.
10) Kiev to host 200 companies at agricultural exhibitions February 3rd, 2017, http://www.agroperspectiva.com/en/news/164197
More than 200 foreign companies from 20 countries will take part in international exhibitions which will be held in Kiev February 15-17, 2017. ‘Grain Technologies’, ‘Agro Animal Show’ and ‘Fruits. Vegetables. Logistics’ have all been organized by LLC Kiev International Contract Fair and will be held at the KievExpoPlaza exhibition center. Companies will present advanced technologies for running a successful agribusiness, and Germany, the Netherlands, the United Kingdom, France, Denmark, Austria and the Czech Republic will also present national expositions. Page 4
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11) Cost of agricultural production increased in 2016 February 1st, 2017, http://finchannel.com/world/ukraine/63130-ukraine-in-2016-the-costs-for-agricultural-production-grew
According to data released by Ukraine’s State Statistical Service, the cost of agricultural production in December 2016 increased by 2.3% as compared to November 2016. In general, the cost of production for agricultural commodities in Ukraine increased 13.5% year-on-year in 2016. In particular, the costs for the production of plant growing commodities increased 10.6% while the cost for the production of animal commodities grew 20.9%. The cost index for materials and equipment of industrial origin used in agriculture grew by 4.2% in 2016.
12) Grain exports to Asian countries increased in 2016 January 27th, 2017, https://www.ukrinform.net/rubric-economics/2164460-ukraines-grain-exports-to-asian-countriesincreased-in-2016.html
A distinctive feature of 2016 for Ukrainian grain exports was the further strengthening of exports to Asian markets. Asian countries occupy nine of the top ten countries which were the main importers of Ukrainian cereals in 2016 and imported a total share of 54.3% of Ukraine’s total grain exports. Indonesia's grain imports increased by 2.1 times to USD 331 million, amounting to 5.4% of Ukraine’s total grain exports. Thailand increased its grain exports to USD 310 million, 4.9% of total Ukrainian grain exports. China's share in Ukraine's total exports came to 7.6%, and India significantly increased its volume of grain purchases from Ukraine to USD 316 million, or 5.2% of total Ukrainian grain exports. In total, Ukraine exports 40.2 million tons of grains in 2016, a 7.5% year-on-year increase. Egypt was the leading importer of Ukrainian grains, importing 12.4% (USD 755 million) of the total.
13) USD 500 million in Eurobonds issued by agribusiness January 25th, 2017, http://www.reuters.com/article/ukraine-kernel-eurobonds-idUSL5N1FF2BP
Kernel, a Ukrainian agricultural business, has sold Eurobonds worth USD 500 million. The Warsaw-listed Ukrainian company is the world's largest producer and exporter of sunflower oil and has posted two strong years of profits (USD 107 million in profits in 2015 and USD 225 million in profits in 2016). Money raised through Kernel's Eurobond will be used to double the capacity at its Black Sea grain terminal to 8 million tons, buy an oil processing plant with a capacity of 1.5 million tons and increase its land holdings to 200,000 hectares. This is Ukraine’s first corporate issuance of a bond since the 2013-2014 uprising and separatist conflict plunged the country into an economic crisis. The last bond from a Ukrainian corporation that wasn't part of debt restructuring was in June 2013 when UkrLandFarming issued a bond for USD 75 million.
14) Free trade area with EU fruitful for agriculture January 18th, 2017, http://ucab.ua/en/pres_sluzhba/novosti/yak_zakinchivsya_pershiy_rik_zoni_vilnoi_torgivli_z_es
On January 1, 2016, the free trade area between Ukraine and the European Union (EU) came into operation, and, after one year, the results are starting to be analyzed. In 2016, Ukraine completely used the quota for the tax-free export of honey, sugar, cereals and flour, malt and wheat gluten, processed tomatoes, grape and apple juice (99.8%), crops such as wheat, oats, corn and barley (99.8%) and poultry meat. In total, Ukraine exhausted quotas for eleven groups of goods in 2016.
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The free trade area is allowing Ukrainian agricultural to penetrate EU countries at increasing rates. For example, Ukrainian agricultural exports to EU countries were at 28.5% in 2014 and 27.7% in 2015. However, after the free trade area came into operation, total agricultural exports to EU countries are up by 25.9% as compared to 2014 and by 27.3% as compared to 2015. Increasing volumes and quota closure rates demonstrate a strong demand for Ukrainian products in the EU. In fact, as of January 17, 2017, Ukraine has already used 100% of its 2017 quota for the tax-free export of honey, 78% of its 2017 quota for grape and apple juice, 66% for sugar, 59% for wheat and 25% for poultry meat.
15) Record volume of sunflower oil exported in 2016 January 18th, 2017, http://finchannel.com/world/ukraine/62846-in-2016-ukraine-exported-record-volumes-of-sunflower-oil
In 2016, Ukraine supplied 4.8 million tons of sunflower oil to foreign markets, a 23% year-on-year increase and a new record for the country. This amounted to USD 4.8 billion, up from USD 4.2 billion in 2015. In total, the share the fat and oil commodities was 13% of total Ukrainian exports, 30% of agricultural exports and 70% of food product exports.
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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.