02/2017
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9 UKRAINE Agriculture Bulletin Ukraine allocates UAH 4.55 billion for agriculture New program to teach beef producers EU standards EBRD and FAO unveil new agribusiness opportunities Adama Ukraine transforming Ukrainian agriculture
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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5)
Seed certification in Ukraine fully renewed .................................................................................... 2 Ukraine allocates UAH 4.55 billion for agriculture .......................................................................... 2 Constitutional Court to examine land sale moratorium.................................................................. 2 15% compensation for the cost of agricultural machinery ............................................................. 2 Seed certification delay threatens spring sowing ........................................................................... 3
Foreign Aid ................................................................................................................. 3 6) 7) 8) 9)
New program to teach beef producers EU standards ..................................................................... 3 USAID rural development project launched in Ukraine .................................................................. 4 EBRD and FAO unveil new agribusiness opportunities ................................................................... 4 New project with EIB to finance Ukrainian farmers ........................................................................ 4
Private Sector.............................................................................................................. 5 10) 11) 12) 13) 14) 15) 16) 17)
Adama Ukraine transforming Ukrainian agriculture ....................................................................... 5 New African swine flu cases recorded in Ukraine ........................................................................... 5 2016-2017 grain exports at 29.4 million tons ................................................................................. 5 Volume of agricultural capital investments increases..................................................................... 6 Agribusiness Climate Index shows slight decline ............................................................................ 6 EBRD exits equity investment in Agri Europe .................................................................................. 6 Agricultural trade with EU increases in 2016 .................................................................................. 7 Ukraine projected to import 20% more meat in 2017 .................................................................... 7
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)
Seed certification in Ukraine fully renewed
March 3rd, 2017, https://www.rbc.ua/rus/news/sertifikatsiya-semyan-ukraine-polnostyu-vosstanovlena-1488560846.html
On its first day of work, the State Center for the Certification and Examination of Agricultural Products issued 192 certificates and has fully ensured the process of seed certification for market players in Ukraine. The intensive issuance of certificates follows a delay caused by the transfer of those responsibilities to the Ministry of Agriculture from another, now defunct state agency. 51 testing laboratories and 140 laboratory assistants are now engaged in selecting and analyzing some 3,000 samples. The Ministry of Agriculture has also announced that it will enhance control over the certification process and ensure maximum process efficiency.
2)
Ukraine allocates UAH 4.55 billion for agriculture
March 1st, 2017, http://ubr.ua/market/agricultural-market/kabmin-vydelil-ukrainskim-ahrarijam-4-5-mlrd-hrn-3835665
The Cabinet of Ministers has allocated UAH 4.55 billion in financial support for the agricultural sector. The Ministry of Agriculture has proposed that UAH 4 billion of this amount be used as grants to develop livestock farming in the country while the remaining UAH 550 million be used as partial compensation for the cost of purchasing agricultural machinery and equipment made in Ukraine.
3)
Constitutional Court to examine land sale moratorium
February 17th, 2017, https://en.lb.ua/news/2017/02/17/3144_mp_ukraine_may_free_land_market.html
55 deputies of the Verkhovna Rada have petitioned the Constitutional Court of Ukraine to examine the issue of whether or not the moratorium on the sale of agricultural land is constitutional. The group of deputies argues that the Ukrainian Constitution guarantees citizens the right of ownership, which consists of three components: possession, use and disposal. The moratorium not allowing villagers to dispose of their land violates this principle. The group is hopeful that the Court will make a ruling in their favor and open up the land market by the fall of 2017. The moratorium on the sale of agricultural land in Ukraine was introduced as a temporarily policy but has been repeatedly extended. Lifting the moratorium is a central requirement of the International Monetary Fund and is supported by leading Ukrainian economists.
4)
15% compensation for the cost of agricultural machinery
February 14th, 2017, http://en.interfax.com.ua/news/economic/403138.html
Ukraine’s Cabinet of Ministers approved a resolution to compensate farmers 15% of the cost of agricultural machinery if more than 35% of the machinery was produced in Ukraine. The resolution is an effort to increase the localization of agricultural machinery to 60% by the year 2020. The plan is to increase the localization percentage to 45% in 2018, 55% in 2019 and 60% in 2020.
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The effort will help upgrade the deteriorating state of agricultural machinery in Ukraine, which is estimated to be as high as 85% and increasing annually. To pay of the initiative, legislation was passed at the end of 2016 which allocated 0.1% (an estimated UAH 550 million) of the cost of gross agricultural products for the compensation. Next year, the amount will increase to 0.15% (an estimated UAH 900 million); in 2019, it will increase again to 0.2% (estimated to be more than UAH 1 billion).
5)
Seed certification delay threatens spring sowing
February 13th, 2017, http://ucab.ua/en/pres_sluzhba/novosti/zatrimka_z_sertifikatsieyu_nasinnya_zagrozhue_zrivom_posivnoi
With the 2017 spring sowing campaign due to begin shortly, seed producers are still waiting on the registration and certification of seeds and planting materials due to the reorganization of the state system. The State Agricultural Inspectorate was terminated in December 2016, with all functions related to the certification of seeds and planting materials transferred to the Ministry of Agriculture; however, the Ministry is still in the process of setting up the necessary regional offices and laboratories for this and has yet to approve a new procedure and renew seed certification. As a result, approximately one third of the seeds necessary for this year's spring sowing campaign cannot be supplied to the agricultural producers. In case the certifications are not completed in time, farmers can purchase lowquality seeds or counterfeit ones, which will likely affect the overall yield on a national level. Farmer associations have appealed to the government to resolve the issue quickly and have proposed mitigation measures the government can take to lessen the impact of the delay, including: circulating seeds with international certification, identifying certification auditors who are eligible for a certification auditor’s license but have yet to pass a qualifying exam, and/or authorizing appropriate persons at the Ministry of Agriculture to perform the certifications.
Foreign Aid 6)
New program to teach beef producers EU standards
March 1st, 2017, http://ucab.ua/en/pres_sluzhba/novosti/virobnikiv_yalovichini_navchatimut_vimogam_es
Ukraine has launched a World Bank Group program to prepare Ukrainian beef producers to enter European markets. The year-long program, developed as part of the ‘Reforming the Investment Climate in Ukraine’ project, will involve enterprises along the entire production chain, from farm to table, and will be implemented with the support of Ukraine’s Food Safety and Consumer Protection Agency, the Ukrainian Food Export Board (UFEB) and the Ukrainian Agribusiness Club. During training, pre-audit inspections will be conducted by experts with the goal of identifying problematic issues and providing recommendations for their correction in compliance with European Union (EU) standards. The training activities will involve both the private sector and state inspectors in order to ensure a consistent understanding of the requirements. The training will also emphasize the role of inspector as an advisor to companies in solving problems and not as an adversary. In the future, it is envisaged that the inspectors who participated in the training will conduct similar trainings for enterprises not involved in the program. The criterion for beef enterprises to be included in the program is their willingness to invest in the implementation of EU requirements. There are currently 14 companies identified to participate in the program, with the first training scheduled for April 2017.
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7)
USAID rural development project launched in Ukraine
February 23rd, 2017, https://www.ukrinform.net/rubric-economics/2181581-usaid-project-for-agricultural-sector-developmentlaunched-in-ukraine.html
The United States Agency for International Development (USAID) has launched the ‘Agricultural and Rural Development Support’ project in Ukraine. The project will contribute to comprehensive economic growth through the development of rural areas and the agricultural sector. More specifically, the project aims to create attractive living conditions in the rural areas of Ukraine, increase the competitiveness of Ukrainian agricultural products, introduce international quality and safety standards, and provide Ukrainian producers with access to new export markets in the European Union (EU). The project will be implemented from August 7, 2017 through July 3, 2020.
8)
EBRD and FAO unveil new agribusiness opportunities
February 20th, 2017, http://www.ebrd.com/news/2017/ebrd-fao-and-eu-unveil-new-opportunities-for-ukrainian-agribusiness.html
The European Bank for Reconstruction and Development (EBRD) and the Food and Agriculture Organization (FAO) of the United Nations are joining forces to promote new business opportunities and diversification in the Ukrainian food sector at the ‘A Million from a Hectare’ agribusiness conference. The conference, which will gather over 200 participants from all over the country, is primarily designed for small domestic farmers and food processors and will encourage them to develop new approaches to business, look for new markets and concentrate on producing high-added-value goods in order to remain competitive on local markets and maximize returns while tapping into export markets. Local small- and medium-sized enterprises will benefit from the first-hand experience of successful local companies of similar size that have tested new approaches and developed successful business models. EBRD will also offer a wide range of development opportunities in the agribusiness sector, including direct advisory services and export promotion programs. The conference is being supported by the EU under the EU4Business Initiative, which offers support to small and medium-sized enterprises in countries that are part of the Deep and Comprehensive Free Trade Area (DCFTA) with the EU.
9)
New project with EIB to finance Ukrainian farmers
February 13th, 2017, https://www.unian.info/economics/1774877-european-investment-bank-to-finance-ukraine-farmers.html
Ukraine’s Ministry of Agriculture is holding talks with the Ministry of Finance and the country’s commercial banks regarding the implementation of a joint project with the European Investment Bank (EIB) which aims to help small- and medium-sized producers develop their businesses. Under the project, EUR 400 million in financing from banks would be matched by EUR 400 million from EIB. However, the exact terms for project are still being established with the Ministry of Finance and banks interested in participating. The project has already been approved by the Cabinet of Ministers and is expected to launch as soon as the technical details have been worked out. 70% of the financing would be aimed at developing small- and medium-sized farms, helping them to create jobs and improve the overall business climate of the agricultural sector. The remaining 30% will be directed to operators of the public sector such as research stations, laboratories, and monitoring and control institutions.
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Private Sector 10) Adama Ukraine transforming Ukrainian agriculture March 6th, 2017, http://bunews.com.ua/economy/item/agribusiness-award-winning-agricultural-innovation-helps-ukrainesfarmers-plan-for-the-future-2?category_id=11
Adama Ukraine, the Ukrainian branch of the multinational Israeli-based agribusiness ADAMA, has won the ‘Make It Simple’ corporate award for its efforts in helping transform Ukraine into a powerhouse player in global agricultural markets. Adama Ukraine won the award specifically for its 2106 pilot project which introduced the forward commodities contract policy called ‘Magic Option for Farmer’. Under the policy, Ukrainian agribusinesses can enter into an agreement with Adama Ukraine at the start of an agricultural season for an established minimum commodity price, ensuring greater stability and predictability in the Ukrainian agribusiness sector and, ultimately, allowing agribusinesses to invest and broaden growth opportunities. Adama Ukraine’s transitioning to a forward market is seen as a gateway to helping the sector move towards best international practices and taking a larger share of global markets. However, the company is still looking to the future, seeing land reform as the next decisive issue for the medium-term development of the sector. In the end, the company believes that land reform will have a snowball effect, starting with a boom in Ukrainian agribusinesses and leading to increased infrastructure and an unlocking of investment opportunities in other sectors.
11) New African swine flu cases recorded in Ukraine March 6th, 2017, http://en.interfax.com.ua/news/economic/407271.html
Ukraine’s Food Safety and Consumer Protection Agency has received confirmation of outbreaks of African swine flu in the Kherson, Zaporizhia and Donetsk regions. The disease was confirmed during an examination of selected samples of biological material from deceased pigs suspected to have the disease. Measures are being taken to localize the disease and prevent the spread of African swine flu pathogens. The African swine flu virus causes a hemorrhagic fever with a high mortality rates in pigs. There is currently no vaccine against African swine flu.
12) 2016-2017 grain exports at 29.4 million tons March 2nd, 2017, http://en.interfax.com.ua/news/economic/406573.html
Since the beginning of the 2016-2017 agricultural year (July 2016 – June 2017), Ukraine has exported 29.43 million tons of grain, including 13.56 million tons of wheat, 11.05 million tons of corn and 4.66 million tons of barley. Ukraine has also exported 242,800 tons of flour. In the 2015-2016 agricultural year (July 2015 – June 2016), Ukraine exported 39.49 million tons of grain, a 13.5% increase over the 2014-2015 agricultural year. The Ministry of Agriculture forecasts that the grain exports for the 2016-2017 agricultural year will be approximately 40 million tons.
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13) Volume of agricultural capital investments increases March 2nd, 2017, http://ubr.ua/market/agricultural-market/v-selskoe-khozjajstvo-v-ukraine-za-hod-investirovali-rekordnye-44mlrd-3835757
In 2016, the volume of capital investments in agriculture exceeded the previous year by nearly 1.5 times, amounting to UAH 44 billion. This trend is largely due to the potential of Ukraine to increase agricultural exports to established and new markets as well as investors’ positive assessment of the rate of return on their investments. Such a volume of capital investments in agriculture is a record in the history of independent Ukraine and indicates the high appeal of Ukrainian investment opportunities to investors.
14) Agribusiness Climate Index shows slight decline February 28th, 2017, http://ucab.ua/en/pres_sluzhba/novosti/ochikuvannya_agrobiznesu_demonstruyut_pomirne_pogirshennya
The sixth ‘Agribusiness Climate Index’ survey was completed for Ukraine in February 2017 and includes two estimates: (1) the agribusiness climate, an estimate of the current economic situation in the sector as well as expectations and (2) the agribusiness index, an indicator of changes in the evaluation of the agribusiness climate since its introduction in 2015. The agribusiness climate was evaluated at +16.8 points, a slight decrease since November 2016 but a considerable increase when compared to the -18.8 points in February 2016. The main positive factors impacting the evaluation were: productivity level (+34.7 points), access to qualified staff for machinery and equipment (+25.6 points) and access to qualified employees with professional knowledge (+25.6 points). The main negative factors were: lack of public support (-41.2 points), impact of the general economic situation (-40.2 points) and access to external capital and resources (-18.3 points). The agribusiness index had access to public subsidies (127.2) and macroeconomic impact (126.3) as the two highest rated items, with access to qualified staff (99.3) at the lowest rating. The agribusiness climate was +13.0 points in the center of the country, +17.0 points in the south, +15.0 points in the northeast and +27.6 points in the west. The results also indicate a clear pattern of larger producers, such as agricultural holdings and farms with a land bank above 5,000 hectares, evaluating the business climate more positively than the rest, likely due to access to foreign markets and the effects of scale economies. Despite the slight decline since November 2016, the overall development trend according to this survey is positive. Read More »
15) EBRD exits equity investment in Agri Europe February 13th, 2017, http://finchannel.com/world/ukraine/63287-ebrd-exits-investment-in-agri-europe
The European Bank for Reconstruction and Development (EBRD) has exited its equity investment in Agri Europe, a leading agribusiness group registered in Cyprus and operating mainly in Serbia and Ukraine. Agri Europe is privately owned and one of the largest vertically integrated agribusiness companies in the Balkans, operating in the sugar, meat processing and farming industries. The company consolidates MK Group (a Serbian producer and trader of agricultural commodities), Carnex (a leading Serbian meat producer), Sunoko (a leading Serbian sugar producer and exporter) and AgroInvest (a Ukrainian subsidiary active in primary agricultural production). EBRD became a shareholder in the company in 2013 with a EUR 50 million investment to support the expansion of its farming and meat processing operations. Prior to its equity investment, EBRD supported Page 6
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the Agri Europe in primary agriculture operations in Ukraine with a USD 7 million loan in 2007 and also arranged for their first syndicated loan with international banks worth EUR 80 million following the global financial crisis. Through the equity partnership, cooperation and involvement produced rewarding results for all interested parties, helping the company to grow into the leading and most active player in a number of industries. EBRD has stated that their exit as an equity investor does not mean the end of cooperation as EBRD has plans to remain in close contact and review selected investment proposals which meet EBRD’s strategy and transition objectives for the sector and the region.
16) Agricultural trade with EU increases in 2016 February 13th, 2017, http://finchannel.com/world/ukraine/63271-in-2016-ukraine-increased-the-exports-of-agriculturalproducts-to-the-eu
In 2016, Ukraine exported USD 4.2 billion in agricultural products to European Union (EU) markets, a 1.6% year-on-year increase. Ukraine exported 6.7 million tons of corn and 1.3 million tons of wheat to EU markets, accounting for USD 1.3 billion in trade, while oilseed exports amounted to USD 607 million and vegetable oil exports amounted to USD 1.2 billion. The main importers of Ukraine’s agricultural goods were Spain, Poland, the Netherlands, Italy, Germany and France, with the foreign agricultural trade turnover with those six countries amounting to nearly 75% of overall agricultural trade with the EU. At the same time, agricultural imports from the EU into Ukraine amounted to USD 1.9 billion, up 14.4% year-on-year. In particular, Ukraine imported 27,000 tons of corn seed worth USD 106 million and USD 111 million worth of oilseeds.
17) Ukraine projected to import 20% more meat in 2017 February 6th, 2017, https://www.ukrinform.net/rubric-economics/2170576-fao-expects-20-rise-in-ukraines-meat-imports-in2017.html
The Food and Agriculture Organization (FAO) of the United Nations is expecting Ukraine’s meat imports to increase 30,000 tons in 2017, a 20% year-on-year increase. The projected increase is a result of greater demand and limited capabilities to increase domestic production. In 2017, domestic meat production is expected to continue to decrease due to changes in how the government provides grants to producers and the threat of cattle diseases. At the same time, Ukraine’s beef and chicken meat exports are likely to remain consistent with 2016 while pork exports may increase slightly.
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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.