06/2016
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1 UKRAINE Agriculture Finance Bulletin Ukraine Proposes Meat Exports to South Africa, Angola, Ghana and South Korea EU Puts EUR 13 Million Towards Food Safety in Ukraine USD 400 Million Agro-Lending Pilot Program Launched Agricultural Exports Total USD 5.7 Billion from January-May
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Agriculture Finance Bulletin Edition #1, June 2016
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6)
Subsidies of 1% of Total Agricultural Output Proposed for 2017.................................................... 2 Agricultural Output Set to Decrease 0.2% ....................................................................................... 2 Increase in Agricultural Exports to China Disclosed at AGRO 2016................................................. 2 US Department of Agriculture to Support Reform Package............................................................ 3 Japan to Participate in State-Backed Agriculture Support Programs .............................................. 3 Ukraine Proposes Meat Exports to South Africa, Angola, Ghana and South Korea ........................ 3
Foreign Aid ................................................................................................................. 3 7) 8)
EBRD Organizes Organic Sector Conference ................................................................................... 3 EU Puts EUR 13 Million Towards Food Safety in Ukraine ................................................................ 4
Private Sector.............................................................................................................. 4 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20)
IFC: Agro-Insurance More Accessible to Farmers............................................................................ 4 USD 400 Million Agro-Lending Pilot Program Launched ................................................................. 4 Milk Producers Demand Government Purchases to Combat Low Prices........................................ 4 USD 180 Million Oilseed Facility Opened in Mykolaiv Seaport ....................................................... 5 Grain Prices Set to Rise, According to UCAB ................................................................................... 5 Agriculture Sector Investment Increases 57% between January and March .................................. 5 UCAB: Animal Husbandry Crisis Could Cost State UAH 2.7 Billion .................................................. 5 Agricultural Exports to ASEAN Members Double to USD 183 Million in Q1 ................................... 6 USDA Forecasts Record 4.5 Million ton Soybean Harvest ............................................................... 6 Agricultural Exports Total USD 5.7 Billion from January-May ......................................................... 6 Georgian Dairy Company Begins Operations in Khmelnytskyi ........................................................ 6 950,000 ton EU Wheat Export Quota Exhausted ............................................................................ 6
Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows 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. BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland
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BFC Agriculture Finance Bulletin
State Initiatives 1)
Subsidies of 1% of Total Agricultural Output Proposed for 2017
June 29th, 2016, http://www.unian.info/economics/1390997-government-plans-provision-of-direct-aid-to-small-farmers-in2017.html
The government has proposed subsidizing small and medium agri-businesses to the tune of 1% of gross agricultural output in 2017, said Prime Minister Volodymyr Groysman. The proposal will go before parliament, while Groysman has tasked his cabinet to develop a delivery mechanism for the state funds. According to Minister of Agrarian Policy and Food Taras Kutovyi, agricultural output in 2015 totaled UAH 550 million, providing an indicator for future funding levels. This year, the agriculture sector will receive an additional UAH 450 million in state funding, according to Kutovyi. Only farms of up to 500 hectares are eligible for direct state aid, he added.
2)
Agricultural Output Set to Decrease 0.2%
June 16th, 2016, http://economics.unian.net/agro/1377816-minekonomrazvitiya-ozvuchilo-prognoz-po-selhozproizvodstvu.html
Agricultural output is expected to fall by 0.2% compared to 2015, according to the Ministry of Economic Development and Trade. High domestic competition, the loss of Commonwealth of Independent States (CIS) dairy markets, the cancellation of the preferential VAT for agricultural producers as well as high productions costs are behind the decline, said the Ministry. Some analysts, however, believe possible increases in consumer demand, favorable weather conditions and improved cropping patterns may yet see an increase in output.
3)
Increase in Agricultural Exports to China Disclosed at AGRO 2016
June 14th, 2016, http://www.kyivpost.com/article/content/business-wire/agri-food-innovation-forum-to-attract-investmentsin-ukrainian-agribusiness-took-place-in-kyiv-416199.html
The 28th International Agriculture Exhibition “AGRO 2016” was held in Kiev. During a conference, Vladyslava Rutytska, Deputy Minister of Agrarian Policy and Food, noted a significant increase in agricultural exports to China, totaling UAH 1.3 billion in 2015. Ukraine also began exporting milk to the country, she added. Transportation solutions remain a problem. China’s “One Belt, One Road” strategy, aimed at creating a modern “silk road”, provides promising opportunities going forward, however, said the Deputy Minister. China also expressed interest in investing in joint agricultural projects, according to Rutytska. The European Bank for Reconstruction and Development (EBRD) has invested EUR 1.7 billion in Ukraine in the past 10 years, according to Managing Director for Eastern Europe and the Caucasus Francis Malige. To create the right circumstances for export to the European Union (EU) and also Asia, the EBRD has invested in production, processing and logistics solutions, he added. The International Finance Corporation (IFC), in turn, has focused on funding innovation and modernization in Ukraine’s agriculture sector, said Regional Manager for Ukraine and Belarus Rufat Alimardanov. The exhibition accommodated over 350 participants from 17 countries.
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BFC Agriculture Finance Bulletin
4)
US Department of Agriculture to Support Reform Package
June 14th, 2016, http://minagro.gov.ua/en/node/21593
The American Trade and Investment Mission to Ukraine will support the government’s “3+5” agriculture sector reform strategy and provide expertise, said Mission Head and Deputy Secretary of the United States Agriculture Department (USAD) Michael Scuse. Following a meeting with the Scuse, Minister of Agrarian Policy and Food Taras Kytovyi reiterated the need to create economic incentives for farmers willing to modernize and make long-term investments.
5)
Japan to Participate in State-Backed Agriculture Support Programs
June 7th, 2016, http://minagro.gov.ua/en/node/21541
Japan is to support certain elements of the “3+5” agriculture sector reform strategy devised by the Ministry of Agrarian Policy and Food (MAPF). The country is interested in participating in state-backed organic farming, small-scale farming and agriculture machinery leasing programs, said Minister of the MAPF Taras Kutovyi following a meeting with Japanese Ambassador Shigeki Sumi. The “3+5” program comprises three strategic pillars – support programs for farmers, state agroenterprise reform, and transparent state-owned land allocation – and five development targets – market access, irrigation and food safety, organic production, niche goods, and rural economy.
6)
Ukraine Proposes Meat Exports to South Africa, Angola, Ghana and South Korea
June 6th, 2016, http://ubr.ua/market/agricultural-market/ukraina-namerena-eksportirovat-miaso-v-uar-angolu-i-ganu-407465
The Ministry of Agrarian Policy and Food sent delegations to South Africa, Angola, Ghana and South Korea in a bid to promote Ukrainian meat products. According to a UNIAN news agency report, the Embassy of South Africa officially offered to supply pork to Ukraine.
Foreign Aid 7)
EBRD Organizes Organic Sector Conference
June 9th, 2016, http://www.ebrd.com/news/2016/ebrd-promotes-organic-farming-and-food-production-in-ukraine.html
The European Bank for Reconstruction and Development (EBRD), in cooperation with the Ukraine Organic Union, is to hold a one-day conference on organic farming in Rivne. The event is being held with the support of the Ministry of Agrarian Policy and Food (MAPF) and the United States Treasury. The conference will gather representatives of the public and private sector and focus on building regional and international supply chains, and increasing the competitiveness and production capacity of small and medium organic enterprises. With its proximity to the European Union (EU), Ukraine is well positioned to exploit the organic market, which grew fourfold in the last decade. To date, the EU imports organic produce from 130 countries. Ukraine currently has 180 registered organic farmers covering 400,764 hectares or, roughly, 1% of arable land. This is far below the European Union (EU) average, with Austria, for example, dedicating 19.4% of its arable land to organic agriculture. The global organic food market is currently worth and estimated at USD 80 billion. Page 3
BFC Agriculture Finance Bulletin
8)
EU Puts EUR 13 Million Towards Food Safety in Ukraine
June 8th, 2016, http://www.ukrinform.ru/rubric-economix/2031115-es-vlozit-13-millionov-v-bezopasnost-ukrainskihproduktov.html
The European Union (EU) will allocate EUR 13 million toward food safety regulation harmonization and the development of food safety and control systems in Ukraine, announced Deputy Head of the EU delegation to Ukraine Thomas Frellesen. Speaking at the Agri \u0026 Food Forum ’16, held in Kiev, Frellsen said the EU would provide access to its research programs and support Ukraine’s agrarian reform packages, if necessary. Modernization provides enormous potential for growth in the country’s agriculture sector, concluded the Deputy.
Private Sector 9)
IFC: Agro-Insurance More Accessible to Farmers
July 5th, 2016, http://agroportal.ua/news/eksklyuzivy/ifc-agrostakhovanie-stanovitsya-bolee-dostupnym/
Agro-insurance has become more accessible to farmers, reported International Finance Corporation (IFC) expert Natalia Gerasimenko. According to data from Ukraine’s 16 insurers, 700,000 hectares of farmland are currently insured, while insurance premiums worth USD 77 million were collected in 2015. Late last year, 1,000 additional policies were signed. The average crop insurance rate is 4.1%, according to IFC research.
10) USD 400 Million Agro-Lending Pilot Program Launched June 21st, 2016, http://agroportal.ua/news/novosti-kompanii/agrariyam-nashli-400-mln-grn-na-kredity/
The Agrarian Fund and Ukraine Capital Bank have launched a USD 400 million pilot agro-lending program aimed at small and medium businesses with net revenue of less than USD 10 million, according to Agrarian Fund Chairman Andrey Radchenko. Interest rates will be 12% per annum and loans disbursed in Ukrainian hryvnia. Credit can be used for fuel, lubricants, seeds, fertilizers, protective measures, machinery repairs and spare parts, and other agricultural activities. Capitalization of the program will be split roughly equally between the Fund and the Bank. Ukrgasbank, Oshadbank and Ukreximbank are touted as future partners should the pilot be successful.
11) Milk Producers Demand Government Purchases to Combat Low Prices June 16th, 2016, http://en.interfax.com.ua/news/economic/350864.html
To bolster what it sees as dangerously low raw milk prices, the Association of Milk Producers has requested the state begin purchasing milk powder and butter. With dairy cow numbers and milk production dropping by 8% and 4%, respectively, the Association fears a continuation of the trend could lead to the annihilation of the industry. The sector has been on the verge of making a loss for the second year running. On June 13, industry representatives sent a letter to Minister of Agrarian Policy and Food Taras Kutovyi requesting the creation of a crisis plan in cooperation with the Agrarian Fund and nongovernmental associations.
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12) USD 180 Million Oilseed Facility Opened in Mykolaiv Seaport June 16th, 2016, http://www.kyivpost.com/article/content/business/us-company-bunge-makes-big-investment-in-ukrainesagricultural-sector-416460.html http://minagro.gov.ua/en/node/21606
Bunge Limited – an international food and agriculture company – has opened a USD 180 million oilseed processing and terminal complex at the Mykolaiv seaport. The facility has a capacity of 1 million tons of grain, 360,000 tons of raw oil and 816,000 tons of bulk cargo, and is expected to increase the cargo handled at the port by 1 million tons per annum. It is the largest foreign investment in the agriculture sector to date, according to the United States Chamber of Commerce in Ukraine. With the new complex coming online, grain exports will increase to 4 million tons per annum worth USD 360 million, according to Minister of Agrarian Policy and Food Taras Kutovyi. In 2011, Bunge opened a handling terminal in Mykolaiv increasing export capacity by 3 million tons per annum. The company operates five grain elevators nationwide and an oilseed processing facility in Dnipropetrovsk. Bunge has been operating in Ukraine since 2002 and owns oil and mayonnaise brands Oleina and Rozumnytsia. The company controls roughly 30% of the Ukrainian vegetable oil market. The country is the world’s largest sunflower oil exporter and its 6th largest grain exporter.
13) Grain Prices Set to Rise, According to UCAB June 16th, 2016, http://ubr.ua/market/agricultural-market/v-ukraine-podorojaet-zerno-410687
The average price of grains is set to increase in the 2016/2017 marketing year, according to Ukrainian Agribusiness Club (UCAB) analyses based on International Financial Corporation (IFC) data. The association estimates wheat prices will increase 6% to USD 145 per ton; barley 5% to USD 141 per ton; and maize to USD 130 per ton. The rise in price estimates are due to weather risks, lower worldwide stocks and an expected rise in oil prices, according to UCAB.
14) Agriculture Sector Investment Increases 57% between January and March June 16th, 2016, http://agroportal.ua/news/vlast/inevstitsii-v-agrosektor-vyrosli-v-poltora-raza/
From January to March 2016, investment in agriculture increase 57% year-on-year, according to the National Science Center’s Institute of Agrarian Economics. Investment will peak by 2017 and is expected to decline thereafter until 2025, according to the Institute’s Investment Department Head, Nikolay Kisil.
15) UCAB: Animal Husbandry Crisis Could Cost State UAH 2.7 Billion June 16th, 2016, http://ucab.ua/ua/pres_sluzhba/novosti/stagnatsiya_u_tvarinnitstvi_koshtuvatime_byudzhetu_bilya_27_mlrd_grn
Animal husbandry in Ukraine is in crisis. Cattle numbers fell by 10%; pig numbers by 2%; sheep and goats by 2%; and poultry by 12%, according to the Ukrainian Agribusiness Club (UCAB). If the situation does not improve, within five years, 40,600 jobs will be lost, tax revenues will decrease by UAH 1.7 billion, and unemployment costs will increase by UAH 0.98 billion, according to UCAB estimates. It also predicts social tensions in rural areas will rise.
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16) Agricultural Exports to ASEAN Members Double to USD 183 Million in Q1 June 13th, 2016, http://finchannel.com/index.php/world/ukraine/
In Q1 of 2016, agricultural exports to Association of Southeast Asian Nations (ASEAN) members doubled to USD 183 million, according to Deputy Minister of Agrarian Policy and Food Vladyslava Rutytska. In the coming 3-4 years, the Deputy estimates exports to ASEAN members will increase to USD 1 billion. While Vietnam and Myanmar saw promising trade developments, Thailand, Indonesia and Malaysia still account for 85% of Ukraine’s exports to ASEAN members, said Vladyslava. Ukraine should negotiate free trade agreements with ASEAN countries, she added.
17) USDA Forecasts Record 4.5 Million ton Soybean Harvest June 13th, 2016, http://agroportal.ua/news/rastenievodstvo/usda-urozhai-soi-v-ukraine-budet-rekordnym/
In 2016/2017, the soybean harvest is estimated at a record 4.5 million tons, up 0.6 million tons year-onyear, according to the United States Department of Agriculture (USDA). The previous estimate was 4 million tons. Yield is expected at 2.14 tons per hectare, 16% higher than a year prior and 9.2% higher than the 5 year average. Due to poor weather, the soya cultivation fell by 8.7% to 2.1 million hectares, according to the Ministry of Agrarian Policy and Food. Sunflower cultivation increased by 15%.
18) Agricultural Exports Total USD 5.7 Billion from January-May June 9th, 2016, http://ucab.ua/en/pres_sluzhba/novosti/eksport_agrarnoi_produktsii_zris/?category=29779
From January-May 2016, agricultural exports totaled USD 5.7 billion, up 2.7% year-on-year, according to the State Fiscal Service. Over the same period, fat and oil exports totaled USD 272.7 million, up 20.6%, with sunflower oil exports increasing 21.5%. Horticultural product exports totaled USD 40 million, up 2.7% year-on-year. Exports of live animals and related goods fell by USD 39.8 million, caused mainly by a decline in beef and pork exports. Ready meal exports dropped to USD 125.1 million. From January -May, agricultural goods’ share of total exports increased 5.5% to 35.8%, compared to the same period in 2015.
19) Georgian Dairy Company Begins Operations in Khmelnytskyi June 6th, 2016, http://ubr.ua/market/agricultural-market/gruziny-budut-proizvodit-molokoprodukty-v-ukraine-407413
Georgian dairy company “Kobuleturi” will begin producing pasteurized milk, yogurt, sour cream, cheese, butter, bryndza and kefir at a former butter factory in Khmelnytskyi oblast. The factory began operating following extensive renovations, according to Director of Kobuleturi Ukraine Anna Sendal. The plant uses Ukrainian raw materials in tandem with modern production technologies, she added.
20) 950,000 ton EU Wheat Export Quota Exhausted June 2nd, 2016, http://rian.com.ua/economy/20160602/1011037925.html
Ukraine’s 950,000 ton European Union (EU) wheat export quota has been reached, according to Deputy Minister of Economic Development and Trade Natalia Mykolskiy. Wheat exports to the EU will continue through its global quotas, however, she added. At 1.64 million tons, Ukraine is the largest wheat exporter to the EU and accounts for 49% of its total wheat imports, said the Deputy Minister. The total is more than the combined wheat exports to the EU of the United States, Canada and Russia, noted Mykolskiy. Ukraine exhausted also its EU quotas for corn, grapes, apple juice and honey exports. Page 6
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.