ARDS Annual Report FY-2017

ANNUAL REPORT FY 2017 Agriculture and Rural Development Support Project

This publication was produced by Chemonics International for review by the United States Agency for International Development. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

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Contents Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Improving Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Land Market Reformed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 InsƟtuƟonal Capacity to Design and Implement Reforms Built . . . . . . . . . . . . . . 17 State Agri-Food Controls Reformed and Improved. . . . . . . . . . . . . . . . . . . . . . . . . 24 Enhancing Value Chains and Supporting Functions . . . . . . . . . . . . . . . . . . . . . . . . 28 Fruit Value Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Vegetable Value Chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Dairy Value Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Meat Value Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SupporƟng FuncƟons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARDS Media clippings FY 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARDS MEL indicators FY 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

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Overview

Overview The USAID Agriculture and Rural Development Support (ARDS) Project supports broad-based, resilient economic growth through a more inclusive, competitive, and better governed agriculture sector that provides attractive livelihoods in rural areas. ARDS works with stakeholders to implement a broad array of solutions for market system failures that span the enabling environment, including land markets, policies, governance, and rights, core function value chains – where the focus is on the meat, dairy, fruit, and vegetable value chains, while integrating and aligning supporting functions and non-farm rural enterprises. The project works at the national and local levels, with a special focus on rural development in southern and eastern Ukraine.

ARDS embraces approaches defined in the U.S. Global Food Security Act of 2016 that emphasize market-led development for agricultural transformation to generate sustainable growth opportunities for small farmers, small and medium-sized enterprises, and poor rural households. Within the unique context of Ukraine’s agriculture sector, ARDS applies the strategy’s guidance in policy, market systems, and value chain facilitation introduced by USAID in 2017, to sustain Ukraine’s gains and capitalize on sector opportunities. ARDS integrates the Collaborating, Learning, and Adapting (CLA) Framework promoted by USAID. Across all efforts, ARDS works with a range of government, private sector, civil society, and donor partners to plan, implement, map outcomes, and scale what works, adapting as needed by redesigning or abandoning of strategies and tactics.

Throughout implementation ARDS applies a gender

integration and mainstreaming strategy. Women are the majority of rural land owners and are a significant asset to family farms – and therefore sector growth. However, women’s voices remain underrepresented in national and local decision making and their entrepreneurial and economic potential has yet to be fully realized.

ARDS applies a holistic, market systems approach to implementation. Market systems are where the private and public sector participate, collaborate, and compete for the production, distribution, and consumption of goods and services at local, regional, and international levels. This approach recognizes the limitations of addressing value chain constraints in isolation without

Figure 1: Market system

Overview considering the larger system – the formal and informal rules, supporting functions, and interplay between market system actors, shown in Figure 1. ARDS targets not only actors directly engaged in the value chain core functions, but also participants from supporting functions and rules and regulations governing the system.

To take a market systems approach, ARDS:  Works to understand incentives and disincentives that drive system behavior and devises tactics and solutions with stakeholders to advance competitiveness, scale technology, adopt new processes – whether in supply chains or government agencies – and avoid destructive competition. Without understanding participants’ mindsets and relationships, it is impossible to align incentives to change behavior and processes in a supply or value chain, supporting functions such as a finance and inputs provider, or an enabling environment entity. An important issue across the project’s initiatives is that of corruption and recognizing incentives and disincentives that influence stakeholders and identifying levers that reduce opportunities for corruption (see box). Over

the life of the project ARDS will be integrating behavior change communications and evaluation into its work to assess if behaviors have changed to allow for a cascade of improvements in the sector, within government, targeted value chains, and specific supply chains.  Recognizes that value chain performance depends on dynamics beyond individual value chains, supporting functions, and their enabling environment. This requires understanding economic, conflict-related, or natural shocks.

For example, this means facilitating viable market linkages for farmers in eastern Ukraine who have lost access to markets and processors in the nongovernment controlled areas of Donetsk and Luhansk, as well as Russia.  Focuses on facilitating solutions that affect interconnected value chains. For example, in Ukraine, this means tackling the need for an agricultural land market, creating systems for self-regulating agri-food inspection, and improving cold chain logistics, which will all bring transformational change to multiple value chains.

Photo: Latifundist.com

Building in Anti-Corruption Tactics The draft law “On agricultural land turnover” has received much attention, but ARDS has accomplished significant work on what the World Bank labels as “infrastructure for land reform”. This infrastructure is vital for creating a transparent governance system that reduces opportunities and instances of corruption. This includes a law for systematic registration of land and immovable property prices, and a law to simplify lease for lands possessed by farmers on permanent use rights, and law to allow private family farms access to agricultural land plots though land auctions, and a law to monitor land relations and land reform. In addition, two pilots at

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Overview the Consolidated Territorial Community (CTC) level, one on land management decentralization and the other on registration of land inheritance, improve transparency and reduce corruption in land management. ARDS has also completed the ground work for developing capacities of sectoral associations to perform certain state functions,

and will continue support to develop codes of practice, as well as permit systems and procedures for state control in meat and dairy sectors, which would lead to a streamlined regulatory environment in the sector, thus, not only improving quality of produce, but also increasing transparency and fair competition in the sector.

Photos: USAID ARDS project

A Role for Women in Agribusiness

ARDS integrated gender considerations across solutions and tactics with partners, beginning with a gender analysis in 2017 to better target its FY18 work to SMEs, cooperatives, banks, and NGOs that are owned or managed by women and strengthen networking between women business owners, producers, and civic organizations. Grantees selected as partners in FY17 either already employ a significant number of women or have made commitments to hire women as new permanent and seasonal jobs are created. Here is a sampling:  Association of Milk Producers’ new laboratory requires four new positions, two will be women or IDPs  Galfrost LLC will create new jobs: four loaders, 16 sorters, three loader drivers, and two operators; all 16 sorters will be women

 Kolosok reaches 3,500 households growing apples, many headed by women, and will begin helping organize them into cooperatives for better supply chain functioning through shared services that benefit producers  Poltava Sad will create at least one new job for every current 10 jobs and half will be women; estimates are 20 new permanent and 150 seasonal jobs  Rozdolne’s frozen fruit and vegetable facility will create 10 permanent and 60 seasonal positions of which 50 percent will be women employees  Ukrainian Berry LLC committed to 66 percent of new hires will be women for the expected 20 to 25 seasonal jobs

Overview Human resources development to meet agriculture market needs

Opening Ukrainian Agrarian Lyceum in Uman gathered lots of guests, September 2017

To prepare Ukraine’s youth for work in the sector, the industry-led Ukrainian Agrarian Lyceum (UAL) Initiative was launched in Uman, Cherkasy Oblast, with support from the Ukrainian Agrarian Council (UAC). UAL will prepare Ukrainian youth for agribusiness careers, beginning with 46 students in its first class. UAL plans to establish 10 new schools by the end of 2018 and grow to serve 15 percent of Ukraine’s student population. As

part of the initiative, UAC focuses on youth leadership skills through the Future Farmers of Ukraine, a program modeled on Future Farmers of America. The effort began in September 2016 and participants are students of high schools and lyceums 14 to 16 years old. ARDS developed an action plan and ARDS provides ongoing advice to UAC.

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Deputies of MAPF minister Olga Trophimtseva and Olena Kovalyova together with Vadym Ivchenko, Member of Parliament, are presenting the changes to organic products regulations at Organic Media Brunch organized by ARDS

1 Improving Rules and Regulations

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Improving Rules and Regulations

Improving Rules and Regulations The “National Strategy and Action Plan for Agriculture and Rural Development in Ukraine for 2015-2020” provides the overall policy framework for ARDS support. In July 2016, the Ministry of Agrarian Policy and Food (MAPF) further prioritized the strategy by defining nine short-term reform priorities. Of the nine priorities, ARDS supports five: land reform, rural development, agricultural markets, organic production and niche crops, and irrigation systems, as well as capacity strengthening of government agencies and other stakeholders to implement reforms envisaged by the strategy. Unfortunately, the pace of reform agenda implementation by MAPF has been uneven and significantly slowed by the resignation of its architect, MAPF Minister Taras Kutoviy, in April 2017, roughly six months into ARDS implementation.

Embracing the US Government’s Global Food Security policy programming guidance, ARDS targets:  Ukraine’s country-led, prioritized policy agenda.  Improved institutional architecture that includes

transparent, evidence-based policy change, inclusive dialogue, and strengthened policy and advocacy institutions.  Mutual accountability where stakeholder commitments, multi-stakeholder participation, joint responsibility for progress, regular document review, and transparent communications on progress are the norm.  Engagement of government, private sector, civil society, academia, and media in solutions and tactics to foster buy in, ownership, and action.  A flexible and adaptive approach to solutions and tactics. For example, as progress on reforms brings a challenge or is delayed, ARDS adjusts to meet the challenge, as well as capitalize on windows of opportunity. A good example is the land rights communications campaign.

ARDS focuses on three main areas to improve rules and regulations: land market reforms, government capacity strengthening for reform design and implementation, and state agri-food control reforms.

Land Market Reformed Although almost 75 percent of agricultural land is privately owned, full land reform is incomplete.

Land reform is one of the most impor tant of the 62 reforms in the Strategy for Sustainable Development, “Ukraine-2020”, which was approved in 2015. The IMF describes land reform as one of Ukraine’s top three priorities. According to MAPF, since 2004 Ukraine has lost around USD $43 billion

because it lacks a true land market. Land market reform is a sensitive topic due to political and electoral factors, despite it’s potential to transform the agricultural sector and Ukraine’s rural economic landscape. A key constraint is the moratorium on the sale of most agricultural land, roughly 96 percent of all agricultural land, impacting the sector’s ability to serve as an engine of growth.

Land Market Reformed The moratorium has wide-ranging effects:  It violates the constitutionally guaranteed right to private ownership of land, depriving small farmers the ability to sell land  It blocks development of small and medium-sized farms; farmers are unable to purchase land  Because small and medium-sized farmers are prohibited from exercising their ownership rights, they cannot use land to attract bank financing  It leads to displacement of small farmers who are often forced to lease the land they own to large, powerful agricultural holdings  As the size of large, mechanized commercial farms increases, job opportunities in the sector shrink, leading to increased rural unemployment and poverty  Many large agricultural holdings pay business income taxes to central registration offices, mainly at the national level, rather than to the administrative entity where their land is located; this results in decreased local government revenues and degradation of rural areas, limiting rural infrastructure improvements and lowering standards of living Lifting the existing moratorium and opening the agricultural land market requires passage of the law “On agricultural land turnover”, currently in draft and requiring further revision, registration in Parliament, and passage. In the meantime, the absence of a transparent and operational land market is a systemic problem that hampers rural development, resulting in a range of market inefficiencies and distortions that affect all value chains and hinder poverty reduction.

ARDS’ role is to deepen stakeholder understanding and identify incentives for stakeholders that change their mindsets and behaviors, fostering ownership and action.

Making meaningful progress requires focusing on three areas in parallel. First, further progress on land reform calls for helping the government and other stakeholders develop legislation that introduces an agricultural land market model supported by land owners, agribusinesses, government, and

First deputy of MAPF minister Maksym Martinyuk talking to journalists about the Land Reform at media training

society at large.This model must be developed through open and wide public consultation, have adequate safeguards to address potential risks at initial implementation stages, and incentivize small farm development. ARDS calls this model “farmer-centric” as it must address small farmer needs and land rights to stimulate small family farm investment and commercialization, allowing farm businesses to drive Ukraine’s rural development.

Second, advancing reforms requires improving land governance through:  Simplification of land administration procedures  Regulation of land management  Improving the maintenance of the land cadastre and registry of rights  Strengthening the protection of land rights Finally, there is a need to decentralize agricultural land management and assist newly-created CTCs develop capacity to manage land resources.This will build trust and public support for land reform, help citizens understand and feel its benefits, and provide local systems and structures to eventually open the agricultural land market.

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Improving Rules and Regulations Citizens’ understanding of land rights ARDS partnered with the Cabinet of Ministers and MAPF to design and roll out a comprehensive sixmonth land reform communications campaign to help citizens understand their land rights and impacts from creation of a private agricultural land market. The campaign included a vast array of channels, including print, digital, social, television, and radio media to media training for journalists and regional initiatives with local activists that reached 2,600 participants. In June 2017, ARDS commissioned a public opinion survey to identify perceptions on lifting the moratorium on land sales and to identify factors that influence the target audiences’ attitudes. With a sample size of 1,053 land owners and an additional 156 small farmers, findings showed that the share of rural land owners and small farmers who understand the benefits of and support the establishment of an agricultural land market increased from 15 percent in 2015 to 35 percent, with rural land owners the most

Agricultural land policies and governance system ARDS made significant headway in this area by launching two pilot and management decentralization efforts at the CTC-level to improve local land administration and designed with an eye toward eventual replication among CTCs. Land reform involves much more than the law “On agricultural land turnover”; land governance is vital and the pilot efforts are improving transparency and reducing land management corruption. In addition, the pilots are providing local communities with the ability to control land resources that they can use to increase economic growth and job creation. The first pilot is with Kipti CTC in Chernihiv Oblast where an electronic land management system was established. ARDS is helping the Kipti CTC obtain information on location and legal

# 9 Share of rural land owners and small farmers who understand the benefits of and support establishment of an agricultural land market in Ukraine

35%

15%

2015

FY 2017

Figure 2: Citizen land rights understanding

impacted by the communications campaign. These efforts pave the way for opening the land market as a growing number of Ukrainians support land reform and understand their land rights. # 6 Number of specific pieces of legislation or implementing regulations proposed, adopted, and/or implemented affecting property rights of the urban and rural poor as a result of USG assistance

9 6

2015

FY 2017

Figure 3: Legislation on property rights

Land Market Reformed

ARDS expert Serhii Kubakh participating in the discussion “The market of agricultural land as a national security issue in Ukraine” at National Agrarian Academy

status of all territorial land plots, develop a land use plan, and present the plan for approval based on consultation with residents and other stakeholders. The second pilot

is with the Koblevo CTC in Mykolaiv Oblast and targets registration of inheritance and rights on inherited land plots and other real estate.

Land of Plenty: Helping Communities Realize the Benefits of Rural Land A result of Ukraine’s decentralization program is the establishment of 413 CTCs, new rural units comprised of small communities, with decision-making powers and budgets transferred from central state authorities. In the two years since CTCs were established, 87 percent of CTC heads report positive effects of the reform according to a July 2017 DESPRO survey1.

Land resources are the main source for rural economic development and CTC budget revenues, but 95 percent of CTCs described limited abilities to manage land.

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Understanding that effectively managing land is both a challenge and growth opportunity for CTCs nationwide, ARDS together with All-Ukrainian Association of Villages and Village Councils designed and supported a pilot project to establish a CTC-level electronic land management system combined with local economic development strategy development. The pilot in Kipti CTC, a typically-sized CTC comprised of 12 villages, 5,500 people, and 29,5000 hectares, had three goals: obtaining and archiving data on quality and quantity

DESPRO is a Swiss-Ukrainian project “Decentralization Support in Ukraine”, funded by the Swiss Confederation

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Improving Rules and Regulations

Electronic land management map developed for Kipti CTC, October 2017

of land resources; creating a plan for efficient land use that addresses CTC needs and is compliant with environmental legislation; and increasing land use efficiency, enabling CTCs to manage community-owned land.

The first project of its kind in Ukraine, the Kipti pilot has become a model for local land management:  The electronic land management system allows for immediate access on available land, resources, property, infrastructure, and land use restrictions.

The Kipti CTC electronic land management system revealed that just by leasing available land, UAH 1.8 million in taxes could be generated for the CTC’s

budget.This is significant for Ukraine when multiplied across the other 412 CTCs.  The system proved to be an efficient tool for public control and engagement in land management, as well as for identifying new economic opportunities and attracting investment.  The system helped the Kipti CTC develop solutions for citizen needs, e.g. waste management and infrastructure.  The pilot helped Kipti CTC create a viable local economic development strategy based on efficient land use that balances the interests of citizens, businesses, and the community.

Land Market Reformed  The effort fostered community leadership and citizen behavior change: CTC witnessed proactive engagement by the CTC and citizens in CTC management and community wellbeing and future growth.

Based on lessons learned across the pilot elements community engagement, electronic land management systems, and local economic strategy development -

ARDS has developed a toolkit for CTCs nationwide to guide community leaders on more effective land use and strategic planning.

The pilot also helped identify regulatory and legislative steps which need to be taken to fully enable land management systems for all CTCs.

“The first thing each newly created CTC needs to do is to sort out all land plots property status. As soon as you clear up the land plots status, you will know where you can build and where you can grow vegetables. Only after this, you can start creating your plans” Volodymyr Bardakov, village Progress, member of Kipti CTC

Agricultural land market While ARDS’ assistance to MAPF and the World Bank on drafting the law “On agricultural land turnover” received the most attention, the project accomplished considerable work on what the World Bank refers to as “infrastructure for land reform.” Improving this infrastructure is important for creating a transparent governance system that reduces opportunities for and instances of corruption. With stakeholders, ARDS has provided legal analysis and drafted new or amended legislation for a transparent and operational land market.

As an example of the potential impact of these types of laws, the draft law that deals with registration of inherited land plots. It allows residents, many who are older and poor, to register inheritance and rights to inherited land plots and other real estate directly at the village council or CTC using rapid, inexpensive, and transparent procedures. This saves land owners money and time as they currently must travel long distances to rayon centers to register land. Implementation of the law Strawberry field in Lviv Oblast, Galfrost input supplier

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Improving Rules and Regulations will also enable local communities to detect and transfer escheated inheritance (land of an owner without will and legal heirs) to communal ownership and use those plots to promote development of small family farms, attract investment, and in turn increase local budget revenues.

In addition to the five laws registered in Parliament, the MAPF Working Group on Reforming Land Relations that ARDS supports drafted laws and other materials on transformation of the right of permanent use of land into ownership or lease; improvement of land valuation procedures; a resolution “On Implementing a Pilot Project on Monitoring Land Relations and Amending Certain Resolutions of the Cabinet of Ministers of Ukraine”; and Roadmap for Reforming Land Relations for 2017-2020.

Several the efforts are driven by the growing problem in Ukraine of increased illegal takeovers of land and farms.

# 4 Number of agricultural enabling environment policies analyzed, consulted on, drafted or revised, approved, and implemented with USG assistance

46

20

Plan FY 2017

FY 2017

Figure 4: Agricultural land policies

Land policies and governance system improved  Assisted MAPF with drafting a law “On agricultural land turnover”  Drafted and helped register in Verkhovna Rada (Ukrainian Parliament) laws for opening transparent land market: Law to allow private family farms to access agricultural land plots through land auctions Law to optimize the use of land plots within one area Law to simplify land lease for lands which are possessed by private farmers on the permanent use rights  Drafted laws to improve transparency of land market: Law to allow for systematic registration of prices for land and immovable property Law to monitor land relations and land reform

 Deregulation in land management and valuation Drafted and helped register in Verkhovna Rada law “On simplification of registration of land in CTCs”  Registration of inheritance rights Drafted and registered in Verkhovna Rada law “On inheritance by farmers of use rights to land”  Strengthening land use rights for small and mediumsize agricultural producers Drafted a law that removes gaps, problematic issues and conflicts of laws with regard to maintenance of the State Land Cadastre and the State Registry of rights to immoveable property  Transparent monitoring system on land administration Drafted and helped adopt CM resolution “On implementing a pilot project on monitoring land relations and amending certain resolutions of the Cabinet of Ministers of Ukraine”

Institutional Capacity to Design and Implement Reforms Built

Institutional Capacity to Design and Implement Reforms Built

Roundtable discussion of ARDS survey results on broken market linkages in agricultural sector at the east of Ukraine, with Olena Kovalyova, deputy MAPF, Vadym Chernysh, Minister of temporary occupied territories, and Patrick Rader, ARDS project director

Ukraine’s Agriculture and Rural Development Strategy for 2015-2020 provides the policy framework and priorities for MAPF and the private sector, civil society, and donor partners who support reform efforts.

MAPF and its agencies’ staff, responsible for sector policy and planning, must embrace a reform-driven agenda, assimilate the private sector’s input, and keep their commitment to sector competitiveness and rural prosperity through faster action on needed reforms.

MAPF is well intentioned and can benefit from skills and knowledge in sector analysis, evidence-based planning, legal drafting, and rationalization of its roles and responsibilities vis-a-vis the private sector.

Ukraine has an array of agriculture business associations that represent business interests and sector NGOs that represent the voice of the rural population, activists, and civil society at large. There are more than 100 nationallevel associations and NGOs and an even larger number at the regional and local levels. National-level business associations and NGOs are fragmented and demonstrate varying levels of capacity and sustainability. Some are well-established and reasonably well funded by members; this type usually represents large business interests.

Others struggle to survive and maintain members.

Their advocacy efforts will help mitigate constraints to enterprise growth that their members deal with on a

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Improving Rules and Regulations day-to-day basis, limiting business innovation, investment, job creation, and revenue. To be effective, these organizations must be able to partner with government, bringing compelling arguments and diplomacy through often protracted reform processes. To serve in this role, there is a need for more professionalism, with organizations accountable to their members, representing and protecting their interests, and serving as a partner for government in design, implementation, and monitoring of sector reforms.

Poverty, unemployment, lack of access to finance, and aging or non-existent infrastructure have led to declines in quality of life in rural areas. Many villagers remain focused on agricultural production, but face a myriad of production, post-harvest, processing, and infrastructure constraints. They primarily sell raw products in local

wholesale markets, struggling to turn a profit. Some offfarm employment exists, but opportunities are scarce.

State programs that promote economic diversification, cooperatives, business initiatives, and professional training and retraining are limited, while CTCs do not yet have sufficient skills to implement sound economic initiatives that offer needed local government revenue, create employment, and strengthen rural communities. Given this confluence of issues, many villagers are inclined to migrate to urban areas, especially youth and the most economically active villagers. CTC representatives have a major role to play and must see their community’s potential, embrace partnerships with business for community economic development, and believe in their community’s ability to mobilize and help spur economic growth.

InsƟtuƟonal capacity of GOU agencies ARDS designed an eight-module training and professional development program for MAPF based on a comprehensive needs assessment. Five training courses were delivered to 98 government officials from June to September 2017 on the following topics:  Legal techniques for developing laws and legislative documents  Effective relationships between government and civil society  Effective public communications  Knowledge in land legislation, land reform, and domestic market regulation for organic products Participants were trained on how to draft and analyze laws, identify possible mistakes and correct them during analysis of regulatory influence of drafts and normative acts, and how to interact with public organizations. They also learned about communication etiquette and cooperation with media, basics of media events, and discussed land management issues.

ARDS delivered five training courses to government officials

Institutional Capacity to Design and Implement Reforms Built Reform Support Teams ARDS provided support to MAPF and five of its Reform Support Team (RST) working groups:  Reforming Land Relations  Rural Development  Organic Production and Niche Crops  Market Development  Irrigation Systems Development The RST working groups are comprised of government officials and 34 agriculture business association and

NGO representatives.

ARDS provided a coordinator and technical expert to coordinate cooperation and information flows between RST working group members and guide them on achieving concrete results. This support led to development and approval of a strategy for development of private farming and cooperatives, and allowed for tangible progress in drafting a national irrigation strategy, and drafting of seven laws and by laws.

Land Reform RST

Market Development RST

 Drafted a law to allow land users to transform the right of permanent use of land into ownership or lease right

 Developed the content and portfolio for publication “Ukrainian Agriculture for Export Markets”

 Drafted a law "On Amendments to Art. 6 of the law “On land valuation”"  Drafted a resolution “On implementing a pilot project on monitoring land relations and amending certain resolutions of the Cabinet of Ministers of Ukraine”  Developed a Roadmap for land relations reform in 2017-2020

 Drafted a concept on agricultural attaché for Ukrainian embassies  Drafted a law “On export duty on livestock”

Organic Products RST

Rural Development RST

Irrigation RST

 Developed proposals to amend draft law No. 5448 “On basic principles and requirements for organic production, turning and marking of organic products “

 Drafted a concept “On development of private farmers and agricultural cooperatives for 20182020”

 Drafted a concept “On development of private farmers and agricultural cooperatives for 20182020”

 Developed implementation plan for a concept for rural areas development

 Developed implementation plan for a concept for rural areas development

 Conducted conference “NGOs participating in rural development” (Sept 2017) – 50 NGOs participated

 Conducted conference “NGOs participating in rural development” (Sept 2017) – 50 NGOs participated

 Conducted training “Development of organic market” for MAPF employees

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Improving Rules and Regulations Capacity of business associaƟons and civil society In addition to work with business associations and NGOs through MAPF working groups, ARDS has targeted associations and NGOs for capacity strengthening in advocacy, using evidence-based analysis, fund raising, and grant writing, starting with a rapid training and professional development needs assessment. This assessment led to design of capacity strengthening programs for both the MAPF Public Council and individual organizations.  During FY 2017, ARDS identified two advocacy issues to work on: 1) anti-raiding in agro-sector and 2) improving legislation on dairy products.

Together with agricultural industry associations and NGOs, ARDS worked on policy initiatives and advocacy interventions.  ARDS provided the MAPF Public Council with analytical and coordination skills building to enhance capacity to publish analytical reports and member information; conduct monitoring and analysis of draft legislation submitted to Parliament; analyze agricultural enterprise statistical information; develop position papers; and hold effective public hearings.

Through its Strategic Investment Fund, ARDS launched a competitive grant program for agriculture sector associations and NGOs to build their capacity for policy

# 12 Number of NGOs receiving U.S. government assistance engaged in advocacy interventions

24 15

Plan FY 2017

FY 2017

Figure 5: NGOs engaged in advocacy

analysis and advocacy for market-oriented reforms.

Eight associations and NGOs were selected from 32 applicants. Two grants have begun and six were in final negotiations as of September 30, 2017. Each grant is for six months and averages about $25,000. ARDS is taking a phased approach to grantee support; in the next round of grantee selection, to be announced in January/ February 2018, high-performing grantees may receive a second grant to gain a more advanced level of assistance as their capacity is strengthened.

Institutional Capacity to Design and Implement Reforms Built

Organization

Expected results

Ukrainian Agrarian Confederation

Proposals for a draft law “On Consolidation of Agricultural Land” prepared; analytical report on the use of agricultural land by farming enterprises of different size prepared and presented for public discussion; MoU between leading agriculture sector associations and the union of chemical producers regarding the market of fertilizers signed

All-Ukrainian Association of Village and Village Councils

Legal and regulatory framework that governs sustainable development of rural territories analyzed; proposals to improve this framework developed, discussed with stakeholders and presented to government agencies for approval

Analytical Center of the Agricultural Union of Ukraine

Deregulation proposals for milk and dairy production, cattle, pigs and goats raising, prepared and presented for public discussion; a concept for development of industry associations based on self-regulation principles developed and presented for public discussion

Association for promotion of the rural green tourism development in Ukraine

A draft law on taxation of providers of rural green tourism services developed and registered in parliament; a draft MAPF Order “On approval of recommendations to owners of individual subsidiary farms and family farms on provision of rural green tourism services” prepared and submitted to MAPF for approval; cluster model for rural green tourism in L’viv Oblast developed

Federation of Organic Movement of Ukraine

By-laws developed to implement new organic law drafted; 9th National Organic Fair prepared and held; recommendations for development of reginal strategies for support to organic production prepared and disseminated

Association “Ukrainian National pig industry standards for environmental impact assessment developed and Pig Breeders “ submitted for approval; guidelines for observance of hygienic requirements to market operators involved in primary pig production developed, tested and submitted for approval; technical instructions for storing, disinfection and recycling of swine manure developed and submitted for approval Ukrainian Association of Soil Scientists and Agricultural Chemists

Condition of soil resources in terms of key indicators of fertility, actual productivity and nature of agricultural use in Kharkiv and Volyn Oblasts assessed; regional program of soils protection and reproduction of their fertility based on an example of Kharkiv Oblast prepared.

All-Ukrainian Agrarian Amendments to the procedure for allocation and distribution of budget subsidies to Council agricultural producers developed, discussed and submitted to MAPF to increase the transparency and equity of subsidy allocations

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Improving Rules and Regulations

SupporƟng Organic movement in Ukraine The Organic Federation of Ukraine, ARDS’ grantee, held its 9th National Organic Fair in Kyiv on September 23, 2017 with ARDS support. The fair focused on raising public awareness about the benefits of organic production and consumption, aimed at supporting growth of Ukraine’s organic market and its rural-based members grow their businesses. During the fair, organic producers presented their certified organic products and collect the feedback from the consumers. Approximately 15,000 people enjoyed the National Organic Fair.

Deputy MAPF Minister Olha Trofimtseva and Chairman of Organic Movement Federation of Ukraine Yevhen Mylovanov at the National Organic Fair

Growing AbiliƟes of Agricultural Business AssociaƟons

Association for Promotion of Rural Green Tourism Development conducting its seminar on October 5, 2017

The Association for Promotion of Rural Green Tourism Development is implementing an advocacy plan for a draft law on support rural green tourism development, that has been developed together with ARDS. The advocacy plan comprises the seminars for the members of the Rural Green Tourism Union who provide rural tourism services, activists and experts of rural green tourism development to deepen their knowledge about the services portfolio under the “Hospitable Ukrainian Homestead” program. The “Hospitable Ukrainian Homestead” program is the Union’s voluntary quality compliance system that will help increase the number of tourists who vacation in rural areas thus improving revenues of rural households, increasing employment and contributing to revival of rural areas.

Institutional Capacity to Design and Implement Reforms Built Capacity of local communities and CTCs ARDS efforts target CTC representatives’ leadership and business acumen to help them prepare and implement effective strategies, plans, and investment projects, with an emphasis on CTC-business partnerships. In FY17, ARDS researched rural development models proven effective in Ukraine.

In parallel, to integrate international best practices in rural development, ARDS brought a rural economic development expert from the University of Missouri to analyze Ukraine’s rural development issues; identify relevant rural development models from the US, Canada, and the EU; and draft recommendations for use in CTC economic development planning. The research was used to create capacity building materials for 13 pilot CTCs to apply rural development methodologies. Training was delivered to the 13 pilot CTCs, reaching 463 participants. Trainees put new skills to use to develop strategies and identify investment opportunities. As pilot CTCs developed plans, ARDS reviewed drafts, provided expert input, and then held a competitive process resulting in 13 CTC “Strategies for Local Economic Development” and 13 investment

Working Group in Kipti CTC discusses draft economic strategy for the community, September, 2017

project designs, of which ARDS plans to co-fund some in partnership with local authorities after a competitive process. ARDS also conducted four seminars in the Donetsk and Luhansk regions (two in Severodonetsk, Kramatorsk, and Mariupol) focused on the “how to” of implementing rural development models.

“ARDS experts and CTCs together are developing individual investment ideas for each supported CTC, and training CTC leaders on investment plan development and tools for attracting investments. In some CTCs, a local agricultural market will be developed; in some, a processing center. The core impact here is to create new job opportunities so CTCs will increase revenue, and youth will have new reasons to stay in their home village.”

Olena Kovalyova, Deputy Minister MAPF

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Improving Rules and Regulations

State Agri-Food Controls Reformed and Improved

In September 2014, the European Parliament and Verkhovna Rada ratified the Deep and Comprehensive Free Trade Area (DCFTA) agreement, which offers both opportunities and challenges for the agriculture sector. For Ukraine’s agricultural enterprises to be competitive in the EU and other world markets, Ukraine must implement European sanitary and phytosanitary standards and bring regulations into compliance with EU technical regulations and procedures. For example, Ukraine’s outdated system of agri-food product controls requires that agricultural producers and exporters undergo inspection by both Ukrainian and European authorities, which is duplicative and wastes time and money, especially given perishability factors.

To resolve this and other system inefficiencies, improve the functioning of the four ARDS targeted value chains, and lay the groundwork for expanded exports, Ukraine needs to take timely and decisive steps to improve the state food product control system. Building on sector deregulation and existing incentives for businesses to introduce and comply with market standards and

requirements in ARDS’ four targeted value chains, ARDS and its partners have the opportunity to address systemic issues of outdated standards, duplicate requirements, non-transparent procedures, and lack of knowledge of and compliance with European standards.

Harmonization with European food quality and safety regulations and procedures is paramount.

ARDS is promoting an approach based on developing new institutional arrangements with agricultural business associations that will serve as self-regulatory organizations (SROs) to their members for effective food product controls. Building understanding and changing government mindsets to recognize that business associations are institutionally capable and incentivized, demonstrate real and broad membership, and can efficiently perform self-regulatory functions is vital. Meanwhile, for associations to serve as SROs, they need institutional capacity, codes of practice, monitoring systems, and authority from government to play this role.

Hence, meaningful public-private dialogue, partnership, and long-term commitment must exist to make gains.

State Agri-Food Controls Reformed and Improved ARDS is working with MAPF and its State Service for Food Safety and Consumer Protection to streamline processes, make the agency more efficient and transparent, and transfer certain functions to potential SROs. ARDS is also working with business associations that are potential SROs to ready them if selected.

ARDS is taking a multi-pronged approach to this effort:  Analyzing experience and best practices of several countries in introducing elements of self-regulation into the agri-food safety system  Supporting development of a draft law on self-regulation as a model agricultural sector framework law

 Evaluating existing association and NGOs capacity as potential SROs  Supporting transfer of regulatory responsibilities from government to SROs via a farm animal welfare initiative, which is being successfully implemented as a public-private partnership between government, business, and scientists in several countries including Canada, Germany, the Netherlands, and New Zealand.  Providing technical assistance to those SROs that prove capable of assuming self-regulatory functions.

Farm animal iniƟaƟve (dairy and meat) ARDS completed an assessment of capacity and potential for a self-governance role of several agricultural business associations and NGOs in the dairy and meat value chains.

The assessment was largely based on previous studies and enhanced with current primary data collected from the organizations that were assessed.ARDS then determined which organizations are best fit to serve as SROs in partnership with government and value chain businesses based on their capacity and willingness to perform self-regulatory functions; a total of six were selected.

ARDS has begun support to selected organizations in developing guidelines and recommendations for their

members on implementing internal regulations and rules for food safety standards. In addition, ARDS analyzed New Zealand’s agriculture sector self-regulatory model to identify elements that can be applied in Ukraine.

Next steps are to develop agreements between the government, regulatory bodies, and selected potential organizations and identify the regulatory functions to be transferred to the organizations, as well as to work with the Ministry of Economic Development and Trade to improve and submit the framework law “On Selfregulatory organizations.”

Phyto-sanitary regulaƟons (fruit and vegetable) As with the meat and dairy value chains,ARDS assessed agricultural business associations and NGOs in the fruit and vegetable value chain to determine which would best serve the value chain as an SRO. The assessment found that fruit and vegetable sector organizations do

not have sufficient capacity currently to perform selfregulatory functions. Thus, initial efforts will focus on strengthening capacities of potential fruit and vegetable SROs through self-governance and institutional capacity development training and technical assistance.

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2 Enhancing Value Chains and Supporting Functions

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Enhancing Value Chains and Supporting Functions

Enhancing Value Chains and Supporting Functions ARDS targets four key value chains to improve the agricultural market system and opportunities for rural households. ARDS works to integrate Ukraine’s rural farm households, small and medium farm enterprises, and rural non-farm enterprises into these value chains for improved rural livelihoods and economic development.

Embracing the US Government Global Food Security Strategy’s Guidance Market Systems and Value Chain Programming, ARDS adopts an inclusive market systems approach that uses value chain principles in the meat, dairy, fruit, and vegetable value chains, while aligning value chain supporting functions and the enabling environment.

This approach relies on facilitation of value chain actors, including the private sector, individual households, national and local government, civil society, and

academia. ARDS only undertakes “light touch” efforts that facilitate sustainable market development and leverage market actor relationships without directly intervening in value or individual supply chains. Inherent in this approach is an emphasis on developing Ukrainian capacity to act on opportunities, respond effectively to shocks and stresses, and solve their own problems.

ARDS also addresses systemic and supporting function constraints that if removed can bring growth in multiple value chains, including input supply systems for dairy and beef cattle production and for fruit and vegetables, market information services for fruit and vegetables, and financial services and logistics for all value chains. Finally, challenges, successes, and learning under this area inform efforts to improve ARDS initiatives to improve rules and regulations.

Fruit Value Chain

Fruit Value Chain

Estimates are that 20 to 30 percent of fruit production is lost in the postharvest period in addition to the estimated 10 percent lost in production. Of the fruit that does make it to market, it lacks traceability and tends to have low marketing appeal.

To remedy the situation, ARDS works with the key value chain actors to help family farms and small and medium fruit farm enterprises to understand market requirements and be willing to:  Control fertilizer usage based on new production innovations and technologies  Ensure proper pesticide controls  Apply improved postharvest handling practices for fresh fruit and fruit to be semi- and fully processed, depending on the supply chain demands

 Put into place improved storage and packaging  Apply good farm management business practices With ARDS support, bigger value chain actors engage with family farms and small fruit farm enterprises, investing in win-win relationships that build trust and sustainable market linkages, e.g. fruit buyers and processors explore new business models for improved supply chain functioning, such as postharvest fruit processing centers. These efforts create added value so that small and medium farming enterprises meet market requirements and receive higher prices – in turn “tighter” relationships among value chain actors, expanded markets, consistent high-quality production output, and higher revenues along the entire fruit value chain.

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Enhancing Value Chains and Supporting Functions ProducƟon modernizaƟon improves enƟre apple value chain Kolosok (Zakarpattya Oblast), a small apple-processing business, used to produce unclarified apple concentrate and export the semifinished product to German enterprises, who in turn lightened the concentrate and sold it with greater added value. In 2017, the company purchased equipment for clarifying (filtering) apple juice concentrate, with co-investment from the ARDS project. The coinvestment is targeted on improving ARDS grantee Kolosok installed new high-tech equipment to produce cleared apple concentrate, the value chain input supply for the increasing the company’s production capacity and expanding the supply chain for apples, with core processing player in the region. more than 4,500 private households involved The new clarification equipment enables Kolosok to produce filtered apple juice concentrate, a final product with added value that opens new markets for the enterprise. More significantly, improved operations and increased production capacity means the company buys more apples from rural farms and families.

Over 4,500 local households and farms now have access to an additional apple sales market for primarily nonstandard apples, and a higher competitive price for their product. Growing demand for apple raw materials also

encourages Kolosok’s local buying agents to broaden their networks of suppliers and increase the volume of apples purchased. Rural households will be able to plan and invest in their orchards because they know that they have a steady and growing market through Kolosok.

Kolosok is also helping with implementation of GLOBAL G.A.P. safety standards. Strict requirements for primary product quality will facilitate the introduction of international standards throughout the supply chain.

“Now we started thinking about increasing our orchard’s yields. This will give us more apples, and we are planting more trees in our orchard because we have a market. Farmers and private households will be able to plan and invest in their orchards as they have a steady and growing sales channel through the Kolosok factory.”

Oleh Kotenskyi, Director, LLC Yabluko, small farm

Fruit Value Chain Berry processing company stimulates local economy and improves product quality Photo: ARDS Project

In 2017, Ukrainian Berry LLC (Zhytomyr Oblast) bought new equipment to sort, freeze, and store berries, with the co-investment from ARDS. The new equipment enables Ukrainian Berry to freeze berries and extend their storage for months. The company can now expand operations, export to international markets, and avoid seasonal price fluctuations in the fresh berry market.

With the new equipment purchased through the investment project, Ukrainian Berry will provide a market for nearby households and small farms to sell fresh berries, thus stimulating their development and increasing incomes. For example, growing berries is five times more

profitable than growing potatoes and those households or small farms growing only potatoes, who are willing to grow raspberries on at least 0.2 hectares of their land plots, can increase their income based on a reliable market with Ukrainian Berry.

Even more significant, the new facility helps the enterprise to create a point of purchase for raw berry materials from households and small farms nearby, and thus stimulate their development. Next season, Ukrainian Berry will provide extension services to ensure berry growers have the latest information on varieties and technologies for growing, storing, and transporting berries to ensure the best prices.

Ukrainian Berry LLC and ARDS co-invested in purchasing equipment to sort, freeze, and store berries

“This project responds to different issues, both economic and social. First, it allows us to freeze our product and export it to EU countries.We created 25 additional jobs for people from the village where the company operates. The construction of this facility enables us to support regional raspberry producers in terms of buying their crops.

We estimate that during the next season, about 100 families will be able to sell their product to our enterprise, the only company within a 100-km radius able to buy such a large quantity of their product and process it.

As a processing company, we must control the quality of the raw material, not even at the stage of buying raw berries, but at the stage of berry cultivation. Therefore, it is in our interest to provide advisory services to our suppliers.�

About 100 households will be able to sell their products to Ukrainian Berry

Taras Bashtannyk, Director, Ukrainian Berry LLC

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Enhancing Value Chains and Supporting Functions Modern berry sorƟng facility opens export markets and expands farmer suppliers’ operaƟons

Over the next three years, Galfrost will engage more than 1,000 private households and farmers as berry suppliers into its supply chain

Western Ukraine has perfect conditions for growing fruits and berries, the region abounds with apples and plums orchards, forests full of blackberries, and cultivated strawberries and raspberries in the fields. Galfrost LLC (Lviv Oblast), an agricultural enterprise founded in 2007, decided to streamline its berry-processing business. Over the past 10 years, the enterprise successfully developed its operations for the local market, and started to produce frozen and sublimated (freeze-dried) products for export markets, as well. Now Galfrost owns a 5,000 m² facility and three storage warehouses, with a total capacity of 1,000 tons.

Growing demand for frozen and sublimated berries gave the company the confidence to start looking for modern, innovative technologies for berry cleaning and sorting, to help grow production and sales of semifinished products by increasing berry-sorting efficiency, and raw material quality and volume.

Galfrost purchased a state-of-the-art optical laser berry sorting facility with co-ivestment from ARDS.

The new equipment was installed in October 2017, planned in parallel with the expansion of the factory’s berry supply input, having contracted with local farms which planted an additional 4 hectares of raspberries in spring 2017.

Galfrost quickly demonstrated positive results from the new machinery, processing an additional 28 tons of raspberries harvested from new fields, significantly increasing output of freeze-dried product in 2017.

Galfrost landed a ground-breaking agreement at the 2017 Asia Fruit Logistica, Asia’s leading international trade show for fruit and vegetables. Galfrost will supply Ukraine’s first trial export to the Oceania region, a batch of freeze-dried raspberries to an Australian buyer. The Ukraine booth at the September 2017 trade show was supported by ARDS. Galfrost’s biggest success, though, is the expansion of its network of small farmer-suppliers. Over the next three years, Galfrost will engage more than 1,000 private households and farmers as berry suppliers into its supply chain. These rural households will also be able to plan and invest in their berry farms because they know that they have a steady and growing market through Galfrost.

“The co-investment with ARDS creates new opportunities down the value chain, meaning we will provide better quality products to our clients. At the same time, the farmers and private households at the beginning of the chain will grow and harvest more berries and supply them to us. All market players will benefit, starting from growing farms to enterprises that will process more fruits and berries.”

Maxym Belozyorov, Deputy Director, Galfrost LLC

Fruit Value Chain Agrarian company helps displaced people return to normal life Founded in 2000, Sady Donbasu LLC used to be the largest apple producer in Donetsk Oblast. In 2014, as the result of military actions, the company’s facilities in the village of Spartak were destroyed, and to this day there is no access to the site. Aiming to preserve its orchards and jobs, the company moved from the nongovernment controlled territories, and is jumpstarting the apple industry in the government-controlled area of Donetsk Oblast.

In 2017, Sady Donbasu established a post-harvest apple processing and storage center, with coinvestment from the ARDS project. The center facilitates international quality and safety standards, value-added production, and market expansion. It also provides jobs for the company’s employees, 90 percent of whom are internally displaced persons from Donetsk. Sady Donbasu co-invested with ARDS to purchase post-harvest apple processing and storage equipment.

The new equipment enables the business to maintain good quality and comply with product packaging standards, which has already allowed the company to increase fruit sales (primarily apples) to retail networks by 15% compared to 2016.

Serhii Tkachuk, IDP working for Sady Donbasu: The company pays a good salary, on time. I am satisfied.”

“I moved from Krasnohorovka, where the ATO zone is, the warfare. Last summer, in July, my partner and I got jobs at Sady Donbasu. We collected sweet cherries in their orchard.

There is an opportunity to earn money here, to feed the family, and to provide necessary things for our children. It was a bit difficult in the very beginning, when I was learning how to do my job, but you can learn everything. Now I am a part of this team.”

“Our whole life depends on this enterprise. It provides a shuttlebus for its workers, and even transports their children to the kindergarten. It pays good salaries to the employees, and covers their basic needs. The company cleans the roads in winter, helps the community in repairing water pipes and electrical systems, and even in emergencies, the company provides the community with tractors, transportation, and other support.”

Natalia Zagorulko, IDP working for Sady Donbasu

Yevhen Maslov, Head of Illinivske village

Despite all the difficulties, Sady Donbasu has survived and continues to develop, improving the wellbeing of the entire rural community where the company operates.

Now, moving from humanitarian aid to productive economic activities, agriculture is the sector that recovers the fastest, providing food security and also new life for people affected by the conflict.

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Enhancing Value Chains and Supporting Functions New model for for fruit supply chain from Kherson to large trader networks

In August 2017, a barge of watermelons moved from Kherson to Kyiv to test a new supply chain model, developed by ARDS

ARDS supported watermelon supply chain actors come together to address shipping costs, perishability, and packaging standards, through design of a new model for supplying watermelon from Kherson Oblast to large buyers using riverways. To test the model, ARDS partners, Kyiv-based Sil’po retail supermarket chain; Nibulon, a large agribusiness operating a significant cargo fleet on the Dnipro River; and 28 small and medium fruit farm enterprises, organized a test shipment from

Kherson by barge to a Nibulon terminal near Kyiv. The pilot tested not only potential improvements in the watermelon supply chain, but eventually other fruit and vegetable supply chains as well. It is expected that this endeavor will help small and medium fruit farming enterprises in the region build a sales channel for their products, reduce logistics costs (the pilot showed a 25 percent reduction), and improve the quality of fruit and vegetables in Ukraine’s retail market networks.

Vegetable Value Chain

Vegetable Value Chain

Ukraine produced roughly 9.8 million tons of vegetables in 2014. Like Ukraine’s fruit sector, there is potential for vegetable sector growth due to high global demand from growing consumption of fresh and prepared vegetables spurred in part by rising consumer awareness of healthy lifestyles and the benefits of vegetables. In the domestic market, deflation of the Ukrainian hryvnia is pushing national retailers and food processors to reduce vegetable imports and source fresh and processed vegetables in Ukraine. Thus, the domestic market also presents opportunities for producers and processors if they improve production, postharvest handling, and marketing given that Ukrainian vegetables in the local market tend to lack traceability and market appeal.

It is estimated that 50 to 60 percent of vegetable production is lost in the postharvest period, double that of fruit, in addition to the estimated 10 percent lost in production. At family farms and small and medium vegetable farm enterprises, proper fertilizer use and pesticide controls are limited and there are acute postharvest and packaging needs.

To remedy the situation, family farms and small and medium vegetable farm enterprises, with buyer support, need to understand market requirements and be willing to:

 Increase appropriate fertilizer usage  Ensure proper pesticide controls  Apply improved postharvest handling practices that create added value for fresh vegetables and vegetables to be semi- and fully processed, depending on the supply chain demands  Put into place improved storage and packaging that create added value  Apply good farm management business practices Other value chain actors must be willing to engage with family farms and small and medium vegetable farm enterprises, investing in win-win relationships that build trust and sustainable market linkages. For example, vegetable buyers and processors must be willing to explore new business models, such as postharvest processing centers. Collectively these efforts create added value so that family farms and small and medium vegetable farm enterprises meet market requirements and receive higher prices – bringing “tighter” relationships, expanded markets, and higher sales along the entire vegetable value chain.

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Enhancing Value Chains and Supporting Functions Vinnytsya factory helps rural farms turn weeds into profit

Used to eradicating horseradish from their fields, now rural residents can supplement their income by selling it.

Ukrainian farmers treat horseradish like a weed, and take great effort to eradicate it from their cultivated fields.

Meanwhile, there is large-scale commercial production of horseradish in the USA and Germany, for example.

Developing the market locally would help Ukrainians turn a nuisance into a profitable crop.

In 2017, ARDS co-invested with Vinnytsia Food and Gustatory Factory (Vinnytsia Oblast) in re-equipping

its bottling and packaging line for sauces and spices.The company, established in 1999, produces horticulture preservatives, including the traditional Ukrainian condiment horseradish with beetroot.

With the new line, the factory has increased productivity, expanded markets, improved working conditions, and decreased energy consumption. It also now purchases much more horseradish and beetroot from small households and farmers in central and western Ukraine.

Every day, village collectors buy 2.5 – 3 tons of horseradish from private households in Vinnytsya, Khmelnitsky, Lviv, Ternopil, Ivano-Frankivsk, and Zakarpattya Oblasts.

The Vinnytsya factory also trains farmers on how to improve raw material production quality and introduce safety standards. At least five farms and more than 1,500 households will benefit from ARDS support to the factory, having a guaranteed market for their crop, increasing production volumes, and introducing new technologies and international safety requirements.

“Now we buy raw materials from households in Vinnytsya, Ternopil, Khmelnitsky, Ivano-Frankivsk, Zakarpattya, and Lviv Oblasts – by selling us more, these people will be able to earn more for themselves. Additionally, we are going to persuade farmers to grow horseradish for us, as currently there are almost no farms growing horseradish.This means that they will use modern growing technologies, and then, learn and implement GLOBAL G.A.P. standards.”

Liubov Artemivna, Director,Vinnytsya Food and Gustatory Factory

“We have lots of horseradish growing in our garden. We did not know where to sell it until we learned about the horseradish collector’s truck. Our family started harvesting horseradish. It has become a good source of additional earnings for us.”

Tamara Bondar, Ivcha village,Vinnytsya Oblast

Vegetable Value Chain Small potato packages bring big results Like most Ukrainian agricultural SMEs, Agrico Ukraine (Semypolky, Kyiv Oblast) struggled with old facilities left over from Soviet collective farms. Mykola Gordiychuk, who founded Agrico in 2007, identified this bottleneck as the biggest barrier for his business development.

In September 2017, Agrico with ARDS co-investment purchased new weighing and packaging equipment, which allows the company and seven other smaller potato farm enterprises produce smaller packages of potatoes (2.5-5 kg instead of 50 kg) that are preferable for selling through retail markets. Additionally, ARDS

helped embed international quality and safety standards for potato production at supplier farms, Global G.A.P. for production, and HACCP for pre-sale handling. An information campaign raised awareness about cultivation techniques, varieties, pre-sale handling, and sales.

Agrico creates added value through the introduction of small packing and branding of its products, mainly targeted for Modern Trade sales channel.Agrico is proud to support another seven small and medium potato farm enterprises that are expected to benefit from a 30 percent increase in potato sales to retail chains and 35 percent increase in prices for small packages.

In partnership with Syngenta, ARDS organized a master-class on growing potato: “Innovations for potato business”

“Now, with the ARDS grant, we pack potato in smaller packages, which makes it easier for our farmers to find new markets and thus sell more of their products.

However, our partnership with ARDS goes far beyond the grant. You know, when some our partners see how we work, they say:” You work as in Europe”. And we answer: “Not as in Europe – we work in a way that everybody should work, and you have to work the same way.”

Mykola Gordiychuk, the founder and director of Agrico Ukraine

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Enhancing Value Chains and Supporting Functions

Dairy Value Chain Photo: Association of Milk Producers

Association of Milk Producers, main ARDS partner in milk value chain, has 130 members and currently produces 17 percent of Ukraine’s milk

Milk production in Ukraine has decreased by 15 percent since 2007 due to a declining dairy cattle population.

Why is this happening? Because small family dairy farms and private rural households with dairy cows do not invest in technology improvement and produce low quality milk of which 88 percent is “second grade�.

Second grade milk is sold at low prices and sales revenues do not cover dairy operating expenses, resulting in fewer small dairy farms, household dairy enterprises, and overall dairy cow population.

For small farms and private rural households who remain in milk production, cow milk productivity remains relatively low in comparison to milk producers in other

parts of Europe because of the failure to ensure dairy cattle welfare and feed ration regimens. Ukraine has not yet adopted a feed quality control system, contributing to low dairy cow productivity and unprofitable milk production.

In addition, the current market structure for milk production is fragmented; 75 percent of milk is produced by private rural households who produce relatively small amount.The value chain is missing a middle market player who can serve as the link between rural households and larger processors by providing milk collection and preprocessing services.

Dairy Value Chain There is also opportunity to introduce dairy value chain innovations, including sector self-regulatory mechanisms and a milk collection and pre-processing intermediary business model. This lack of value chain intermediaries is a critical systemic issue for the sector. Processors must be willing to implement safety standards and link with intermediaries that can catalyze improvement in raw product supplies. Milk producers themselves must take more responsibility for animal welfare and change attitudes about their farm animals, seeing them as “animals” as opposed to “commodities” and prioritizing proper feeding and vaccination. Finally, patience is required across the board as investments in the dairy sector can take six to eight years for cost recovery.

ARDS aims to bring positive change to milk production and the dairy value chain by supporting stakeholders

introduce and maintain standards for cow breeding fodder guidance, animal health monitoring, and raw milk quality monitoring. ARDS is cooperating with the Association of Milk Producers (AMP), which has 130 members and currently produces 17 percent of Ukraine’s milk. ARDS aims to foster behavior and process changes among AMP members and through their example scale it out to other players. Specifically, ARDS is supporting raw milk quality monitoring through development of a laboratory and introduction of milk collector/pre-processor enterprises to dairy supply chains.This new intermediary role would be responsible for testing and collection of raw material from private households, pre-processing, and supplying it in large batches to dairy processors.

Modern milk laboratory restores the dairy sector in Ukraine Dairy production in Ukraine has declined by 15 percent from 2007 to 2016, down 10.4 million tons, due in large part to the decreasing dairy cattle population in the industrial sector over the last decade. The decline

was driven by a more than 30 percent drop in milk exports resulting from the loss of powerful markets in Russia and Kazakhstan, as well as the non-government controlled area of Ukraine.

“The Association supported the idea of creating such a laboratory. We began to look for financial resources within our structure, but it was not enough. If we acted by ourselves only, the implementation of our plans would take long time. ARDS helped us to accelerate this process. Moreover, in addition to funding, we could get the project’s consultancy support in order to properly choose the equipment, to find experienced experts able to help us. Purchasing equipment is just a half of the process, and purchasing right equipment – sounds much better, however the main idea is to training people accordingly.”

Lyubomyr Dykun, Vide-President Association of Milk Producers

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Enhancing Value Chains and Supporting Functions

The milk laboratory, a co-investment by ARDS and AMP targets more than 4,000 private households and 150 small farms the Association of Milk Producers cooperates with, as well as others in the vicinity of the laboratory

Low-quality milk sold at low prices further exacerbates the challenges in the dairy sector, as low revenue does not compensate for operating expenses.

The lack of feed quality controls and no balanced feed rations for cattle result in low productivity and unprofitable milk production, and failures to ensure cattle welfare result in animal diseases. This leads to further reductions in the dairy cattle population, and the destructive cycle continues.

The Association of Milk Producers (AMP), a voluntary non-governmental non-profit organization of agricultural producers, took the lead in solving these system issues in the dairy value chain. AMP initiated the creation of a modern laboratory to provide services to AMP’s dairy farm members (150 farms), as well as to private households in 20 regions of Ukraine.

In 2017, AMP with co-investment from ARDS purchased equipment for a modern milk laboratory.

The new laboratory will be used to conduct physical and chemical tests on raw milk, enabling farmers to monitor animal health and adjust feeding rations accordingly, thus facilitating higher milk productivity with optimal pricing. The laboratory is unique to Ukraine because it can test not only milk quality, but also identify cow diseases that affect milk quality.

One hundred and fifty AMP members, who produce 17 percent of milk in Ukraine, have been introduced to international quality and safety systems for milk production; 4,000 private household dairy producers will benefit from ARDS support, supplying better quality raw material to milk processors and earning more profits from selling their product.

“With new laboratory equipment, we will monitor fat and protein in milk so that we can better adjust the cow feeding rations.

We expect milk productivity to grow by 10-20 percent, and to increase the productive lifespan of cattle. Farmers will earn more profit, and will invest in technical modernization.

Additionally, we will monitor mastitis in dairy cattle through tests, and provide the proper antibiotics for treatment. Mastitis is a very common disease, which reduces herds by 20 percent or more. Timely prevention provides good performance, we are talking about serious money. Regular laboratory research is carried out all over the world. Now Ukrainian farmers have this opportunity, too.�

Lyubomyr Dykun, Vice President, Association of Milk Producers

Dairy Value Chain Quality systems for raw milk established ARDS co-investment in the first of its kind modern milk laboratory in the Cherkassy Oblast enables domestic milk producers to comply with GLOBAL G.A.P. and other international standards for raw milk quality and safety.

Additionally, ARDS has developed milk safety control guidelines, which are being piloted by four AMP member processors. Guidelines detail GLOBAL G.A.P. norms to be implemented and the list of documents, forms, and records that must be maintained depending on the certification that an enterprise chooses. Upon completion of the pilot, guidelines will be revised as needed and AMP will roll them out to its members.

This effort is helping catalyze development of AMP as a dairy sector self-regulatory organization.

The milk-testing laboratory enables producers to monitor animal health and respond to undesirable changes in a timely manner, adjust feeding rations, optimize costs and sales, and increase cost efficiency and competitiveness of Ukrainian cattle breeding

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Enhancing Value Chains and Supporting Functions

Meat Value Chain The low purchasing power of the Ukrainian population contributes to low demand for processed pork and beef and growing demand for less expensive poultry.

Forty six percent of meat consumed by Ukrainians is chicken, followed by pork at 38 percent and beef at 15 percent.Total meat consumption is 51.4 kg per capita (2016) compared to the EU average of 69.2 kg per capita (OECD, 2016).

Beef. Beef production has declined by 12 percent since 2010. Despite this decrease, Ukraine still exports 45,000 tons of beef, the equivalent of 100,000 calves.

Existing fiscal policy and the national subsidy system contribute to dissolution of a transparent beef market. Each year, up to one million calves are illegally slaughtered between the prohibited age of 3 to 21 days.

This occurs because:

 The cost of milk required to raise a calf until 21 days of age is not offset by sale of the calf; it is more profitable to slaughter the calf and sell the milk instead  Due to current fiscal policy, beef producers are not allowed to officially purchase calves from private households and as such cannot obtain documents proving purchase of the calves; without official documentation, beef producers cannot legally feed the calves  When a calf is five days old, it must be recorded in the state register by the household or enterprise, triggering government control of the animal, including taxes when the animal is sold  When a household officially sells a calf, it must pay a tax and risks losing utilities subsidiaries  When selling a calf for illegal slaughter, a household discloses no tax liability or official income and hence households continue to receive subsidies Other issues in the beef market include:  Lack of safety controls for cattle breeding  Lack of slaughterhouse and beef pre-sale preparation infrastructure  An epidemic of cattle modular dermatitis, causing significant animal health and welfare issues; importers prefer to purchase live cattle, not sides of beef where the diseased hide is removed, and ship by sea, usually to Asia  Lack of port infrastructure for shipping live cattle except in Mykolaiv, resulting in a monopoly and subsequent opportunities for corruption  Complexities of permit documentation for animal exports and the need for transparent, efficient customs regulation of animal exports

Meat Value Chain Pork. Ukraine is currently facing a swine flu epidemic.

Pork exports are prohibited and the domestic pork market is under the threat. Since 2015, pork production has decreased rapidly after a steady rise.

The sector is extremely challenging because of swine flu and cattle modular dermatitis, as well as the environmental risks posed by how meat is processed.

There are strict standards for handling slaughterhouse process waste, but most small and medium-sized meat processing enterprises do not yet follow the new regulations. To tackle the needed safety control system based on EU standards, pork and beef business associations must provide safety standards guidance to their members and have capacity for future designated regulatory functions. Private households, cattle farm enterprises, and processors must understand the value of implementing safety standards. Finally, government, must be open to partnering with sector associations to serve as sector self-regulatory organizations. In addition, as described above, there are a range of policy and regulatory constraints that disincentivize private households, farm enterprises, and small and medium enterprises processors to produce meat and meat products which must be tackled. For example, to mitigate threats to the meat production value chain through the decreasing number of cattle, producers must have alternatives for killing newborn cattle, such as breeding centers. Breeding centers could serve as a new value chain actor that provides a link between private

households and farm enterprises producing beef cattle and small and medium sized meat processors who buy meat.

ARDS cooperates with sector associations of meat producers, lead processing companies, traders, and retail chains, as well as the Ministry of Agrarian Policy and Food (MAPF). Ultimately, ARDS expects that its meat value chain partners will:  Implement international safety control and traceability systems for animal feeding and slaughter  Eliminate the shadow cattle market — the slaughtering and sales of calves without registration  Increase incomes of the rural private households and small cattle farm enterprises as key suppliers of young cattle  Expand local markets and exports

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Enhancing Value Chains and Supporting Functions Beef producĆ&#x;on for local and export markets Due to environmental risks from meat processing, there are new strict waste handling standards that are not yet implemented by most SME processors. This has made technical assistance and investment from the ARDS Strategic Investment Fund nearly impossible. Luckily,

based on discussions with two forward-looking SMEs, ARDS is ready to support two meat processing SMEs in Bilourakhyne (Luhansk Region) and Boryspil (Kyiv Region) as they finalize preparing their facilities for project support eligibility by meeting waste handling standards.

Safety standards in meat producĆ&#x;on and processing ARDS supported the Pig Producers Association develop and pilot Guidelines on Compliance with Food Safety Legislation at Facilities for Growing, Keeping, Slaughtering Pigs, and Cutting Meat. The guidelines were piloted at four association facilities, two facilities for keeping and breeding pigs and two facilities for slaughtering and meat cutting. Once the pilots were complete, the Association started sharing the guidelines for further implementation by its member SME pork processors.

ARDS has tracked the issue of swine flu in Ukraine.

At the request of the government, ARDS organized a training on Fighting and Preventing the Emergence of Plague of Pigs: Coordinated Actions of Authorities and Pig Producers and Industry Associations for MAPF employees involving best national veterinaries and experts.

Supporting Functions

Supporting Functions Ukraine’s fruit and vegetables, dairy, and meat householdlevel farmers and small and medium farm enterprises face difficulties meeting quality standards, conducting proper postharvest handling, and accessing proper storage, transport, and aggregation services that link them to supply chains. This hinders their ability to make a profit, keeping them in poverty. ARDS works along the value chains to help farm households and small and medium farm enterprises obtain fair prices for their produce and access local and global markets. But, to support Ukraine’s value chains as an engine for rural economic growth, it takes more than intervening with core value chain actors and the enabling environment in which they work. In a market system, supporting functions are also required to sustain core value chain functions. They include information, infrastructure, skills and technology, and a range of services for value chain actors, e.g., financial, inputs, and postharvest.

ARDS supports partner firms integrate farmers and farm enterprises into their supply chains. For supply chains – and the overall value chain – to be successful, supporting function providers need to be in place.To play these roles, entities need awareness about business opportunities and new skills. For example, household farms and farm enterprises need financing to invest in improved inputs and technologies, but banks need to know what is in it for them – will they make money? When banks know that farmer cooperatives or rural farm enterprises have a ready market and formal linkages with a buyer, they are more likely to develop appropriate financial products to meet producer needs. And when business-minded cooperatives, farm enterprises, and agricultural firms understand how credit works, credit tools, business plans, financial modeling, and loan applications, they are readied for financing. Similar awareness is needed in inputs dealer-producer relationships: who can do what

for whom and how? Hence support to both the supply and demand sides of the supporting functions equation is necessary.

Currently, supporting functions in the targeted value chains are weak or non-existent.To remedy the situation, firms must identify needed supply chains upgrades and invest in and/or partner with others who recognize the business need and opportunity, invest resources, and provide the supporting functions. For example, fruit processors must be willing to explore new business models, such as intermediary fruit collectors linked to postharvest fruit processing centers closer to farmers.

This provides producers with a ready market in proximity to their farms, clarity on market requirements, and higher prices that incentivize them to meet standards and invest in their farms. The resulting behavior and process changes bring “tighter” relationships in supply chains for increased volumes, markets, and sales.

Working across the targeted value chains,ARDS partners identify supporting function needs and appropriate business, public, and public-private partnership models to meet those needs. Based on ARDS’ first year of analysis, discussions, and partner needs, focus is on three areas of supporting functions that require upgrading and support:  Market infrastructure: technologies for new products and markets; exhibitions and B2B events to identify new markets; strengthened cooperatives; and cluster business models for aggregation and other supplier services  Technology and infrastructure: food safety standards integration in value and supply chains and improved irrigation system management  Specialized services: financial, market information, and soil testing services

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Enhancing Value Chains and Supporting Functions Market infrastructure # 15 Number of farmers and others who have applied improved technologies or management practices with USG assistance

125 125

farmer supplier operations; Kirovograd Dairy Cooperative’s efforts to improve its pasteurized milk processing capacity currently at 25 percent to avoid having to sell 75 percent of its raw product to larger processors at low prices; and Agrico Ukraine’s new potato packaging line that produces 2.5 to 5 kg packages for the firm, as well as seven smaller potato farm enterprises.

New markets for Donetsk and Luhansk.

Plan FY 2017

FY 2017

Figure 6: SMEs applied new technologies

New technologies for new products and markets.  ARDS helped introduce new technologies oriented to new and expanding markets by training 184 small and medium farm enterprises in drip irrigation and crop protection for sweet cherries, blueberries, and strawberries; 29 in new seed varieties and crop protection for tomato, bell pepper and cabbage; and 49 in sweet cherry production, harvesting, and pre-sale handling. In addition, ARDS grantees represent risk-taking, forwardlooking firms ready to take on new technologies and expand their production and markets. This includes the Association of Milk Producers’ new milk laboratory aimed at improving farm-level milk quality and livestock productivity for household, cooperative, and enterprise suppliers; Galfrost’s state of the art optical laser berry sorting facility that has led to expansion of its farm and small

 In 2017, ARDS conducted a comprehensive study on issues that small and medium farm enterprises face in the Donetsk and Lugansk regions. Using findings, ARDS defined potential small and medium farm enterprises for support – 63 in production and 8 processors. ARDS then developed an action plan for their support in collaboration with local CTCs, MAPF, and the Ministry of Temporarily Occupied Territories and IDPs.  Special attention is on Donetsk and Luhansk given loss of their traditional markets and processor-buyers in Donetsk and Luhansk that are not currently controlled by the government of Ukraine, as well as Russia; loss of sector assets; and increased fuel, transport, inputs, and household products costs. Now moving from humanitarian aid to productive economic activities, agriculture is key. Armed with an action plan, national and local government with ARDS are designing oblast-level programs for agricultural infrastructure investment to help renew value chain activities. ARDS SIF co-investor, Sady Donbasu, which moved from the non-government controlled territories to Donetsk’s Mariinka Rayon is jumpstarting the apple industry.

ARDS plans to provide more grants for cost-shared investment with agricultural enterprises in 2018.

Supporting Functions Trade exhibitions and B2B events.  In May 2017, ARDS facilitated 15 B2B meetings between Ukrainian companies and International Procurement and Logistics (IPL), the largest importer of produce in the United Kingdom and wholly owned by Asda, a United Kingdom-based chain of supermarkets. IPL provided recommendations to four Ukrainian firms on mitigating issues hindering export potential. Two firms are now working with IPL to develop export activities, while a third, Synenko, signed a protocol of intention to export melons and watermelons to the United Kingdom in 2017. A test shipment was completed successfully in August 2017 and Synenko’s owner was invited to London in October 2017 to negotiate further sales.

In addition, in April 2017, 20 fruit and vegetable firms participated in the Export and Sale 2017 Exhibition in Kyiv attended by 250 representatives from 11 countries. Twenty B2B negotiations were held with buyers from Ukraine and the EU.  In September 2017, a delegation of fruit producers and director of the Ukrainian Fruit Growers Association (UkrSadProm) that represents 30 fruit producers showcased their apple and fresh, frozen, and freeze-dried berry products at Asia Fruit Logistica, Asia’s leading international trade show for fruit and vegetables. ARDS rented the booth; produced Ukrainian product catalogues in English and Chinese; and trained the delegation on the Asian market and presentation and negotiation skills. Three days of intensive negotiations yielded significant interest in products from buyers in Australia, China, Hong Kong, India, and the United Arab Emirates, with the delegation gaining information and insights on market demand, standards, prices, shipment times, and packaging to shape future “deals”.

They raised awareness of Ukrainian produce and

# 17 Value (in min UAH) of targeted agricultural commodities exported with USG assistance

95

35.7 Plan FY 2017

FY 2017

Figure 7: SMEs export in mln UAH

made several deals for trial shipments, including apples to India and freeze-dried raspberries to Australia. The key factor in concluding agreements was existence of phytosanitary agreements between countries and a firm’s ability to meet them.

ARDS will follow up with the participants to finetune a program for export promotion with the association.

ARDS-supported Ukrainian booth at Asia Fruit Logistics in Hong Kong

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Enhancing Value Chains and Supporting Functions Producer group capacity development.

ARDS provided training in business and financial management and governance to 25 processor and production cooperatives in tandem with the technical training described above. Targeted cooperative support is also underway, starting with management and technical support to processor cooperative ‘Yvankovetsky Svitanok’ in Kirovograd Oblast. ARDS is supporting Kolosok’s juice filtering facility develop their plan to promote cooperatives among their small farmer suppliers to improve supply chain functioning.

ARDS also works with the National Association of Agricultural Advisory Services of Ukraine and Association of Agricultural Service Cooperatives on legislation and an advocacy campaign to remove constraints to cooperatives in taxation and pasture land administration. ARDS helped partners draft a law that has been registered with Parliament.

Technology and infrastructure Food safety standards integration:  Enterprises. New cluster model aggregators are embedding food safety standards in their work with farmers, signaling not just market standards such as size and color, but also food safety standards. For example, ARDS investment partnerAgrico Ukraine’s new potato packaging center has built in an awareness campaign on GLOBAL G.A.P. production standards. ARDS coinvestor Rozdolne’s modernized frozen fruit and vegetable processing facility integrates International Featured Standards (IFS), European food quality and safety standards, and certification of production with 30 farm enterprises; 100 aggregator entrepreneurs in Kherson, Dnipropetrovsk, Zaporizhya and Mykolaiv Oblasts; and the more than 10,000 households that aggregators and farm enterprises reach.

# 22 Number of agriculture service cooperatives/producer groups providing access to modern technology and new markets for their agricultural SME members

10 10

Plan FY 2017

FY 2017

Figure 8: Cooperatives with access to new technologies

 Business associations. ARDS, in partnership with the Association of Milk Producers, Association of Pig Growers, Association of Potato Producers, and UkrSadProm developed four guiding documents for implementing international food safety standards for milk, meat, potato, and fruit value chains. Compliance with Global G.A.P. is a critical prerequisite for producers to access organized formal domestic and international markets. Hazard analysis and critical control point (HACCP) is a food production, storage, and distribution monitoring system for identification and control of associated health hazards. ARDS has tested the guidelines at 18 small and medium farm enterprises (4 milk, 4 pig production, 6 fruit and berries, and 4 potato).

As a result, the guidelines will be adjusted and prepared for approval by the Ministry of Health and MAPF. Once finalized, they will be transferred to the associations that will build member capacity to comply with the standards.

Supporting Functions  Local markets. In Pochatok, Odessa Oblast, ARDS is supporting the wholesale market design and implement HACCP certification for its facilities.

Because HoReCa (hotel, restaurant, cafes) enterprises forced by law now to buy HACCP-certified products, it is key that wholesale markets not lose this vital client, given that HoReCa enterprises represent roughly 20 percent of the agriculture sector’s market.

If local wholesale markets don’t introduce HACCP standards, HoReCa will switch to supermarkets or other wholesale providers. ARDS has provided expert support in implementing HACCP standards and consulted Pochatok market operators on food safety. In 2017, ARDS trained 36 local farmers and 15 market laboratory and safety control staff.

This initiative will be expanded to six markets across Ukraine in FY18/19 and they will be used as examples for peer learning and behavior change initiatives in the last two years of the project.

USAID Mission Director Susan Kosinski Fritz visits Pochatok Market in Odesa

What is GLOBAL G.A.P.?

Most retailers in today’s markets require certain standards that ensure safe and sustainable agriculture. GLOBAL G.A.P. certification is a highly regarded, reliable standard for demonstrating on-farm food safety and sustainability.

By complying with the GLOBAL G.A.P. Control Points and Compliance Criteria (CPCC), producers can sell their products both locally and globally. GLOBAL G.A.P. certification offers producers a ticket to the global market. The standard is available for crops, livestock, and aquaculture. GLOBAL G.A.P. certification advantages are:  Adds value to products through compliance with a globally recognized standard  Allows enterprises to gain access to new local and global customers, markets, suppliers, and retailers  Reduces exposure to food safety and product safety reputational risks  Improves efficiency of farm processes and management  Provides a GLOBAL G.A.P. Number (GGN) for easy identification and traceability

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Enhancing Value Chains and Supporting Functions ď ą Finance. Understanding that banks do not find the agriculture sector attractive for lending, ARDS provided consultancies to more than 50 SMEs on the advantages and best use of different financial tools for attracting investments into their businesses.

ARDS also prepared a brochure that describes the biggest credit institutions that operate in agricultural sector. As a result of this work, four SMEs applied for and received at total of 16.3 mln UAH in credit from banks. For other interested SMEs, ARDS is developing industry-specific financial models to justify loan amount requests and will continue in FY 2018.

Specialized services # 20 Number of certified local markets

1 1

Plan FY 2017

FY 2017

Figure 9: Certified local markets

Just the Tool for the Job: Financial Models In August 2017, ARDS developed two Excel-based financial models: for a fictitious melon and pumpkin processing plant and Lugansk slaughter house. These models allow calculation of the long- and short-term financing for business operations or expansion. For example, such model was shared with Synenko, a melon and vegetable producer with revenues of more than UAH 30 million. Synenko used the model to develop a financial model for a melon, watermelon, and potato sorting center. The model was then submitted as part of loan applications to financial institutions, as it is an effective business plan and credit application centerpiece and allows firms to model multiple scenarios and substantiate requested loan amounts. # 14 Value of new private sector investment in the agriculture sector or food chain leveraged by U.S. government assistance MIn UAH

# 18 Number of micro, small, and medium enterprises (MSMEs), including farmers, receiving agricultural-related credit as a result of USG assistance

# l9 Value of agricultural and rural loans as a result of USG assistance MIn UAH

61

5 36.5

25

4 54

Plan FY 2017

FY 2017

Plan FY 2017

FY 2017

Plan FY 2017

Figure 10: Supported SMEs with financial tools

FY 2017

Supporting Functions  ARDS is collaborating with the IFC Europe and Central Asia Agri-Finance Project to design and implement new financing tools for producers, such as crop receipts, for apples and potatoes given their ease of storage and long shelf life. The crop receipts instrument, now available in eight Oblasts, has attracted more than $18 million in working capital to agribusinesses producing cereals and other field crops. In addition, in partnership with IFC, ARDS trained 13 fruit, seven vegetable, seven dairy, and one meat small and medium enterprises on traditional bank financing and new financing tools and will provide post-training advice and support in obtaining financing from partner banks, such as Credit Dnipro and ProCredit, and PUM Bank in the future. The cooperation between ARDS partner enterprises and banks will allow IFC to accelerate development and implementation of new tools and financial products to help agribusinesses obtain much-needed financing from banks, as well as from input suppliers and distributors.

Mobile application developers present PROD at agricultural fair

# 16 Number of SME clients receiving improved extension services

150

 Market information. ARDS invested in the development of the new mobile application PROD that provides fruit and vegetable sector enterprises with product market information. Main features are produce purchase and sales advertising; commodity price database; product price comparisons; and rapid direct communication with buyers and sellers. The application was launched in September and as of September 30, more than 75 small and medium farm enterprises are using it. The application is still in testing mode and will be improved based on user feedback. It is available for download from the Apple Store and Google Play.  Soil testing. ARDS is collaborating with Prime Lab Tech (PLT) in Boryspil, Kyiv Oblast, which provides soil and plant analysis services to farmers. The PLT laboratory was established in 2015 with support from USAID. ARDS provided a soil fertility expert from the University of Missouri to participate in PTL’s “Open Doors Day” to promote regular soil quality monitoring and effective and safe agrochemical growth for yield increases. The market for soil testing services is just beginning to develop as farmers do not understand its utility. The Open Day event raised awareness among farmers but more must be done.

77

Plan FY 2017

FY 2017

Figure 11: SMEs received services

Lab specialist in ARDS-supported PLT Lab conducts soil analysis

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ANNEXES

3 ARDS Media clippings FY 2017 ARDS MEL indicators FY 2017

1

2

ARDS Strategic Investment Fund

Asia Fruit Logistica

4

Organic Media Brunch

3

Guidelines for Pig Producers

5

Watermelon Pilot

6

Trainings with MAPF

7

Support for Organic Law

8

Protocol on Intentions with Credit Dnipro Bank

10

Public Information Media-Campaign about Best Practices of Rural Development in Ukraine

9

Public Information Media-Campaign Built Upon Sharing U.S. and European Experience of Rural Development

11

Public Information Media-Campaign Built Upon Signing Protocol on Intentions with 13 Selected CTCs

12

Public Information Media-Campaign on ARDS’ Donetsk and Luhansk and Zaporizhzhia Agrarian Markets Research

15

Village Tourism

13

Round Table on Meat Production and Export

14

16

OTHER

Signing Letter on Intentions with Nibulon, Silpo Food and Pivdennyi Export

60 ]

ARDS Monitoring, Evaluating and Learning (MEL) Indicators FY 2017

ARDS MEL indicators FY 2017 Indicator #4: Number of agricultural enabling environment policies analyzed, consulted on, drafted or revised, approved, and implemented with USG assistance

Actual

Plan

Q1'17 3

23 46

Q4'17 11

Q2'17 13

16 20 5 2 Q3'17 19 Analyzed

Drafted/ Revised

Consulted

Approved

Indicator #6: Number of specific pieces of legislation or implementing regulations proposed, adopted, and/or implemented affecting property rights of the urban and rural poor as a result of USG assistance

Actual

Plan

4

9 3 6

Q4'17 3

1

1

Q3'17 1 Analyzed

Approved

Drafted

Revised

Q2'17 5

ARDS Monitoring, Evaluating and Learning (MEL) Indicators FY 2017

Indicator #9: Share of rural land owners and small farmers who understand the benefits of and support establishment of an agricultural land market in Ukraine Plan FY 2017

Baseline

35%

35%

Actual

Zaporizhizhia Vinnytsia

Cherkasy Chernihiv Chernivtsi

Male 44.32%

Dnipropetrovsk

Uzhhorod 15%

Donetsk Ivano-Frankivsk

Ternopil

Kharkiv Kherson

Sumy Rivne

Khmelnytski

Poltava

Kirovohrad

Odesa Mykolayiv

Kyiv Lviv

Female 55.68%

Luhansk

Indicator #12: Number of NGOs receiving U.S. government assistance engaged in advocacy interventions Actual

23

Plan FY 2017 24

15

1 Anti- raiding in agrosector Q4'16 1

Legislation on dairy products

female 20.83%

Q4'14 4

Q4'13 19

male 79.17% Esri, Garmin, FAO, NOAA | Esri,‌

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ARDS Monitoring, Evaluating and Learning (MEL) Indicators FY 2017 Indicator #14: Value of new private sector investment in the agriculture sector or food chain leveraged by U.S. government assistance Actual

Plan

Vegetables 1M

37M

female 25.22%

25M

male 74.78%

Fruit 36M

Zhytomyr 4M

Kyiv 1M

Uzhgorod 9M

Poltava 23M Esri, HERE, Garmin, FAO, NOAA, USGS | Esri, HE...

Indicator #15: Number of farmers and others who have applied improved technologies or management practices with USG assistance Actual

Actual by Technology type

Plan 125

125

Water Management 1 Soil Fertility 28

Credits 13

Actual by Sex

female 22.4%

male 77.6%

vegetables 19

meat 3

Crop Ge… 36

Livestoc…

26 Disease management 11

Actual by Value chain

dairy 32 Cultural practicies 10

Actual by Region Zhytomyr Cherkasy 6 7 Zaporizhizhia Chernivtsi 11 5 Ivano-Fran…

Vinnytsia 4 10 Kha… 5 Uzhhorod 5 Kherson 12 Su… 6 Poltava Khmelnyt…

3 1 Mykolayiv Kyiv 25 7 Lutsk 2

fruits 71

Esri, HERE, Garmin, FAO, NOAA, USGS | Esri, …

ARDS Monitoring, Evaluating and Learning (MEL) Indicators FY 2017

Indicator #16: Number of MSME clients receiving improved extension services Actual

Plan

150 female 20.78%

77

male 79.22%

Indicator #17: Value of products exported as a result of USG assistance Actual

Plan

95M

EU 0M

Medium 7M

36M Small 29M Belarus 35M

female 35.59%

male 64.41%

Esri, HERE, Garmin, FAO, NOAA, USGS | Esri, ‌

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ARDS Monitoring, Evaluating and Learning (MEL) Indicators FY 2017 Indicator #18: Number of micro, small, and medium enterprises (MSMEs), including farmers, receiving agricultural-related credit as a result of USG assistance Actual

Plan

5

female 25.22%

Vegetables 1

4

Fruit 3 male 74.78%

Zhytomyr 1 Kyiv 1

Poltava 1 Uzhgorod 1 Esri, HERE, Garmin, FAO, NOAA, USGS | Esri, …

Indicator #19: Value of agricultural and rural loans as a result of USG assistance Vegetables 1M 54M 61M Actual

female 25.22%

Plan

male 74.78% fruit 53M

Zhytomyr 4M

Kyiv 1M

Uzhgorod 13M

Poltava 37M

Esri, HERE, Garmin, FAO, NOAA, USGS | Esri, …

ARDS Monitoring, Evaluating and Learning (MEL) Indicators FY 2017

Indicator #20: Number of certified local market

Actual

1

Plan

1 female 37.93%

male 62.07% Esri, HERE, Garmin, FAO, NOAA, USGS | Esri, …

Indicator #22: Number of agriculture service cooperatives/producer groups providing access to modern technology and new markets for their agricultural MSME members Actual

Plan

Actual by Technology type

10 10.0

female 30% Credits

Cultur…

male 70%

Disease ma…

Soil Fertility

Uzhhorod 0.5

Ternopil 3

Poltava 0.5 Odesa 0.5

Dnipropetrovsk 0.5 Kherson 0.5 Khmelnyt…

1

Kyiv 3 Esri, HERE, Garmin, FAO, NOAA, USGS | Esri, …

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ARDS Monitoring, Evaluating and Learning (MEL) Indicators FY 2017

Indicator #24: Number of ARDS-supported public information campaigns with practical information on rural development

Actual

Actual by Quarter

Actual by Media type

Plan 8

TV 1

Digital press 3

Q3'17 2

4 Social med‌ 2 Q4'17 6 Printed press 2

Indicator #25: Percentage of female participants in USG-assisted programs designed to increase access to productive economic resources (assets, credit, income or employment)

Actual by Sex

Plan by Sex

Actual by Sex

female 25.74%

female 174

male 50%

female 50% male 502

male 74.26%

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Acronyms

AMP AVVC CLA CM CPCC CTC DCFTA FY GGN HACCP IDP IFC IFS IPL MAPF NGO PLT RST SME SRO UAC UAL USAID

AssociaƟon of Milk Producers All-Ukrainian AssociaƟon of Villages and Village Councils CollaboraƟng, Learning and AdapƟng Cabinet of Ministers Control Points and Compliance Criteria Consolidated Territorial Community Deep and Comprehensive Free Trade Area Fiscal Year GLOBAL G.A.P. Number Hazard Analysis and CriƟcal Control Point Internally Displaced Person InternaƟonal Financial CorporaƟon InternaƟonal Featured Standards InternaƟonal Procurement and LogisƟcs Ministry of Agrarian Policy and Food Non-governmental OrganizaƟon Prime Lab Tech Reform Support Team Small and Medium Enterprise Self-regulatory OrganizaƟon Ukrainian Agrarian Council Ukrainian Agrarian Lyceum United States Agency for InternaƟonal Development