Ukraine is by far the single biggest supplier of maize for animal feed to the EU and to Ireland. I had never been there before, but the Irish have a presence there. Origin, the agri spin-off from the IAWS Group is the third-largest supplier of agri inputs on the Ukrainian market – they have chosen well. Last week, the Irish Farmers Journal had an opportunity to attend a conference and farm tour, organised by the European Landowners Association.
While Ukrainian news has been dominated by the Russian annexation of Crimea in the east, this large country with 42m heactars of terrific agricultural land and 10% bigger in area than France has seen an explosion of agricultural investment and productivity with more to come.
Between 2010 and 2017, capital investment in Ukrainian agriculture rose almost six-fold and production has almost doubled since 2013.
The Deputy Minister for European Integration Olga Trofimtseva (and even her title conveys a political viewpoint) spoke of the scope for expansion in this extraordinarily competitive country with deep, rich black soil and ready access to the Black Sea ports for the shipment of produce across the world. Minister Trofimtseva also spoke of the appalling effect of the Russian occupation of the country but that is in the past.
With money pouring in from among others the European Investment Bank, we can expect to see Ukraine become an increasingly important world player – the Black Sea is now already recognised as the world reference price for wheat.
The farms
Some of the farms are huge – the one we visited was 54,000ha or over 125,000ac. The farming enterprise was owned by a Swedish family but the land was owned by 18,000 landowners who owned an average of about 3ha (7.5-8ac). The land was rented from them and was formerly part of the huge Russian-style collective farms. Ownership was established on the basis of the old family and official documentation that was still in existence after the fall of the Soviet Union. The rent paid by the Swedish farming company varied from US$30/ha to a peak of US$200/ha or about €70/ac for the best-quality and best-located land. To cope with peak demand, the farm rents in combines at a cost of US$45 (€40)/ha harvested.
At this stage, there is no free market in land. Ukraine, as a non-EU member, is free to make its own rules but foreigners are free to enter into leases as the Swedish investors have. Seven years would be the normal lease period.
The most profitable crops, according to the Ukrainian chief executive of the company, are maize and soya. Maize this year yielded 10-11t/ha and he sold it at a price of US$196/t or €170/t ex-store.
Following on from that is soya and sunflower and some way back is winter wheat, where heat and spring/summer moisture deficits mean that average yields are around 2-2.5t/ac (5-6t/ha).
While there are in effect no government aids to agriculture, neither are there any real taxes. There is a flat land tax of roughly US$5/ha – or little more than €1.50/ac. As a result, there is no need to worry about depreciation allowances or tax incentives – there aren’t any.
As a result, the world and the internet is scoured for the best bargains. This high-horsepower John Deere with its dual wheels (pictured right) was sourced with low hours on the clock in the United States. The farm’s grain cleaning equipment was bought secondhand (but almost unused) from Japan.
Rail infrastructure
Ukraine produces over 65m tonnes of cereals – exporting 15m tonnes of wheat, over 16m tonnes of corn (maize), almost 5m tonnes of barley and 2.5m tonnes of soya.
All the world great grain traders and shippers are in Ukraine with the port of Odessa being the main centre.
There are excellent railway links put in by the Russians but, given the explosion in grain output, it’s not surprising that there is a harvest bulge in grain traffic from the interior to the port with complaints of a shortage of grain wagons and bottlenecks at the port itself, but given these constraints, I was surprised at how reasonable the cost of transporting grain from around Kiev to Odessa (almost 500km away) was US$20-22/t.
This single farm sells its grain in an unusual way. Since coming to the Ukraine, they have invested heavily in grain storage to get over the inevitable harvest time drop in prices. At this stage, they have 250,000t of storage so they are in a position to offer buyers grain ex-store for high-value crops like soya. This year they received US$340/t for on-farm, cleaned, non-GM soya.
Tenders are invited by the farm for approximately 200,000t of maize/corn; 40,000t of soya; 40,000t of wheat and 40,000t of sunflower.
The grain is then railed down to Odessa to meet the quantity and time demands of the buyers.
Theoretically, all crops in Ukraine are meant to be GM-free but the best estimate is that about 70% of the soya is GM. However, as it is relatively easy to test for the presence of GM material, the balance that has emerged is that non-GM maize and soya command a premium of about 10%.
With that enormous size of operation, operating in a country with a reputation for good agriculture but poor governance, a number of factors struck me:
The level of wages – excellent machinery operators were earning approximately US$1,000/month or about €850/month – general operatives about US$600/month.On the 125,000ac, a total of about 1,100 people are employed. It seems an incredible number. Our host reckoned it was probably 400 too many, even with an enterprise that milks 600 cows but, as he put it: “The farms stretch in total over 80km (50 miles). In many small villages we are the only significant employer. If we sacked a large number suddenly, there would be a revolution.”The Ukrainian government is passionately committed to agricultural growth and expansion. At the conference, the former Minister for Agriculture reckoned that they could and will easily double production. He made the point that in their view, EU agriculture was being over-regulated and that EU producers were becoming less competitive.The farm we visited had, not surprisingly for its size, very fully equipped machinery maintenance, spare parts and repair facilities with the capacity to replicate broken bolts and simple components by 3D-printing.There was a huge emphasis on providing detailed training for machinery, sprayer and fertiliser spreader operators during the slack winter season.Was this a typical farm? I presume not but the calibre of its managers and its average return on equity of 20-25% tells a lot of what can be achieved when all the variables are brought together.
Ukraine is by far the single biggest supplier of maize for animal feed to the EU and to Ireland. I had never been there before, but the Irish have a presence there. Origin, the agri spin-off from the IAWS Group is the third-largest supplier of agri inputs on the Ukrainian market – they have chosen well. Last week, the Irish Farmers Journal had an opportunity to attend a conference and farm tour, organised by the European Landowners Association.
While Ukrainian news has been dominated by the Russian annexation of Crimea in the east, this large country with 42m heactars of terrific agricultural land and 10% bigger in area than France has seen an explosion of agricultural investment and productivity with more to come.
Between 2010 and 2017, capital investment in Ukrainian agriculture rose almost six-fold and production has almost doubled since 2013.
The Deputy Minister for European Integration Olga Trofimtseva (and even her title conveys a political viewpoint) spoke of the scope for expansion in this extraordinarily competitive country with deep, rich black soil and ready access to the Black Sea ports for the shipment of produce across the world. Minister Trofimtseva also spoke of the appalling effect of the Russian occupation of the country but that is in the past.
With money pouring in from among others the European Investment Bank, we can expect to see Ukraine become an increasingly important world player – the Black Sea is now already recognised as the world reference price for wheat.
The farms
Some of the farms are huge – the one we visited was 54,000ha or over 125,000ac. The farming enterprise was owned by a Swedish family but the land was owned by 18,000 landowners who owned an average of about 3ha (7.5-8ac). The land was rented from them and was formerly part of the huge Russian-style collective farms. Ownership was established on the basis of the old family and official documentation that was still in existence after the fall of the Soviet Union. The rent paid by the Swedish farming company varied from US$30/ha to a peak of US$200/ha or about €70/ac for the best-quality and best-located land. To cope with peak demand, the farm rents in combines at a cost of US$45 (€40)/ha harvested.
At this stage, there is no free market in land. Ukraine, as a non-EU member, is free to make its own rules but foreigners are free to enter into leases as the Swedish investors have. Seven years would be the normal lease period.
The most profitable crops, according to the Ukrainian chief executive of the company, are maize and soya. Maize this year yielded 10-11t/ha and he sold it at a price of US$196/t or €170/t ex-store.
Following on from that is soya and sunflower and some way back is winter wheat, where heat and spring/summer moisture deficits mean that average yields are around 2-2.5t/ac (5-6t/ha).
While there are in effect no government aids to agriculture, neither are there any real taxes. There is a flat land tax of roughly US$5/ha – or little more than €1.50/ac. As a result, there is no need to worry about depreciation allowances or tax incentives – there aren’t any.
As a result, the world and the internet is scoured for the best bargains. This high-horsepower John Deere with its dual wheels (pictured right) was sourced with low hours on the clock in the United States. The farm’s grain cleaning equipment was bought secondhand (but almost unused) from Japan.
Rail infrastructure
Ukraine produces over 65m tonnes of cereals – exporting 15m tonnes of wheat, over 16m tonnes of corn (maize), almost 5m tonnes of barley and 2.5m tonnes of soya.
All the world great grain traders and shippers are in Ukraine with the port of Odessa being the main centre.
There are excellent railway links put in by the Russians but, given the explosion in grain output, it’s not surprising that there is a harvest bulge in grain traffic from the interior to the port with complaints of a shortage of grain wagons and bottlenecks at the port itself, but given these constraints, I was surprised at how reasonable the cost of transporting grain from around Kiev to Odessa (almost 500km away) was US$20-22/t.
This single farm sells its grain in an unusual way. Since coming to the Ukraine, they have invested heavily in grain storage to get over the inevitable harvest time drop in prices. At this stage, they have 250,000t of storage so they are in a position to offer buyers grain ex-store for high-value crops like soya. This year they received US$340/t for on-farm, cleaned, non-GM soya.
Tenders are invited by the farm for approximately 200,000t of maize/corn; 40,000t of soya; 40,000t of wheat and 40,000t of sunflower.
The grain is then railed down to Odessa to meet the quantity and time demands of the buyers.
Theoretically, all crops in Ukraine are meant to be GM-free but the best estimate is that about 70% of the soya is GM. However, as it is relatively easy to test for the presence of GM material, the balance that has emerged is that non-GM maize and soya command a premium of about 10%.
With that enormous size of operation, operating in a country with a reputation for good agriculture but poor governance, a number of factors struck me:
The level of wages – excellent machinery operators were earning approximately US$1,000/month or about €850/month – general operatives about US$600/month.On the 125,000ac, a total of about 1,100 people are employed. It seems an incredible number. Our host reckoned it was probably 400 too many, even with an enterprise that milks 600 cows but, as he put it: “The farms stretch in total over 80km (50 miles). In many small villages we are the only significant employer. If we sacked a large number suddenly, there would be a revolution.”The Ukrainian government is passionately committed to agricultural growth and expansion. At the conference, the former Minister for Agriculture reckoned that they could and will easily double production. He made the point that in their view, EU agriculture was being over-regulated and that EU producers were becoming less competitive.The farm we visited had, not surprisingly for its size, very fully equipped machinery maintenance, spare parts and repair facilities with the capacity to replicate broken bolts and simple components by 3D-printing.There was a huge emphasis on providing detailed training for machinery, sprayer and fertiliser spreader operators during the slack winter season.Was this a typical farm? I presume not but the calibre of its managers and its average return on equity of 20-25% tells a lot of what can be achieved when all the variables are brought together.
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