Agriculture has become the leading economic sector in Ukraine, and this is even more palpable since the Maidan events and the crisis with Russia.
The black earth that covers the majority of cropland - approximately 32 million ha - constitutes a valuable asset that offers exceptional fertility and which has always made Ukraine the leading agricultural producer in the Tsar’s Empire, and subsequently in the Soviet Union.
Ukraine is currently the world’s leading exporter of sunflower oil and seeds. It is one of the top exporters of grain and the leading supplier of maize to China. It looks towards Asia and Africa to develop its business opportunities, providing stiff competition to Western nations handicapped by higher production costs than its own, and in which public opinion has fading interest in export activity, preferring a “household” vision of food production.
Resilient agriculture: annual production potential of at least 100 million tonnes of grain
Ukrainian farming came through the crises of 1991… 2003, 2008 and 2014 not only unscathed but on the contrary by taking advantage of them to bring about an overhaul conducive to productive investment and an increase in harvesting yields and export capabilities. Ukraine regained its title of net exporter of cereals at the beginning of the 2000s and has continually increased its sales abroad ever since. Cereal exports rose from less than 8 million tonnes in 2005 to more than 40 million tonnes in 2016, and this figure is heading towards 60 million tonnes, and possibly 80 in the future.
All the production gains that exceed domestic needs, equating to slightly under 30 million tonnes, are earmarked for export; however, agriculture as a share of GDP has not yet reverted to its level from the 1990s. Today, it stands at approximately 15.5%, as against more than 19% before independence.
Progress is therefore still necessary to fully harness the agronomic potential in the country. The 42 million ha of farmland can generate annual production of 4 to 5 tonnes each. The theoretical potential therefore lies between 160 and 200 million tonnes. The estimated potential calculated from consensus between experts, standing at 100 million tonnes, is therefore both conservative and realistic.
Profound reorganisation of farming enterprises
Ukrainian agriculture is highly diversified, with several million smallholdings which span only several hectares, and several hundred holdings covering tens of thousands of actors, the largest of which spans almost 700,000 ha.
Breakdown of land by size of production unit
Source: Note N °114 CEP French Ministry of Agriculture, and personal data
*Surveys have failed to “attribute” approximately 6 million ha to enterprises which depend on the government or local authorities.
The livestock sector, the poor relation of the agricultural recovery but at the dawn of a new era
In the space of just a few years, poultry farming has become concentrated around approximately ten highly automated industrial firms and is today designed and managed to comply with the most stringent European regulations. Catering for more than 80% of production, these are the only firms which export to the Middle East, but also to the European Union since the entry into force of the Association Agreement.
To facilitate their presence on competitive Western markets and on markets dominated by Western firms, these companies are in search of Western SMEs or groups to acquire. They promote their vertical integration by recording raw materials - essentially feed - at production cost, which is half that of their European competitors. They remain interested by Western technology and are taking steps to meet future requirements in livestock living standards.
Pig farming has developed almost all over the country as the leading use for cereals and as a traditional ingredient for cooking and food. The roles of pig breeders and fatteners are fulfilled satisfactorily by and large, despite genuine health concerns (in particular, endemic Asian swine fever). The downstream segment is as yet insufficiently organised to meet the needs of distribution (compliance with health standards, improvement of carcass treatment with jointed and vacuum-packed meats, environmental integration, etc.).
A different fate has befallen cattle farming, the big loser post-independence. This type of livestock is slowly being reintroduced in large SMEs or in some agricultural holdings, where it has a role both in the implementation of circular economy measures and in the creation of qualified jobs which help to maintain an active working population in rural communities that were being deserted due to more intense cereal farming.
The projects under development aim to create integrated dairy farms with herds of 500 to 5,000 dairy cows and fattening facilities for weanlings intended for export. Major dairy product groups welcome these developments, having previously been often disappointed by their attempts to support farm production.
Enterprises source their information, as they have done for plant production, by looking at the most efficient regions in the world (New Zealand, Israel, Canada, etc.). They contact the suppliers which are the most prepared to take the risk, either alone or with the support of insurance or credit companies, of exporting to a country with a reputation for being among the most challenging. In genetics, entrepreneurs most often opt for the Holstein breed, and find suppliers in Sweden, Denmark or Germany, where operators are sometimes also sellers of French equipment.
The choice of milking and breeding technology is highly concentrated on German, Danish or Dutch suppliers, countries in which the universities deliver education and training for technical managers.
In search of the best technology
Farming enterprises, and in particular holdings, have achieved their growth by visiting the world. Firstly by touring the Internet, exploiting everything which is available in English, then by travelling to the large production basins in the world, notably in South America. Here, they discovered the regular and long-standing practice of low- and zero-tillage, long before it developed in Europe. From the Americans, they borrowed soil analysis methods and their analytical accounting concepts to control their production costs.
They are open to the practice of tracking farm machines and trucks using real-time satellite positioning beacons.
In plant genetics, operators draw on domestic resources for straw cereals, whose main breeder is the Academy of Agrarian Science. For major export-bound production (maize, rape seed, sunflower, soybean, etc.) they turn to the world’s largest plant breeders, amongst which French groups occupy a leading, if not the top, position.
Groups which have already succeeded in reducing production costs below 100 dollars per tonne of grain harvested seek to lower their costs even further; they are therefore continually monitoring existing technology, most notably with regard to ongoing changes in water regimes and climate temperatures. In this respect, they might be less averse to GM crops than Europeans.
The organic boom
Over the past three years, and more acutely since the entry into force of the European Union Association Agreement (1st September 2017), groups have become interested in “organic” production (like many European countries, Ukraine has adopted the English term “organic” which is less ambiguous than the French term “biologique”). At the end of 2016, the country boasted fewer than a hundred certified firms; at the end of 2018, this had risen to nearly 600, with several hundred others in the process of being certified. These enterprises intend to produce vegetables, fruit, cereals and oil without resorting to the treatments employed in traditional intensive farming, but with lower costs, thereby enabling them to meet the needs of mass retail, both for the domestic market and - perhaps more importantly - for export to European retailers. This development is likely to have a critical impact in Europe in that by responding to the wish of mass retailers to offer organic products at the price of traditionally farmed goods, this will deprive small producers of their margins, who will then have to fight on niche markets and content themselves with remaining small.
A very significant French footprint
French firms are quite well represented in the Ukrainian farming sector. The four major French dairy product firms have opened industrial subsidiaries there which own substantial market share in dairy products. The banking sector is also active, with two large groups involved in the farming sector (with significant market share and acknowledged for their ability to understand the needs of enterprises). Seed manufacturers are also established in the country. Two of them have installed industrial production units and the others are developing their seed breeding locally under licence. About 15 farm operators have set up in the country and are developing, becoming stakeholders in local life, much in the spirit of former kolkhozes which had the responsibility of providing services to the community.