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Ukraine Agribusiness Report Q1 2009
Business Monitor International, Nov 2009, Pages: 48
The Ukraine Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on the Ukraine's agribusiness service.
Agriculture in the Ukraine, once the bread basket of Europe, has fallen on sorry times since the collapse of the Soviet Union and independence in 1991. Now, however, it looks like a recovery may be under way. In the new Ukraine Agribusiness Report for Q109, we examine how agriculture in Ukraine can retrieve its former status.
After government subsidies and guaranteed markets fell along with the Soviet Union, Ukraine's agriculture went into a long decline through the 1990s. By the end of the decade, production volumes had collapsed, agricultural GDP fallen by half and more than 2mn jobs had been lost in rural areas.
Since 2000, however, the sector's prospects have improved and a nascent recovery has begun. This has been driven by the development of a small number of larger, profitable operators, though production in most sectors is still dominated by inefficient, loss-making farms.
The emergence of a new class of efficient farms can most clearly be seen in the poultry sector, which we forecast to grow by 63.3% to 2012. There, two large, profitable firms account for more than 70% of production.
We also expect grain production to retake lost ground over the medium term, and, by the end of our forecast period in 2012, we expect Ukraine to be firmly established among the world's top wheat exporters. With yields far below the potential of Ukraine's fertile soil and much arable land lying fallow, there is plenty of room for production growth.
There are, however, a number of challenges that must be met if this recovery is to continue. Recent government interference in the form of export quotas on grain have starved the industry of much-needed funds for investment. A ban on the sale of agricultural land has hampered the expansion of profitable farms, forcing them to lease land instead of owning it outright. This has served to discourage investment in land improvement. A drain of workers from rural areas into the cities also threatens to derail the recovery of the agricultural sector.
Ukraine's former agricultural success may also come back to haunt it if measures to preserve the environment are not taken. The intensive agriculture introduced to Ukraine when it was part of the Soviet Union and the rapid expansion of area under agricultural harvest have put pressure on natural resources. This has led to falls in the fertility of the soil and declines in water retention. As agriculture in the Ukraine redevelops, more attention will have to be paid to the environment if the recovery is to be sustainable.
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