Ukraine, one of the most fertile nations, wants to feed the world, Europe News & Top Stories
KIEV (BLOOMBERG) – It was nicknamed the breadbasket of the Soviet Union, and now Ukraine could finally begin to tap its agricultural potential at a time when the world seems to need it most.
On July 1, a new law will allow the purchase and sale of farmland for the first time in two decades.
The government says that the advent of a functioning market means that one of the most fertile places on the planet is the first step towards larger and more efficient agriculture by encouraging investment.
This is a long overdue reform in a nation perpetually plagued by corruption and political interests.
But it has implications beyond Ukraine after the global food supply was exacerbated by the coronavirus pandemic.
The country of 40 million people is well below its weight on the world stage.
It is the largest exporter of sunflower oil, the fourth largest shipper of corn and delivers grain to countries from Morocco to Bangladesh and Indonesia.
But corn yields are a third lower than in the United States and wheat about a quarter lower than in the European Union.
This is in part due to the legacy of the communist era.
The buying and selling of land was banned in Soviet times, then banned again in 2001, a decade after Ukraine gained independence, for fear that much of it would be acquired by the super-rich. and foreigners.
This hampered development because farmers could only rent plots, which meant they could not use them as collateral to access funds for development.
“This reform is an event on a global scale, because it is important not only for Ukraine, but for the whole world,” said Oleg Nivievskyi, assistant professor at the Kiev School of Economics. “While for Ukrainians it is additional export earnings, for the rest of the world it is additional food.”
From next month, all individuals will be allowed to purchase plots of up to 100 ha, as part of President Volodymyr Zelenskiy’s efforts to revive the struggling economy.
The move could increase gross domestic product by 1.5 percentage points per year in the coming years, the Kiev School of Economics has estimated.
This is as agriculture becomes more efficient and the market becomes more transparent, according to Nivievskyi.
Landowners will benefit from a market price, while farmers will have the opportunity to diversify into higher margin crops and have better access to finance, he said.
The country has a potential arable land market of over 40 million hectares, an area almost the size of California, with exports meeting growing demand from places such as the Persian Gulf.
For Igor Hoszowski, agricultural logistics analyst in Kiev, it is also an opportunity to right a historic wrong.
His great-grandfather had been a wealthy farmer who grew wheat in the vast fields of western Ukraine.
Then the Soviets seized much of his land to create a collective state farm in the 1940s. The change in law will allow him to buy his family’s plots once cultivated.
âIt’s a window of opportunity for me to at least reclaim the parcel of land my ancestors owned,â said Hoszowski, 37. “In addition, everyone understands that the agricultural industry is a powerhouse of the Ukrainian economy.”
Despite all the optimism, however, Ukraine has a reputation for falling short of its potential.
The country suffers from rampant corruption, something Zelenskiy vowed to tackle when he took power in 2019.
Like Russia, the privatizations of the 1990s allowed the country’s powerful tycoons to take control of large swathes of the economy.
Ukrainians fear the land will become the next target.
Landowners fear they will be cheated, and the government’s plan to open the market to foreigners from 2024 is causing concern.
A poll by polling agency Rating in late April found that a majority of respondents believed the plans should go to a referendum – and about two-thirds of them would vote against.
“On land reform, if it is done on behalf of the poor but for the benefit of the rich, it will end up being counterproductive in the long run,” said Tim Benton, director of emerging risks research at Chatham House in London and a food safety expert.
Fragility of the food supply
There is no doubt about the potential, if done right. The Covid-19 has highlighted the fragility of food supply chains and countries are seeking to secure sufficient quantities.
Food costs have reached their highest level in almost a decade according to a monthly United Nations index.
Ukraine’s very fertile land, on the other hand, contrasts with the rapidly dwindling land resources around the world.
Some 12 million hectares are lost each year due to desertification and drought, an area that could produce 20 million tonnes of grain.
The wealthy Gulf states, but dependent on food imports, in particular, are keeping a close watch on Ukraine.
The state-run Saudi Agricultural & Livestock Investment owns Mriya Agro Holding, an agricultural company.
Agriculture featured prominently in the US $ 3 billion (S $ 4 billion) cooperation agreements signed between Ukraine and the United Arab Emirates this year.
The country aims to ensure food security for the emirates and a number of other countries in the region, including Saudi Arabia and Qatar, Agriculture Minister Roman Leshchenko wrote in a blog post by the ‘Atlantic Council in March.
âAt every step of this process, we will work to ensure that Ukrainians are protected from the greed of tycoons and corrupt officials,â he said. âThe government will never lose sight of the central idea that Ukrainian farmland is the nation’s greatest asset.
For Hoszowski, it’s a chance to capture some of what he expects to be a booming industry in Ukraine’s western Volyn region.
He and his wife plan to buy five or six hectares, although that is only a fraction of the forty his ancestors lost under Stalin’s rule.
One of the plans is to turn the acquisition into a small farming business. For now, it’s an investment in an asset that he says will never depreciate.
“By buying even a small piece of land, you join the club of its beneficiaries,” he said. “As long as this industry grows, you get richer.”