UKRAINIAN AGRIBUSINESS CLUB. The emergence of large scale agricultural. Lessons and perspectives

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1 UKRAINIAN AGRIBUSINESS CLUB The emergence of large scale agricultural production in Ukraine: Lessons and perspectives Dr. Alex Lissitsa

2 Croplands of the Earth

3 Soil Performace and Soil Resistance

4 Climat Change

5 Agricultural Production in Ukraine Gross Agricultural Output and Growth Rates, Total outp put, mln. UA AH Nominal total farm output, mln. UAH Adjusted output (in 2000 prices), mln. UAH Source: State Statistics Committee and own calculations

6 Yield, cwt/ha. Grains Production in Ukraine All crops planted Production,, ths. tons Production Yield Source: State Statistics Committee and own calculations

7 Oilseed Production in Ukraine Oilseeds production in , mln. tons 7,0 6,5 6,0 55 5,5 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 Sunflower seeds Rapeseed Soybean Source: State Statistics Committee and own calculations

8 Milk and Meat Production in Ukraine Milk and meat production, ths. tons Meat mln. tons Milk, Meat production Dairy production Source: State Statistics Committee and own calculations

9 Main crops production, m. t. 2006/ / / /10 Wheat Barley Corn Sunflower seed Rapeseed USDA data

10 Yields, t/ha Ukraine W. Europe USA/Can. Wheat Barley Corn Sunflower seed Rapeseed We have favorable natural conditions, but the technological gap reduces our production 2 3 times

11 Milk Yields kg/cow in 2008 Milk yield kg ECM per cow Germany Belgiu m United Kingdo m Netherlands Ireland France Italy Spain Luxembourg Sweden Austria Swi Hunga ss ry Poland Czech Republ Slowak Republ lic lic Ukraine

12 Labour Productivity (kg per hour) Labour productivity kg ECM per hour Germany Belgium Hungary United Kingdom Netherlands Ireland France Italy Spain Luxembourg Sweden Austria Swiss Poland Czech Republic Slowak Republic Ukraine

13 Wages paid in per hour Wages paid per dairy hour Germany Belgium United Kingdom Netherlands Ireland France Italy Spain Luxembourg Sweden Austria Swiss Hungary Poland Czech Republic Slowak Republic Ukraine

14 Exports position of Ukraine, m. t. 2006/ / / /10* Wheat 3.4 (7) 1.2 (12) 12.5 (5) 5.0 (6) Barley 5.1 (1) 1.0(5) 6.3(1) 4.5(1) Corn 1.0 (7) 2.1 (6) 5.2 (4) 3.0 (4) Sunflower seed 0.3 (1) 0.1 (6) 0.6 (1) 0.4 (1) Rapeseed 0.5 (2) 0.9 (2) 2.6 (2) 1.6 (2) USDA data, * - forecast

15 Foreign Trade and Investments Foreign trade within agro-products In million USD Exports Imports Balance Direct Investments in Ukrainian agriculture, mio. USD Foreign investments ,3 557,3 803,2 Investments into assets , , ,00 Source: State Statistic Committee

16 Structural Change in Agriculture of Ukraine % 08 to 07 Arable farms Number of Farms ,0% Arable lands, mln ha 16,3 15,6 16,7 18,2 9,0% Average size of farm, ha ,3% Cattle farms Number of Farms ,7% Number of catlle, mln 163 1, , , ,16-12,1% 1% Average cattle farm ,9% Pork farms Number of farms ,4% number of porks, mln 1,63 2,03 2,25 1,97-12,4% Average size of pork farm ,5% Poultry farms Number of farms ,4% Number of chicken, mln ,8% Average size of chicken farm, mln ,7%

17 Agricultural Sector Developments in Ukraine Year 2007: 25 agriholdings control over 2,5-3,0 mln. ha of farmland In addition smaller agricultural producers operate 1,5-2,0 mln. ha of farmland Year 2008: About 40 agriholdings cultivate more than 4,0-4,5 mln. ha of farmland The next agricultural enterprises operate 2,2-2,5 mln. ha of farmland Year 2010: About 85 agriholdings cultivate more than 6,0 mln. ha of farmland The next agricultural enterprises operate 3,5-4,0 mln. ha of farmland

18 These ~150 largest agricultural operators produce about: 40% of wheat 60% of corn 55% of sunflower seed 85% of sunflower oil 80% of rapeseed 40% of total meat output 20% of milk Source: UCAB experts estimates

19 Some largest Ukrainian land operators, ha Myronivski Kliboproduct (Poultry, Beef, Fruits, Cash Crops) Estimation Ukrainian i Agrarian Investments t (Cash Crops, Rapeseed) Illich Metallurgical Plant (Cash Crops) Astarta Kiev (Sugar, Cash Crops) Industrial Milk Company (Dairy, Cash Crops, Vegetables) Kernel Group (Sunflower oil, Cash Crops) UkrRos (Sugar, Cash Crops) Shakhtar (Cash Crops) Landkom Ukraine (Cash Crops) Source: questionnaire conducted by UCAB

20 Motivation of Agriholdings establishing Preferential terms of agricultural enterprises taxation Increasing of crop production profitability Comparatively low expenses of land accumulation Expectation of farmland market introduction in the nearest future Necessity of reliable supply ppy of processing branches with agricultural raw materials Better access to the financial recources

21 Farmland Market in Ukraine Land market is banned by Moratorium which is being prolonged each year Land market implementation needs to laws On land market and Land cadastre to be passed All agriholdings g lease land from private persons for 5 to 49 years Current maximum land-plot-size owned by one person limited at 100 ha

22 Market Capitalisation of Ukrianian Agricultural Companies ,19 $

23 Market Capitalization of leading Ukainian agricultural companies Name of the Company Description Stock Market Market Cap company Exchange Capitalization (Millions) (in 1000) Astarta Holding NV Company, through its subsidiaries, produces and sells sugar made Warsaw USD USD of sugar beet, sugar byproducts, grain crops, meat, and milk. (1, PLN) (1, PLN) Agroton Public Ltd. The Company operates in crop farming, livestock, food processing Frankfurt USD USD and food production. Agroton Public Ltd. also operates elevator ( EUR) ( EUR) storage facilities. Kernel Holding SA Kernel Holding SA produces, refines, and markets sunflower oils, Warsaw USD USD and exports grain. (3, PLN) ( PLN) MHP SA MHP SA is a holding company of subsidiaries engaged in various London 1, (USD) 1, USD agricultural businesses in Ukraine especially in chicken production. Mriya Agro Holding The Company cultivates agricultural commodities such as wheat, Frankfurt USD USD corn, rapeseed, sugarbeets, buckwheat, potatoes and others ( EUR) ( EUR) crops in parts of the Ukraine. MCB Agricole The Company leases arable land in Ukraine and grows rapeseed, Frankfurt USD ,7 USD Holding AG barley, sunflowers, corn, and rye. ( EUR) ( EUR) Dk Dakor Agro Holding The Company raises and processes sugar beets, sugar and sugar Fankf Frankfurt ,1 USD ,2 USD by products, in addition to other agrcultural activities and raising ( EUR) ( EUR) livestock. Sintal Agriculture The Company grows wheat, corn, sunflowers, barley, sugar beets, Frankfurt USD USD Ltd buckweat, soybeans, peas and other crops in Ukraine. ( EUR) ( EUR) UkrRos The Company is a vertically integrated holding company which Kiev USD ,6 USD operates sugar refineries, produces grain crops, sugar by products (UAH) ( UAH) Creativ Industrial Creativ Industrial Group produces refined deodorized oil, Berlin ,1 USD USD Group modified fats, hard and soft margarine, and mayonnaise (EUR) ( EUR) AgroGeneration Agrogeneration produces agricultural raw materials. The Paris N/A N/A Company focuses on the re cultivation and restructuring of farms. Agrogeneration conducts operations in Ukraine. 3,52 mlrd $ 5,1 mlrd $

24 Summary Ukrainian Agricultural Sector has shown in last 3-5 years very stable development Problems are Lack of human capital, insufficient food quality and safety and low efficiency and productivity No alternative e to industrialized agriculture re Agriholdings will dominate in Ukrainian agribusiness in next decade

25 Association Ukrainian Agribusiness Club info@agribusiness.kiev.ua