Volodymyr Konovalchuk,
Ph.D. Head of Consulting,
Co-founder, Bridges

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Food prices are likely to increase in the future: Demand and supply are the major forces determining prices
• Higher demand:
- Diet changes due to income growth – more meat, especially in developing countries
- Population growth
- Expansion of biofuels production
• Inadequate supply:
- Bad weather
- Exporter policies (export quotas and other trade restrictions)
- Competition for agricultural land
- Increasing input (energy) prices
- Agricultural land area is limited

Total world grain & oilseeds:
Future increase in food production can only be achieved by increasing yields

Agribusiness: A Global Industry
• North America, South America and Eastern Europe are key global suppliers
• Asia is expected to remain a major importer of agri-commodities
• Africa and Middle East will continue to depend on grain imports
Regional Imports and Exports of Selected Agri-Commodities
(in millions metric tons)
2011 2016
2011 2016
33 33
54 57
Soybean and Meal
Exports
Corn
Exports
Exports
Imports
131
75
Soybean and Meal
Exports
12
26
Corn
Exports
Soybean and Meal
Imports
(36)
(38)
16
24
Wheat
Exports
Wheat
Imports
(31)
(37)
Soybean
Imports
(28)
(57)
4
Corn
Exports
(3)
Soybean
Meal
Imports
(8)
(12)

Position of Ukraine:
Leading world wheat producers

Position of Ukraine:
Leading world barley producers

Position of Ukraine:
Leading world sunflower seed producers

Agricultural Enterprises and agro-holdings,
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Some farm up to 500,000 ha
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Legal & organization status: joint-stock companies, limited liability companies, private enterprises, etc.
Private family farms
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Average size 45 hectares (vary from 2 hectares to 4,000
 hectares), employ on average 5 workers
Legal status: a private family-run ag. business/enterprise
Small land plot holders
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Land shares received by former collective farm workers
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Average land share size is 4 hectares (varies from 1 to 8 hectares depending on region)
Most of land plots are rented out to bigger agricultural producers.

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Land of former collective farms was distributed among its members. Each member received “share” (or plot) of land that varied in size depending on the region.
Average share size is 4 ha (or about 9-10 acres)
Currently there is a land sales ban
(moratorium), so owners of land plots can not legally sell them.
The main method of agricultural land distribution is rent. Farmers and agricultural companies rent land from multiple plot owners.
Rent payments range between $20-
60/hectare/year depending on the region

NUMBER OF PRIVATE FARMS BY OBLASTS
Odesa vs Ivano-Frankivsk oblast
Area of cultivated land is 4,1 times greater in Odesa
There are 13 time more private farmers in Odesa oblast.
Farm size is almost the same – about 40 ha as of January, 2011

COMMODITY TRENDS FOR THE SEASON IN UKRAINE:
WHEAT, RYE, CORN, BARLEY, SOYBEANS,
SUNFLOWERS

AREA PLANTED UNDER GRAINS AND LEGUMES
IN UKRAINE FOR SUMMER 2012 CROP

Wheat supply and demand
Units: 1000 tons; yield: tons/ha
Source: USDA/FAS

Barley supply and demand
Marketing Year
2011/2012
(begins July 2011)
Area Harvested
Beginning Stocks
Production
TY Imports
Total Supply
TY Exports
Total Consumption
Ending Stocks
Yield
Units: 1000 tons; yield: tons/ha
Source: USDA/FAS
3,684
794
9,098
35
9,922
2,300
6,300
1,122
2.47
Marketing Year
2012/2013
(begins July 2012)
3,300
1,122
6,600
30
7,752
2,500
4,800
752
2

Corn supply and demand
Marketing Year
2011/2012
(begins Oct 2011)
Area Harvested
Beginning Stocks
Production
TY Imports
Total Supply
TY Exports
Total Consumption
Ending Stocks
Yield
Units: 1000 tons; yield: tons/ha
Source: USDA/FAS
3,544
1,121
22,500
45
23,666
15,000
7,800
866
6.35
Marketing Year
2012/2013
(begins Oct 2012)
4,720
866
21,000
50
21,916
14,000
7,300
616
4.45

Rye supply and demand
Area Harvested
Beginning Stocks
Production
TY Imports
Total Supply
TY Exports
Total Consumption
Ending Stocks
Yield
Marketing Year
2011/2012
(begins July 2011)
280
174
579
0
755
11
630
114
2.07
Units: 1000 tons; yield: tons/ha
Source: USDA/FAS
Marketing Year
2012/2013
(begins July 2012)
300
114
650
0
766
15
630
121
2.17

Production Highlights:
2011 MY VS 2012 MY
Production of major grain crops in Ukraine
(1000 tons)
22500 22324
21000
20000
15000
15000
9,098
10000
6,600
5000
579.0
650
0
MY 2011/2012 MY 2012/2013
Corn Wheat Barley Rye
Notes:
 Total grain crop this marketing year is expected to be about
45-46 million tons (vs 56.7 million tons last year);
 The average total grain crop during 2002-2011 was 39.8 million tons

GRAIN CROP PRICE TRENDS IN UKRAINE, USD/ton

OIL CROP PRICE TRENDS IN UKRAINE, USD/ton

World markets
Wheat and Barley price trends
Chicago Board of trade, USD/ton

COMMODITY TRENDS FOR THE SEASON :
SOME KEY POINTS
• The total grain crop in Ukraine is above average but lower than last year’s record crop
• High world market prices
• Ukraine has accumulated significant ending stocks of major crops that should allow the country to fully satisfy its domestic consumption needs and to have some exportable surplus
• Wheat and barley production in MY 2012/13 is projected to decline compared to last year, mainly due to winter kill and anticipated lower yields than last year
• Marketing Year 2012/13 may well be called the year of corn in
Ukraine, which was gaining popularity in the country in the last several years
• Increase in corn production is mostly attributed to the need to replant large areas of lost or damaged wheat and barley and some favorable market conditions for corn.
• Large supplies of corn may result in lower corn prices later in the season

CORN PRODUCTION, YIELD, DOMESTIC
CONSUMPTION AND EXPORT TRENDS

Grain yields, t/ha
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6.4
Oil crop yields, t/ha
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2.6
USA
EU-25
China
Argentina
Brazil
Romania
Canada
Ukraine
India
Russia
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4.9
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4.6
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4.4
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3.2
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2.9
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3.0
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2.5
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1.5
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1.4
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1.9
2.8
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2.0
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1.8
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0.9
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1.2
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2.6
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2.1
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2.8
Kazakhstan
Source: UNDP reports

SOME POLICY DEVELOPMENTS DURING THE LAST YEAR
• The Ministry of Agriculture agreed with the traders that they will export no more than 19.4 million tons of grain, which includes only about 4 million tons of wheat.
• Because the export limit for wheat has almost been reached, the government announced wheat export ban beginning in mid November.
• There is lack of grain transporting railroad cars in Ukraine.
Possible restrictions for wheat exports worsened the situation.
• Another policy change affected planting seeds market.
Beginning in the fall 2011 State Customs Service started requiring GMO test results for every single shipment of planting seed.
• In MY 2011/12, the government introduced grain export tariffs starting July 2011 that were later lifted.
• In spring 2012, the government revived the idea of bioethanol production from agricultural crops. Draft legislation is considered for adoption.

Agricultural land sales ban (or moratorium) may be lifted in the future
What is going to happen?
What will be the agricultural land price in Ukraine?

FORECASTED VALUE OF AGRICULTURAL LAND AFTER
LIFTING THE LAND SALES BAN, UAH/HECTARE ($1=8 UAH)
After lifting the agricultural land sales ban expected value of agricultural land in Ukraine will range $190-690/hectare

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Lack of working capital in agribusiness
Lack of new technologies, inefficient land use and input use, thus a lower productivity
Poor supply chain logistics and infrastructure
Undeveloped farm credit system

Some of the most important measures include:
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Lift agricultural land sales moratorium
(currently the major way of land redistribution is lease).
Improve agricultural education
Reduce government bureaucracy and intervention (obey WTO rules, remove export quotas forever, reduce tariffs and other non-tariff barriers)
Enforce property rights and protect investors