Thursday, 7 August 2014

Ukraine wheat yields up

International agri-businesses, as in large scale, progressive and not small scale, cash strapped, local farmers, are announcing some heady winter wheat yields.

Trigon Agri managed 5.61mt/ha in Kharkov and an impressive 5.99mt/ha in Kirovograd.

Kernel Holding is reporting 5.60mt/ha from 30kha of winter wheat.

All of this is great news and a combination of good management and favourable weather is rightly being cited as the reason for improved crop productivity.

But in the Ukraine agri-business environment this news could have repercussions that are less than good.

If you look at farming around the world, simply put they are either low input output large scale systems as found in Australia and Canada or high input output small scale systems such as those in parts of Europe.

What is being tried in Ukraine is high input output over large areas and is without precedent.

Early on in Ukraine’s agricultural renaissance it became apparent that simply lifting high yielding agri systems from Europe and the USA and dropping them into Ukraine didn't work.

The fundamentals of farming remained but Ukraine has its own unique set of issues that eroded anticipated high crop yields. 

Add to that the issue that businesses were trying to implement a farming system that had not been tried with problems we hadn't anticipated and you can understand why the financial results and physical performance were all over the place.

The point I’m leading up to is that Ukraine agri-business are still immature, have over stretched and over promised and are often run by none farming management with short term views who react to markets. 

So if wheat yields well this year it will be gung-ho into wheat this autumn followed by a scratching of heads when for a multitude of reasons it doesn't do as well as we had expected.

It is no joke when I recount stories of investors or accountants who seriously argued to grow 100% oilseed rape or 100% seed potatoes because these were the most profitable crop that year.

While you don’t strictly need farmers to manage these large agri-businesses it does help to have that long term view and grudging acceptance on board that not every crop in every year is going stick rigidly to the plan.

We have rotations to spread risk, they teach you that in week one at agricultural college.