Friday, 11 December 2015

Ukraine's agricultural policy increases world market competition

On Tuesday Ukraine’s agriculture ministry outlined its five year, 10-point plan to develop the country’s agricultural sector.

This includes intensifying efforts to draw investment to farming by improving conditions for doing business, revising its food-security policy and implement reforms in land, taxation and associated institutions.

The plan targets increasing the competitiveness of Ukrainian agricultural products and raising exports.
This week Ukraine’s minister of agriculture and other spokespersons reported the agricultural exports for 11 months of this year totalled more than USD13bn, almost 40% of Ukraine's total exports and that agricultural exports provide the largest share of foreign currency revenue.

Ukraine is a cash poor country with few options to generate income to kick start the economy, IMF and EBRD handouts will only go so far.

The minister also stated that "by 2020 we plan to increase [exports] to 40-70mmt of grain [and] harvest 80-100mmt, our goal to export over USD20bn."

I paraphrase and his five year plan might be overly optimistic but the intentions are clear.

On a practical basis away from the grandstanding, the ministry reported they have fulfilled 80% of their planned reforms aimed at deregulation of the agriculture sector and, along with continued efforts to deal with corruption, will improve Ukraine’s ease of doing business and corporate governance making it easier for investments to take place.

Investments will be what drives Ukraine's agricultural development.

There was also the quiet news that slipped under the radar this week about how Ukraine adopted a Law on seed and seedling legislaton. (See "Did Ukraine just reach a tipping point?" below).

Which all bodes well for Ukraine, less so for farmers elsewhere. 

I often receive comments from farmers around the globe (understandably) griping about how reports of Ukraine increasing grain output and exports doesn’t help prices which is fair enough.

When asked, the advice I give is that you need to be aware this is happening and to look outward at what’s going on around the world, this isn't going to go away.

Even if supply and demand balance, Ukraine and other places like it will always be able to compete on price, their competitive advantages mean the cost of production will always be lower.

Western farmers need to capitalise on their strengths such as marketing, traceability, reliability and quality along with pretty good environmental credentials to give consumers a choice along with cutting the cost of production.

I went to a UK trade show a few weeks ago, one comment still ringing in my ears was from a farmer who said yes, he understands all that but at the end of the day he just want's to grow crops.  

Good that he does but judging by the hi-tech, expensive machines on display, while he he is working hard growing crops he is in danger of being a conduit funneling EU funds to Mr Deere while his business is perpetually broke.

I also overheard a conversation in a shop, the lady was complaining her bread maker wasn’t working properly, the shop assistant told her that she needed to buy quality flour as flour made from UK wheat was no good.

Undoubtedly the task ahead is a big one.