Ukraine has the largest area of agricultural land in Europe with approximately 43 m ha of land out of which 32.5 m ha are used for crop production. Fertile soil (Ukraine accounts for c.25% of global black soil, known as “chernozem”) and moderate climate give Ukrainian agri producers strong competitive advantages.
Currently Ukraine is a world market leader in exports of sunflower oil and barley. In recent years Ukraine has been producing around 40-50 m t of grain per year and has regained its status of a major supplier of grains to world markets. Ukraine’s agricultural export propensity is supported by additional geographic advantages.
Ukrainian agricultural holdings have higher efficiency than world peers mainly due to low production costs (inexpensive labor force and low land rent rates). On the other hand, fertile soils allow reaching comparatively high crop productivity at a low fertilizer usage.
Agricultural markets and agricultural production generally are subject to production and selling restrictions and limitations in the form of quotas, tariffs and other mechanisms to protect national producers both at international and domestic levels.
Weather risk is typical for the industry, but weather conditions in Ukraine are generally favorable.
Prices of agricultural commodities are influenced by a variety of unpredictable factors that are out of control of local agri companies, among them weather conditions and changes in global supply and demand.
To ensure 100% of harvested grains can be safely stored in Ukraine, investments in the construction of 15-20 m t of storage capacity are needed.
Ukraine has the capacity to produce much greater volumes of grains, oilseeds and livestock products than its shrinking population can be expected to consume. Productivity of fertilizers in Ukraine is 1.7 higher than the world average in 2010.
Meat supply in Ukraine is limited, as the livestock headcount has decreased by 82% since 1987. Dairy market is unconsolidated. Meat and dairy markets have good prospects for quick growth.
In spite of high market concentration, a large percent of household egg production (c.42%) in Ukraine could be occupied by industrial producers. Ukrainian egg sector has good export opportunities for shell eggs and egg products.
With large vertically integrated agri businesses currently operating on 10-15% of total arable land in Ukraine, industry consolidation in the long run is expected, especially in view of the expected land trade liberalization. There are small farms in Ukraine as well as successfully working agri businesses that could be acquired.
No special requirements of licensing are imposed on participants of agricultural sector in Ukraine. Ukrainian tax legislation allows agricultural producers to choose between special tax regimes and the general system of taxation.
Ukraine has 42.8 m ha of agricultural land comprising
71% of the country’s total area, of which 32.5
m ha is arable (excl. pastures, grasslands, permanent
plantings etc.). Ukraine has favorable climate
for large scale agriculture, rich agricultural soils and
access to abundant land and water resources.
Arable land represents 76% of Ukrainian agricultural land. The total amount of Ukrainian arable land equals 30% of the European Union’s arable land and represents 2.4% of the world’s total arable land, according to FAO and Eurostat. In the table below agricultural area of Ukraine is compared to agricultural areas in selected countries in 2009:
Ukraine is richly endowed with chernozem (also
known as “black soil”), one of the most fertile soils
worldwide. Ukraine accounts for about 25% of the
global chernozem area.
Chernozem, a black-colored soil that contains a very high percentage of humus (3% to 15%) along with phosphoric acids, phosphorus and ammonia, occupies 41% of Ukraine’s total area and even more of its agricultural land (54%), and plow land (58%). Only two chernozem belts exist worldwide: one extending from northeast Ukraine to Russia, and the other – in the Canadian Prairies.
According to industry researches which are based on information from individual companies and media reports, large agri businesses presently lease over Overall land rent rates are relatively low, especially if compared with those in the EU or US. 3.5 m ha of land, or 10.8% of total arable land and 20% of leased arable land, with the smallest company in this group controlling over 30 thsd ha.
Overall land rent rates are relatively low, especially if compared with those in the EU or US
In 2011, 3 m Ukrainians were working in Ukraine’s
agricultural industry, or 15% of all labor force.
Ukrainian agricultural producers enjoy a number of
competitive advantages over their foreign peers, particularly
low labor costs. Labor force is inexpensive
and highly qualified. Domestic agricultural companies
pay farm workers USD 2/hour on average compared
to USD 40/hour in Germany, USD 6-10 in CEE countries,
and USD 3 in Russia.
Among the popular crops in Ukraine are wheat, corn, sugar beets, sunflowers, legumes, tobacco, vegetables and fruits. The production volumes are shown in the table below:
Due to insufficient fertilizers and crop protection products application and lack of modern machinery in the fields, agricultural yields in Ukraine are lower than average in European Union and the world.
Ukraine’s current fertilizer rate stands at 78 kg/ha
used for 2011 harvest, which is higher than in neighboring
Russia (33 kg/ha), but still lower than, for example,
in Slovenia (195 kg/ha), China (130 kg/ha) or
developed EU countries (120 kg/ha on ave.). The US
reports the highest fertilizer usage rate in the world
of 150 kg/ha. Despite low fertilizer usage, Ukrainian
farms have demonstrated superior crop productivity
per unit of fertilizer applied thanks to the country’s
Ukraine reported 52 kg of crop output per 1 kg of fertilizer applied in 2010.
Ukraine harvested 39.2 m t of grain with an average yield of 2.7 t/ha in 2010. This enabled the country to export more than 15 m t of grain in 2010/11, while retaining almost 25 m t for domestic consumption. In 2010/2011 Ukraine exported 4.2 m t of wheat, 2.8 m t of barley and 4.9 m t of corn (9.2, 6.3, 5.1 in 2009/2010, respectively). Middle East and Northern Africa were major geographies of Ukrainian grain export in 2010/11. Saudi Arabia was the largest importer of Ukrainian barley (64% of total exported barley), Egypt was the largest importer of wheat (15%) and corn (19%).
In 2009/2010 agricultural year, Ukraine accounted for 58% of the global sunflower oil export market. The table below shows volumes of sunflower oil exported from major sunflower oil producing countries during the period from 2004/2005 to 2010/2011 agricultural year:
Ukraine’s existing transportation and storage infrastructure provides a solid basis for further development of the agricultural sector and commodity exports.
Ukraine’s shorter transportation distances, low
transportation costs, and more developed transportation
infrastructure provide greater cost advantages
for agricultural exporters compared with its closest
neighbors, particularly Russia and Kazakhstan,
which are Ukraine’s competitors in exports to the
Ukraine has a well developed infrastructure for transportation. To ensure 100% of harvested grains can be safely stored in Ukraine, investments in the construction of 15-20 m t of storage capacity are needed.
Despite the volatility of sugar production in Ukraine, positive structural changes took place in the industry in the past decade, driving the increase in sugar beet yields from 17.7 t per hectare in 2000/01 agricultural year to 32 t per hectare in 2011/12 agricultural year according to the State Statistics Committee of Ukraine. During the same period, harvest losses decreased from 23% to 0.8%, according to the Agency of Industrial News (AIN). These changes were primarily attributable to the integration of sugar beet and sugar production.
Sugar beet harvest in 2011 was the highest in the last decade and 18.7 m t of sugar beets were produced in Ukraine compared to 13.7 m t in 2010 (+36.2%). Seven largest Ukrainian producers accounted for c.54% of total sugar output in 2010/11.
Sugar production in Ukraine declined before 2009, domestic market was protected from imports and experienced sustained deficit. These facts caused increase in sales prices up to USD 1,000 per t by the end of 2010. Sugar sales prices declined in 2011 due to a big harvest in a situation of export limitations.
The by-products of the sugar beet crops such as pulp and molasses could add c. 10% to the value of the harvest. Bio-technologies like biogas production are possible and could be very profitable in Ukraine.
Ukraine has a number of sugar production capacities
that are not in use. According to Ukrtsukor
(Ukrainian sugar producers’ union), in 2010 out
of 73 sugar plants that received quotas for sugar
production, only 20 plants used their quota to full
extent, while 7 of the plants did not produce sugar
at all due to unavailability of raw material. Investments
in these plants will cause improvement of
processing efficiency and sugar conversion ratios,
and decrease of production costs.
Meat market is considered to be relatively stable compared to the markets of other agricultural commodities. This is explained by a limited role of meat products as staple foods along with the limited storage capacities availability that hinders buying meat products in bulk in cases of panic on the market.
In accordance with a global trend, meat consumption in Ukraine has grown in line with increasing national income level. The table below reveals a pronounced correlation between the level of meat consumption (measured by processed weight) and per capita income of the Ukrainian population.
The following table shows relative distribution of meat consumption in Ukraine and selected countries between beef, poultry and pork in 2010. According to the State Statistics Committee of Ukraine, meat production in Ukraine grew by 7.4% in 2010 reaching 2.06 m t (slaughtered weight) from 1.92 m t in 2009. The table below presents the meat production volumes in Ukraine in 2007-2010.
Meat supply in Ukraine is limited, as the livestock headcount has decreased substantially since the Soviet Union collapse. The table below shows historical dynamics of cattle headcount in Ukraine.
Per capita consumption of meat in Ukraine remains below the levels of developed countries. In 2010, per capita consumption of meat in Ukraine was 42.8 kg per year against 90 kg per year as nutrition standard. Such low level of market saturation leaves significant room for growth.
Poultry processors will continue to enjoy competitive
advantage over other meat producers thanks
to poultry being the least fodder-intensive type of
meat (2 kg of grain per 1 kg of poultry as compared
to 6.0 kg for beef). Thanks to large players in this
industry investing heavily in modernization and new
capacities, they boast much more advanced technologies
compared to pork and beef producers.
Poultry consumption in Ukraine is moderately high
by international standards.
The biggest share in the structure of pig breeding
is still maintained by households, but it is very
likely that in the nearest future households will lose
ground to agricultural enterprises.
Development of pig breeding in Ukraine is following the route of gradual formation of highly concentrated production conglomerates. By volumes of breeding, twenty largest enterprises accounted for 36.5% of overall volume of pig breeding of the year 2010.
Ukraine’s egg market grew during 2005-11,
reaching 18.7 bn pieces in 2011. Per capita
consumption stood at 281 eggs in 2010, up from
240 five years before. Notably, egg consumption
continued to expand in 2009 even as household
income declined, as eggs are a relatively cheap
source of protein.
Consumption of eggs in Ukraine is high and already saturated on per capita basis (c.16.2 kg per capita compared to 13.1 kg per capita in Europe). Expansion in local market is mainly possible through structural changes – i.e. squeezing out household production.
Egg products are represented by dry egg powder and are sold mainly to the food industry (producers of bread, sauce, confectionary etc.). The market for egg products in Ukraine has enjoyed much faster growth than the shell egg market. Dry egg products are easy to export as they are not fragile like shell eggs and have a much longer storage period as well as much lower transportation costs.
Egg market in Ukraine is highly concentrated. Household production took c.42% of total production of shell eggs in 2010. Among industrial producers Avangard has leading positions on the egg market (market share is 44% in shell eggs segment and 79% in egg products) in 2010. The second largest eggs producer is Ovostar Group, which debuted on the WSE in 2010 (5% in shell eggs segment and 19% in eggs products).
Milk is one of the traditional products of livestock
breeding, its share in the structure of output
of the sector makes up nearly 30%. However, recent
years have been marked with unfailing negative
trend – volumes of production have been decreasing.
Over the last decade production of milk
decreased by 12-15% while the population of cows
decreased by 47%. According to the State Statistics
Committee of Ukraine, volumes of milk production
have been saved from the same sharp decline due
to improvement of productivity which nearly doubled.
The overall output of milk in 2011 was 11,094
m t (all producers) or 1.4% down from the level of
2010. Milk production is traditionally concentrated in
households. The share of agricultural enterprises in
the overall production of raw milk does not exceed
18-20%. It is remarkable that in 2010 volumes of
milk production at agricultural enterprises decreased
only by 0.9%.
Large agri holdings with free cash flows available for long-term investments see high demand for quality dairy products going forward and seek cooperation with international dairy companies to take advantage of their industry experience.
In 2010, dairy exports accounted for 8% (flat y-o-y) of total Ukrainian milk production (1,895 thsd t, +1% y-o-y),
while dairy imports accounted for only 2% (-0.7pp y-o-y) of total domestic consumption. In 2010, Ukraine exported
79 thsd t of hard cheese, mainly to Russia. Skimmed milk powder (SMP) was the second largest export
item with 21% of total dairy exports, sold mainly to Bangladesh, Russia and Kazakhstan.
Average prices for milk increased by 53.5% in January 2010 mainly due to changes in tax privileges, as well as due to a deficit of milk in Ukraine, growth in prices for cows’ fodder and decrease in production volumes.
Over the last five years the term “agroholding”
has emerged and became common for description
of agricultural production in Ukraine. This type
of production structure having several competitive
advantages in production as well as in investment
sphere is expanding its influence at nearly every
field of agricultural activity, actively consolidating
through leasehold the main production resource –
Last tendencies in the Ukrainian agroholdings activities:
• The grain market in 2010/2011 was characterized by a high level of administrative intervention, i.e. quotas (till 31 March 2011 and the export duties to 1 January 2012), which led to the revision of the priorities of export-oriented agricultural holdings specialized in soybean, rape seed and corn.
• Low quotas and high tariff made the barley crop less attractive for growing, while corn has become very attractive due to high economic returns and stable excess demand in foreign markets.
• Sugar segment is characterized by a high degree of consolidation as a result of assets purchase transactions of Kernel and Ukrlandfarming sugar companies. This trend will continue.
• In the dairy sector, the selling price of milk and dairy products increased by 60% as a result of which the profitability of milk production amounted to 17.5%. Moreover, there is a lack of quality raw milk products. Due to such factors, the sector is attractive for investors.
• In livestock, integration processes dominated the poultry industry; however in 2010 they also started to play a notable role in the pig breeding industry. In the near future, consolidation and expansion of production capacity will continue.
• Today, agricultural holdings are paying careful attention to the cultivation of potatoes (Mriya, Svarog, IMC). The barriers faced in this field are as follows: the need in costly investments in the infrastructure, logistics and marketing.
During 2010 and the first half of 2011 the process of consolidation of land resources kept going and even considerably sped up as compared to 2009. In the middle of 2011 there were 79 large holdings in Ukraine with total land bank of 5.1 m ha.
Since the downturn of 2009, agricultural companies have been the undisputable leaders of IPO activity, and currently 15 agricultural and food processing companies from Ukraine are listed on foreign and domestic stock exchanges.
Ukrainian agricultural holdings have higher efficiency than world peers mainly due to low production costs inexpensive labor force and low land rent rates).
No special requirements for licensing are imposed on
participants of agricultural sector.
However some trade restrictions in a form of quotas and export duties (both direct and indirect like cancellation of VAT reimbursement for traders) intended to cover State budget deficit are usually not imposed for a long period of time. In addition, the Government of Ukraine has a power to control prices for agricultural commodities in a number of ways: e.g. setting limits on extra charges or discounts for certain types of agricultural commodities; setting limits on profitability of wholesale and retail traders; setting minimum and maximum intervention prices for certain types of agricultural commodities. At the same time there exist a number of ways forcompanies to limit their exposure to such restrictions and regulation. It is therefore important to properly disclose impact of trade restrictions and specific regulations on a business and its financial performance.
Among the recent state incentives in the agri sector the removal of the grain export quotas should be noted. The abolishment of the regulated prices for some agri foodstuffs is debated about from time to time. Production of either animal or vegetable foodstuffs involves compliance with sanitary rules and other standards.
The basic regulatory acts are the Land Code and the
Laws of Ukraine “On state support of agriculture”, “On
safety and quality of foodstuffs”, “On prices and pricing
policy”, “On grain and grain market in Ukraine”,
“On state regulation of production and marketing of
The main regulatory authorities in the sector are the Ministry of Agrarian Policy of Ukraine and the Ministry of Economic Development and Trade of Ukraine. The regulatory authority related to pricing is also exercised locally by municipal bodies.
The turnover of agricultural land being the basis for
the agricultural production is subject to durational
moratorium effective from 2002. In particular, the
moratorium has been set for sale and purchase or
other transfer, as well as for changing the designation
purpose of agricultural land. Legislation that will
enable the land market operation and cancellation
of the moratorium in Ukraine is yet to be adopted.
In particular, the law of Ukraine on land market is
expected to be adopted during 2012.
As long as the moratorium is not cancelled all the market players in the agricultural industry operate on the basis of land lease agreements.
Ukrainian tax legislation allows agricultural producers
to choose between special tax regimes and the
general system of taxation. Two of the most beneficial
state-offered advantages of the special tax regime
for the agricultural producers are subsidy VAT
regime, and the fixed agricultural tax (further “FAT”).
A company is eligible for both subsidies if more than
75% of the company’s total gross revenue is generated
from agricultural activity. The rules for calculation
of this 75% ratio slightly differ for VAT and FAT
Companies that qualify for the subsidy VAT regime are entitled to retain VAT on sales of agricultural products, net of VAT paid on purchases, for use in agricultural production. In accordance with the Tax Code of Ukraine, the VAT rate will be decreased from currently effective 20% to 17% from 1 January 2014. The special VAT regime for agricultural industry will be effective till 1 January 2018.
FAT regime exempts the agricultural companies from CIT, land tax, water usage tax and trade patent fees. The advantage of the FAT regime is that the amount of FAT does not depend on the amount of a company’s income. Instead it is calculated based on the total area and value of the land which is either owned or rented by the taxpayer.
The agricultural companies which did not opt for the FAT are required to pay the land tax imposed on owners and users of land. The amount of tax payable depends on the use (e.g. farmland) and location of the land. Agricultural land is taxed at a rate of 0.03-0.1% of the estimated value which is normally immaterial for most of agricultural producers.
|Ministry of Agrarian Policy of Ukraine||Governmental institution.
Mission is to work for the development of rural areas and improvement in agriculture and livestock production
|24, Khreshchatyk str., Kyiv 01001
Tel: (+380 44) 279-84-74
|Organic Federation||Governmental institution.
Mission is the conservation and regeneration of the environment through the introduction of organic technologies in production
|4, Obolonska str., Kyiv 04071
Tel: (+380 44) 425-55-25;
Fax: (+380 44) 425-45-90
|Agrarian Fund||Governmental institution.
Mission is the realization of the pricing policy on behalf of the state
|1, Borisa Grinchenko str.,
Теl: (+380 44) 278-78-43,
Fax: (+380 44) 279-74-01
|Ukrainian Agrarian Confederation||All-Ukrainian public organization.
The aim of this organization is to maintain a sustainable development of Ukrainian agro-industrial complex and promote its integration into the world market
|53/80, Saksaganskogo str.,
office 807, Kyiv 01033
Tel./Fax: (+380 44) 287-65-66,
|Agrarian Union of Ukraine||All-Ukrainian public organization.
Mission is to unite the efforts of large farms for increasing production, improving its quality and efficiency of management based on market demands; create favorable conditions for living and work of the agro workers
|24, Khreschatyk str., off. 504-505
Tel. (+380 44) 226-30-42;
Fax (+380 44) 278-29-84
|Association of Farmers and Private Land Owners of Ukraine||All-Ukrainian public organization.
The purpose of the Association is to promote mass farming movement in Ukraine and proper public control over the authorities in protecting the rights and legal interests of farmers and landowners
|21, Patrisa Lumumby, off.411
Теl: (+380 44) 501-78-73,
|Ukrainian Grain Association||All-Ukrainian public organization.
Mission is to protect its members’ interests both on domestic and international levels and develop the domestic grain market
|13, Predslavynska Str.,
Tel: (+380 44) 528-67-64
Fax: (+380 44) 528-67-99
|Union of Poultry Farmers in Ukraine||All-Ukrainian public organization.
Mission is to consolidate the efforts of the industry players to address the common problems and support the interests of the poultry farmers in front of the state administration
Tel: (+380 44) 494-49-30
|National Association of Milk Producers of Ukraine “Ukrmolprom”||All-Ukrainian public organization.
Mission is to consolidate the efforts of the industry players to address the common problems and support interests of the milk producers in front of the state administration
|1,Grinchenko str, 01001 Kyiv
Tel: (+380 44) 226-27-83,
(+380 44) 279-83-89;
Fax: (+380 44) 279-73-89
|Association “Ukroliyaprom”||All-Ukrainian public organization.
Mission is to coordinate and support its members in addressing common organizational, economic, technical and other issues
|1,Grinchenko str, 01001 Kyiv
Тel/Fax: (+380 44) 226-31-38
(+380 44) 279-63-56,
(+380 44) 279-82-45,
(+380 44) 279-68-89
|National Association of Sugar Producers of Ukraine “Ukrtsukor”||All-Ukrainian public organization.
Mission is to coordinate and support its members in addressing common organizational, economic, technical and other issues
Тel: (+380 44) 227-31-41
Fax: (+380 44) 279-66-83
|Association “Winegrowers and Winemakers of Ukraine”||All-Ukrainian public organization.
The mission is to promote the development of viticulture and wine-making in Ukraine
|4, Vinogradniy lane, off. 2
Тel: (+380 44) 253-07-06,
(+380 44) 253-26-83
|Association Ukrainian Agribusiness Club||All-Ukrainian public organization.
Organization’s objective is realizing and protecting the civil, social, economical, professional and other interests and liberties of its members through assistance in implementation of educational and scientific activities in agricultural business sphere
|20А,Velyka Zhytomyrska str., office 53
Tel: (+380 44) 201-49-50
Fax: (+380 44) 201-49-51
|APK Inform||Educational and scientific activities in agricultural business sphere||21,Checherina str,3rd floor
Tel/Fax: (+380 56) 232-07-95
|Ukragroconsult||Consulting and analytical services for agro and food sectors||29B,Tymoshenko str,off.5
Tel: (+380 44) 451-46-34
Fax: (+380 44) 451-46-34
|Agroperspectiva||Information and Analytical Centre for agricultural and chemical businesses||LLC “Аgrarika” PO Box 90
Tel/Fax: (+380 44) 220-24-51