As seeding progresses in Ukraine, farmers are eyeing input prices, markets and weather, just as their counterparts do in other parts of the world. But Ukraine’s farmers have the added worry of whether conflict in the eastern part of the country will boil over.
Last week Russian and Ukrainian officials signed an accord agreeing to back away from further violence and calling for demonstrators to leave public buildings in eastern Ukraine. But three pro-Russia separatists were slain in a shootout in the eastern city of Slavyansk over the weekend, and the bodies of two people allegedly abducted by pro-Russian activists were discovered Tuesday. Ukraine forces on Thursday reportedly killed up to five pro-Moscow separatists.
Both sides lay blame for the violence on the other’s doorstep; Russian President Vladimir Putin most recently warned of “consequences” if Kiev used its army against its own people. The U.S. is now deploying NATO troops to Eastern Europe.
Mike Lee, an agribusiness consultant based in the western Ukraine city of Lviv, said the conflicts have polarized people. Lee is originally from the United Kingdom but he’s also worked in Kazakhstan, Uzbekistan and Russia. He now works with private investors setting up farms in Ukraine.
It’s difficult to know whether Russia is stirring up trouble in eastern Ukraine, or whether the separatists are local people unsure about legislators in Kiev, he said.
“In all conflicts, the first casualty is the truth, and it’s very difficult to actually find out what’s going on. Time will tell, I suppose,” said Lee.
Crop season already difficult
Lee said Lviv is quiet right now but the conflict in the east is affecting agricultural production throughout Ukraine. “I do see the inflation and exchange rate having a big impact on an already difficult season.” [Related story]
Commodity prices collapsed after the 2013 harvest, Lee said. “That collapse has made a big hole in everybody’s cash position. And cash is king.”
Ukraine’s planting season is 20 days ahead of what it was last year. There’s an urgency to get the crop in the ground, but Lee said he thinks “people are struggling.”
Lee expects to see more land left fallow and less corn in the ground this spring.
“The last three years I’ve had my suppliers on the phone at this time of year screaming at me that supplies of (maize) seeds have run down,” he said.
But the phones have been quiet this year, he said. “So that tells me that there’s a surplus of maize seed to go in the ground.”
Gas prices are also climbing, which will turn maize drying from a costly exercise to a “prohibitively costly exercise,” said Lee.
Fertilizer is available, although it’s more expensive. How much fertilizer will be applied to seeded acres is a question mark, Lee said.
On the positive side, Ukraine has been getting much-needed rain recently. Spring cereals and rapeseed have been planted and maize planting is gaining momentum, Lee said.
“If we don’t get a wash-out through the rest of this month, into next month, I could see crops going into the ground in good time, in good fashion,” said Lee.
“How they perform after that with the amount of fertilizer that may or may not be applied, we’ll see.”
Longer-term view in ag
Lee said there is a group of legislators in Kiev who are “trying to bring in sensible changes to legislation.”
For example, the Ukraine government recently announced land leases would be extended “which on the face of it is a good thing because it encourages a bit more of a longer-term view, which is what agriculture needs,” said Lee.
There is a moratorium on selling agricultural land in Ukraine. Lee said expectations that the government will eventually lift the moratorium have created a culture of short-term rental agreements “where landlords are looking to have a short lease because they want to be able to sell at the first opportunity.”
Renters have first refusal for extending lease agreements or land sales once they’ve started renting a chunk of land, said Lee. But renters “find it difficult to invest long-term in the land because leases are relatively short.”
A working group with Ukraine’s Ministry of Agrarian Policy and Food is also considering loosening regulations around importing plant protection products by moving to a licensing system, a move Lee said could significantly boost wheat yields in years rather than decades.
Right now Ukrainian farmers can’t pick up the latest chemicals that are available to their Western European counterparts, Lee said. Generic chemicals are also available from third-party suppliers, but Lee said farmers who buy from them run the risk of buying adulterated products.
“So while there is a range of chemicals to use, it isn’t the sort of full armoury that we can go at, I presume, because there isn’t a big enough demand to bring in some of those more expensive chemicals,” said Lee.
“And the legislation and the process are so cumbersome and expensive that it’s not worthwhile.”
Lee said changing the legislation would “open up the market to allow the import of a wider range of chemicals into Ukraine.”
Other changes planned, or recently made, to Ukraine’s ag policy and legislation include cancelling grain and granary certification, developing the organic industry for export to the European Union, new lending support through the National Bank, simplifying agricultural land allocation, and renewing the Deputy Prime Minister position of the agrarian complex.