Ukraine bid­ding to be­come bread­bas­ket of Europe again

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Olek­sandr Verzhykhovskiy slips a crisp stalk of wheat through his fin­gers and sur­veys the sun-drenched fields that once made war-torn Ukraine the "bread­bas­ket of Europe" -- and now em­body its eco­nomic hopes.

"This is a trea­sure -- if you know how to treat it right," the 29-year-old chief ex­ec­u­tive of the AgroKIM agri­cul­ture com­pany said with a list­ful air. But the three brand new com­bines work­ing these fields about 100 kilo­me­tres (60 miles) north of Kiev are in­te­gral el­e­ments in the mad­den­ing state of af­fairs the cri­siswracked ex-Soviet state faces.

Verzhykhovskiy's boom­ing crop holds the prom­ise of Ukraine re­gain­ing its ti­tle as one of the world's main sup­pli­ers of var­i­ous grains. But the nearby ham­let of Mala Divytsa re­flects the far more de­press­ing re­al­ity of di­lap­i­dated houses and pot­holed roads that seem to have last been patched up in long-gone com­mu­nist times. The 16month-long sep­a­ratist in­sur­gency has shut­tered much of east Ukraine's heavy in­dus­try and claimed more than 6,800 lives. It has also sent eco­nomic shock waves through­out the coun­try of more than 40 mil­lion.

The econ­omy con­tracted by nearly seven per­cent last year and is pro­jected to do even worse in 2015. Ukraine de­pends on Western fi­nan­cial as­sis­tance -- funds that pri­mar­ily go to pay off old debts.

Fac­tory out­put is down by nearly a fifth from last sum­mer and con­sumers are buy­ing 25 per­cent less than they did a year ago. But Verzhykhovskiy looks at his sway­ing stalks and smiles.

Ukraine's to­tal crop pro­duc­tion reached a post-Soviet record of 63 mil­lion tonnes in 2014 and is on course to nearly match that mark this year. The bat­tled-scarred na­tion - - so ea­ger to wres­tle it­self away from Moscow and fully em­brace the West -man­aged to ex­port an im­pres­sive 34.5 mil­lion tonnes of grain in 2014. The Fi­nan­cial Times wrote last month that Ukraine was set to be­come China's top sup­plier of corn in the first half of this year. The Lon­don busi­ness daily re­ported that close to an eye­pop­ping 90 per­cent of China's maize im­ports came from Ukraine -- and not its di­rect neigh­bour and fel­low agri­cul­tural power Rus­sia.

Moscow's ex­ports have been par­tic­u­larly hard-hit by a trade war with the West that was sparked by the Krem­lin's March 2014 seizure of Ukraine's Crimea penin­sula. It has helped that the fight­ing has left most cul­ti­vated fields un­touched. A cen­turies-old farm­ing tra­di­tion also inspires many Ukraini­ans to feel spe­cial pride in their land. But some fac­tors are well out­side Verzhykhovskiy's con­trol. A strong dol­lar has seen com­modi­ties lose value and the price of corn drop by about 15 per­cent since the start of the year.

"Prices are not good," the young farm boss con­ceded. "We op­er­ate with­out a profit on most of our ce­re­als." This has cut off for­eign in­vest­ments and left Ukrainian farm­ers re­liant on lo­cal banks for loans loaded with ex­or­bi­tant in­ter­est rates few can af­ford. "Last year was tough on in­vest­ment," Deputy Agri­cul­ture Min­is­ter Olek­siy Pavlenko told AFP But the min­is­ter is plac­ing hope on $1 bil­lion in new farm­ing equip­ment that has been promised by the United States. Bei­jing and Kiev signed a $3 bil­lion loan-for-corn deal in 2012 which Ukraine also hopes to ex­tend. All that ma­chin­ery would find plenty of fer­tile land to plough.

The World Bank es­ti­mates that more than 70 per­cent of Ukraine's ter­ri­tory is arable for farm­ing. The rate is Europe's sec­ond high­est and bested only by small and im­pov­er­ished Moldova. But econ­o­mists and the agri­cul­ture min­istry ad­mit that the sec­tor now needs a push that can only come from pri­vate in­vest­ment.

World Bank data also shows all Ukraine's cul­ti­vated land yield­ing about 4,000 kilo­grams of ce­real per hectare (3,600 pounds per acre) -- about half the rate of Ger­many and sim­i­lar to that of Canada. Yet for­eign­ers re­main wary about plough­ing money into even the peace­ful parts of the un­set­tled east Euro­pean coun­try.

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