2017 har­vest good, but will fall short of 2016's record

Kyiv Post - - Business Focus - BY JOSH KOVENSKY KOVENSKY@KYIVPOST.COM

It was a good har­vest in Ukraine.

The Min­istry of Agri­cul­ture ex­pects 62 mil­lion tons of corn and wheat to be har­vested by the end of the sea­son. That would make this year’s har­vest the sec­ond-best ever, af­ter last year’s record, when the na­tion’s farm­ers gath­ered 66 mil­lion tons.

But it was, none­the­less, dis­ap­point­ing as grain har­vests have been on a ris­ing trend since 2013.

Bad weather

The govern­ment blames lower yields this year on bad weather.

Maksym Mar­tynyuk, act­ing agri­cul­ture min­is­ter, said that the re­sult is still good “thanks to the fact that the weather was not bad ev­ery­where.” He said that the coun­try’s cen­tral steppe had re­ceived less pre­cip­i­ta­tion in win­ter than ex­pected. Dragon Cap­i­tal in­vest­ment bank also noted low rain­fall. It wrote in a re­cent re­search note that it ex­pects a 15 per­cent de­cline in corn yields com­pared to last year be­cause of a lack of pre­cip­i­ta­tion in July-Septem­ber.

“The lat­est 2017 har­vest es­ti­mates are still above Ukraine’s av­er­age for the past five years of 60 mil­lion tons,” the bank wrote.

But Dmitry Churin, an an­a­lyst at Eavex Cap­i­tal, ar­gued that weather did not play as de­ci­sive a role as many ar­gue. In­stead, he said that years of record har­vests had led to the soil be­ing over­farmed.

“The land can­not de­liver high- er re­sults every year,” Churin said. “Af­ter three years, it’s very hard to have the same har­vest yield.”

Another fac­tor is that many farm­ers were forced to add less fer­til­izer dur­ing plant­ing sea­son, in large part due to the shut­down of the Cherkasy Azot plant. The plant, which be­longs to ex­iled bil­lion­aire oli­garch Dmytro Fir­tash through his Ostchem plant, has faced dif­fi­cul­ties over debt and ac­cess to nat­u­ral gas. Fir­tash is fight­ing ex­tra­di­tion to the U.S. from Aus­tria on cor­rup­tion charges that he de­nies.

“The agro­pro­duc­ers tried to re­duce their fer­til­izer dis­tri­bu­tion into the land, and that could be one of the rea­sons,” Churin said.

There are no other big do­mes­tic fer­til­izer sup­pli­ers, forc­ing farm­ers to im­port more ex­pen­sive fer­til­iz­ers from abroad.

Fewer ex­ports

Prof­its from this year’s har­vest likely won’t be as tow­er­ing as many in Kyiv would like. The drop in pro­duc­tion is likely to lead to a lower vol­ume of ex­ports over the com­ing six months.

Dragon Cap­i­tal wrote that it ex­pected grain ex­ports, from now un­til June, to drop by as much as 12 per­cent in com­par­i­son with last year, hit­ting around 40 mil­lion tons.

A lit­tle more than 20 mil­lion tons goes to do­mes­tic Ukrainian con­sump­tion.

Other ar­eas could see an uptick. Poul­try pro­duc­tion is spurred by My­ronivsky Hli­bo­pro­dukt’s ex­pan­sion of their Vin­nyt­sya pro­duc­tion plant. “But (MHP) will have cost pres­sures,” Churin said. “Feed cost will be higher for MHP be­cause of the lower har­vest.”

Mar­tynyuk said that other ar­eas of po­ten­tial ex­pan­sion and in­vest­ment could help in­crease fu­ture har­vests.

For­eign in­vestors are in­ter­ested in Ukrainian agri­cul­ture, but “gen­er­ally those with whom I’ve talked on the of­fi­cial level in the last year are not Euro­pean in­vestors,” Mar­tynyuk said.

He said that the Ira­nian govern­ment and Saudi Ara­bia had ex­pressed in­ter­est in in­creas­ing their in­vest­ment in Ukraine.

One po­ten­tial agree­ment with Iran would see Tehran lease thou­sands of hectares of agri­cul­tural land in Ukraine. The food pro­duced by th­ese farms would go back to Iran as part of a joint ven­ture with Ukrainian com­pa­nies.

Mar­tynyuk said the amount of grain pro­duced in Ukraine could reach 100 mil­lion tons per year, re­quir­ing mul­ti­mil­lion-dol­lar in­vest­ments in more stor­age ter­mi­nals and el­e­va­tors.

Ukraine’s grain har­vest

2012

Act­ing Ukrainian Agri­cul­ture Min­is­ter Maksym Mar­tynyuk speaks with the Kyiv Post in his of­fice on Oct. 20. (Oleg Pe­tra­siuk)

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