Tag: food production

Farms for sale in crisis-ridden Ukraine

Experts say the crisis in Ukraine is set to trigger the sale of state-owned farm land and small family plots to foreigners

Ukraine, known as Europe’s bread basket, has the eighth largest agricultural area in use globally and is the world’s third largest exporter of corn and sixth largest grain grower, potentially making it a prime target for foreign investment.

But the government has been wary of allowing foreign land sales, fearing rural unrest, and the value of its 32 million hectares (79 million acres) of farmland has been limited by its division into small plots with relatively low productivity.

However economic turmoil emanating from the conflict between pro-Russia rebels and government forces in the east has intensified the need for change, said Heinz Strubenhoff, agribusiness investment manager for the World Bank’s International Finance Corporation in Ukraine.

Opening the farm sector, a key driver of the economy, to outside investors has long been backed by the World Bank and International Monetary Fund (IMF), and Strubenhoff believes changes will now happen sooner rather than later.

“It’s time to think about privatization. They need to prepare everything to allow for farm land sales (to foreign and domestic investors) in three to four years,” Strubenhoff told the Thomson Reuters Foundation.

Currently, farm land cannot be bought or sold in Ukraine, but companies can sign onto long-term leases with small holders.

President Petro Poroshenko, elected last May after protests ousted previous Russian-backed leader Viktor Yanukovich, had considered lifting restrictions on land sales during “long discussions” with World Bank officials, Strubenhoff said.

But Kiev backed off the move as it feared a backlash from rural communities, he said.

Ukraine’s Ministry of Agriculture was unable to immediately respond to requests for comment.

Agriculture Minister Oleksiy Pavlenko told local media last month that he believes Ukraine can produce 100 million tonnes of grain annually by 2020, up from 62 million tonnes in 2014.

To nearly double production, the country aims to attract $25 billion in outside investment for agriculture, Pavlenko said.

But enticing new capital in the midst of the conflict that has displaced nearly a million people won’t be easy.

Jean-Jacques Hervé, counselor to the board for agriculture at France’s Credit Agricole Bank in Ukraine, said local people don’t have enough money to buy the land.

“Speculators with access to foreign currency would be the biggest winners (if the land market was opened),” he told the Thomson Reuters Foundation.

Selling land to foreign investors could cause problems and the government should instead help get finance to farmers, search for new export markets and simplify the procedures for land leases, he said.

Frédéric Mousseau, policy director of the Oakland Institute, an NGO critical of privatization, said pushing Ukraine to open its land market would end up giving domestic and foreign oligarchs more control over the country’s agriculture potential.

“About 20 percent of the country’s most fertile lands are already controlled by large agribusiness firms (through long-term leases),” Mousseau told the Thomson Reuters Foundation.

“The (proposed) reforms would just intensify this concentration.”

But despite concerns from some quarters, U.N. officials are backing the World Bank’s view on sales.

“In the long term, Ukraine should aim to open its land market to allow optimum resource allocation,” Dmitry Prikhodko, an economist with the U.N.’s Food and Agriculture Organization (FAO) told the Thomson Reuters Foundation.

With foreign currency reserves low, Kiev needs the World Bank’s money – up to $2 billion this year with another $8 billion from the IMF – which potentially gives officials like Strubenhoff greater policy leverage.

“There is a big chance in the crisis for the Ukrainian government,” Strubenhoff said.

Source: Reuters

Oligarchs, seed companies benefit from land redistribution

The federal government has admitted that national and international companies in Ukraine benefit from EU subsidies and loans. Fertile lands in Ukraine are being transferred to Ukrainian oligarchs and international seed companies, and in return the Kiev government receives international loans.

The inquiry of the parliamentary group of the Left Party, submitted on January 19, 2015, criticizes the ‘land grabbing’, i.e. the ‘landgrab by states and major national and international companies’ in Ukraine.

Concerned citizens are outraged over a planned redistribution of land:

‘In the shadow of the Ukrainian crisis we can observe an alarming transfer of land to Ukrainian oligarchs, but also Western publicly owned agricultural companies and non-Western states. In the past Ukraine was considered a breadbasket of the Soviet Union and thanks to the considerable amount of black earth is known to be particularly fruitful and productive. With 32 million hectares of crop land Ukraine has twice as much crop area as ​​Germany. Ukrainian and foreign agroholdings already control about half of the Ukrainian agricultural land, which is about 17 million hectares. The lessors generate low income due to the low rent payments and are sometimes even paid in kind’.

Seed producers have a strong interest in Ukrainian lands:

‘Ukraine is one of the auspicious growth markets for seed producers Monsanto and DuPont. It is feared that Monsanto exercises great pressure on the authorities in Ukraine to force through its demands for development of production of biotechnology and genetically modified organisms (GMOs). Last year Monsanto invested 140 million to increase the capability for future production’.

German companies also benefit from the ‘land grabbing’:

‘One of the German companies that profit from land grabbing in Eastern Europe, is AGRARIUS AG, founded in 2007 with headquartered in Bad Homburg, which offers ‘investment in farmland’ and services related to the purchase of land. In Hamburg German agricultural CEE GmbH lures with returns of 100 percent in the ‘most interesting agricultural market in the world’, and KTG Agrar SE, also based in Hamburg, advertises organic products because they promise a much higher profit margin’.

International and national companies receive financial, developmental and EU subsidies. In the past ten years agricultural corporations have been increasingly cultivating rapeseed in Ukraine. This is connected with the increased needs of the EU for biofuels. About 90 percent of rape is exported to the EU and processed there. The federal government reported as part of the inquiry that the European Bank for Reconstruction and Development (EBRD) had awarded 2,014 loans to a total of 131 Ukrainian and 55 international agroholdings.

To the question of whether the agricultural concerns DuPont and Monsanto would receive KfW loans for its operations in Ukraine, the federal government was not willing to give a clear answer.

It is stated in the response:

‘The publication of information on granting of credit by the KfW bank group affects trade and business secrets of the concerned companies. The public response to the question of whether and to what extent a company finances its business activities and by which type of loan is generally suitable to give competitors information not only about the financial resources of a company, but also about its strategy and positioning in the market’.

Source: German Economic News