Throughout modern history Ukraine has been called the “bread basket of Europe”. Today the country is frequently referred to as being a potential global agricultural superpower. Ukraine comes by this reputation justifiably, as its agricultural output is legendary.
A recently published report by Baker Tilly, Credit Agricole and AEQUO highlights just how much the sector has grown in the last two years.
By European standards Ukraine’s land resources are enormous. Over 70% of the country’s total area is agricultural land. This amounts to just over 42 million hectares of which 32 million is arable land suitable for grain and vegetable farming. In addition Ukraine possesses a significant amount of rich fertile black soil known as “chornozem” representing 30% of the world’s reserves.
These advantages are further leveraged by Ukraine’s favorable geographic location which places it in a temperate continental climate zone with adequate access to water and transportation networks. The sector also benefits from the services of a highly skilled and large labor pool where approximately 25% of Ukraine’s 44.5 million population is employed in the agricultural sector.
The largest portion of Ukraine’s present agricultural output consists of a diverse combination of cereal and forage crops including wheat, maize, barley, sunflowers, sugar beets, tobacco, legumes, fruits and vegetables.
Ukraine maintains a leading position as a large producer of cereal grains, particularly wheat. The entire annual cereal crop can reach as high as 90-100 million tons. Assuming a favorable harvest and discounting the 40-50 million tons needed for the domestic market, this still leaves approximately 50-60 million tons available for export on an annual basis. With such outputs, Ukraine currently occupies third place on the world grain export market.
Industry experts predict that by the mid-2020s, Ukraine will be No. 3 in food production worldwide, second only to the U.S. and Brazil, .
Another major growth opportunity for Ukraine lies in the area of organic farming where the country’s unspoiled soil allows it to become a major producer of organic food. Many hundreds of thousands of acres are already devoted to organic farming and in time Ukraine expects to become a major exporter to Western Europe to meet the ever-increasing demand for such organics.
Long Term Land Lease – A Path to Purchase
Ukraine’s agricultural land remains one of the best mid to long-term investment opportunities in the world. Although Ukraine’s agricultural land may not be currently bought and sold there is a dynamic and flourishing market in valid leasehold agreements ranging anywhere from 5 to 15 years and sometimes extending to 25 and even 49 years, – the maximum permitted under existing Ukrainian law. Moreover many such leases contain a provision granting the lessee the first right of refusal to buy the land should the current moratorium be lifted during the term of the lease.
Despite the recent decision by Ukraine’s Parliament (January 2017) to extend the existing moratorium on agricultural land sales until January 2018, the present government has pledged to reform the agricultural sector by the end of 2020. The current government’s path to success by 2020 is built on:
The reforms, which would include lifting the moratorium, are motivated by the Government’s desire to minimize social discord and implement a balanced and agreed upon model that is designed and endorsed by all the relevant stakeholders in the agricultural sector.