“If all of Ukraine’s farms could produce the yields we are getting, this country could play a big role in feeding the world and establish itself as a geopolitical power,” says the British chief executive of London-listed Landkom.
Once considered the bread basket of Europe, Ukraine’s farms are still recovering from the economic collapse that followed the break-up of the Soviet Union. In spite of a favourable climate and some of the planet’s most fertile soils, grain production halved after the Stalin-era collective farm system was broken up and wheat fields were turned over to pasture.
Landkom’s business model is simple: lease inefficiently farmed land and apply western fertilisers and irrigation. With Ukraine’s grain yield about 35 per cent of western Europe’s, there is plenty of scope to improve returns.
Landkom, which raised just over $100m on Aim, London’s junior stock market, last year, has leased more than 100,000 hectares. And it is just one of of a growing number of agribusinesses that sees profit in Ukraine.
Ukraine has a very long tradition of being an agricultural center and even exporter. Besides Egypt, Rome - yes, the Roman Empire, used to import wheat from Ukraine ages ago. This tradition continued for millenia, amazingly enough, but has fallen on hard times in the past, and most recently again after the fall of the Soviet Union. Though, truthfully, it was a little sick even then compared to its Western counterparts.
Now Western companies are looking at redeveloping the agricultural sector in Ukraine. This would be fantastic...if they can work around the problems with pollution, etc. This would probably, at least initially, take place in Western Ukraine where agriculture has been strongest. However, the whole of Ukraine, minus the worst polluted parts, could participate in this. That rich black soil exists even in Gorlovka where my wife's family is from.
The second problem is of course, the land market. It's really screwy and I don't understand at all how it can possibly exist: apparently they can't sell their lots...which to me is just plain odd. However, the transfer of ownership is a nightmare for any real estate: my father-in-law died and left his house to his daughters. Lyuda does not want it since she lives here in the States and wants to just sign over her half to her sister whom still does live in Ukraine. It has been an outright bureaucratic nightmare that we have been trying to resolve for two years without luck.
Finally, of course, one cannot talk about doing business in Ukraine without discussing the corruption. Anyone gets going well is going to attract the economic undead that will want to suck the life out of anyone or any company with money. If that doesn't get fixed...this is all just a wash.
However, Ukraine as the breadbasket has appeal. It's an absolute advantage that no one can really outdo. That soil is pretty amazing stuff. While my gardening has been restricted to the soils of Southwestern US, the stuff they have is just profoundly good to work with as I found when I did so a couple years ago.
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