PARIS (Reuters) — Limited access to credit due to the political crisis in Ukraine could shrink grains crops by up to 15 percent this season partly because farmers spent less on fertilizers and pesticides, an executive at AgroGeneration, one of the country’s largest farm operators, said.
Analysts have been hopeful that favourable weather has brightened prospects for the 2014 grain harvest in Ukraine, one of the world’s largest grain exporting countries, easing drawbacks related to the lack of financing available for sowing.
But Charles Vilgrain, deputy chief executive and co-founder of French group AgroGeneration, which grows over 247,000 acres of grains in the Black Sea country, is less optimistic.
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“To sow is one thing, then you need to raise the crops in good shape up to the harvest. I would bet on a drop of 10 to 15 percent in the Ukrainian crop this season,” he told Reuters in an interview.
Ukraine harvested a record 63 million tonnes of grains last year but Vilgrain said lenders’ reluctance to offer favourable loans to farmers due to the political situation, which had already hampered spring sowings this year, may be forced to cut the use of fertilizers and pesticides.
“Too many operators, whatever their size, did not have the necessary financing to bring the crops from sowing to harvest with the yield they wished for,” he said, adding that there would also be a quality issue with wheat and barley.
AgroGeneration, which grows wheat, barley, corn and rapeseed, is among the five largest farm operators in Ukraine after a merger with agricultural group Harmelia last year.
The company also experienced financing hiccups, delaying by a few days the payment of q bond interest due on April 1 because of delays in money transfers linked to the political problems.
The election of a new president in Ukraine could ease lending conditions but that could be too late for some, creating new opportunities for survivors, Vilgrain said. This could include takeovers of struggling companies.
“There are many companies which will be in a precarious situation, and not necessarily bad ones,” he said.
“Either some which, like us had a bad year in 2013 but did not have broad enough shoulders to handle it, or some which did not have the ad hoc financing for this 2014 campaign. Inevitably this will create new opportunities,” he added.
Ukraine was all the more important now the group had pulled out of Argentina, where it was co-managing over 39,000 acres of land.
“Argentina had also become a sensitive environment both politically and economically, with restrictions on free transfers of capital and currencies, which was not reassuring for existing or future investors,” he said.
Diversifying internationally is still part of the group’s objectives but he declined to give further details.
“We will concentrate on Ukraine first,” he said.
