KIEV, Ukraine – The list of obstacles facing Ukrainian farmers might seem long and insurmountable.
Incomplete land reform, out-of-date equipment, poor infrastructure and lack of cash flow all hinder their ability to make a living.
The government is in a perpetual state of political infighting. The hryvnia, Ukraine’s currency, has performed poorly in the financial crisis, falling 40 percent through autumn before strengthening in late December.
As well, much of this year’s large crop was feed quality.
However, therein lies the potential.
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Ukraine has fertile agricultural land and lots of it. Various international agencies have worked in the country since it declared independence 17 years ago to help develop a sustainable industry that generates cash flow and makes best use of the land.
“Their production is expanding,” said a senior grain analyst at the U.S. Department of Agriculture.
“At this point, consumption has not kept pace and they have become net exporters of wheat, barley and corn.”
A mid-October estimate from the agriculture ministry suggested exports could be as high as 17.5 million tonnes.
The former Soviet Union, to which Ukraine belonged, was a net importer.
Ukraine produces a lower protein winter wheat that is most comparable in North America to soft red winter wheat varieties.
“Their wheat is more competitive with U.K. wheat or lower class French wheat,” the analyst saId.
It will also compete with Russian wheat but less so with the crop from Kazakhstan.
Buyers in Africa, the Middle East and South Asia blend lower quality Ukrainian wheat with higher quality grain from elsewhere. Egypt, for example, is a battleground because it imports both qualities for blending.
Ukraine’s feed wheat typically goes to Spain, Portugal, Italy and Greece by Mediterranean barges, giving it a competitive advantage over French or German wheat.
The Ukrainian price is the determining factor in these markets, the analyst added, although erratic quality and export policies that limit shipments and artificially set prices also play roles. These issues don’t exactly create good will with customers, he said.
Canadian Wheat Board market analyst Bruce Burnett said Ukrainian production tanked soon after Soviet republics began gaining independence. Farmers couldn’t afford fertilizer to keep their land in good condition and keep yields strong, and its use dropped by 85 percent.
The livestock industry also took a dive, and feed wheat that would have produced meat instead hit the international market.
“Wheat is of a lower quality inherently in that region,” Burnett said.
“It is what it is. They do have to invest in breeding and these types of things, but it’s not going to improve overnight.”
Still, local users find it satisfactory, and mills are set up to grind it.
Burnett said having another large player in the wheat market is a concern.
“It depresses the price structure for all wheat,” he said.
“The base is pulled down.”
He added that if Ukraine could improve its wheat to a hard red winter, similar to that grown in the United States, it could cut into some of Canada’s customer base for Canada Prairie Spring and winter wheat classes.
