Will Ukraine's agriculture get a boost with reform?

As of July 1, it will be possible for the first time in 20 years to buy and sell agricultural land in Ukraine. According to the Ukrainian government, this is the first step towards better and more efficient farmers in the fertile land, because it attracts investors. Ukrainians themselves are hard-headed.

Ukraine was once called the breadbasket of the Soviet Union. With the long-awaited agrarian reform of 1 July, the country, burdened by corruption and vested political interests, finally wants to live up to that eternal expectation. The world is ready, now that food prices are up to highest level in ten years are due to, among other things, the corona crisis.

No agricultural topper
Although Ukraine has some of the most fertile agricultural soils in the world, the country has never proven itself as an agricultural topper. It is the world's largest exporter of sunflower oil, the fourth largest producer of maize (although the yield is a third lower than that in the US) and a supplier of grain (even with a hectare yield that is a quarter lower than in the EU) to countries from Morocco to Bangladesh and Indonesia.

This is partly due to the fact that in Soviet times agricultural land was expropriated and the buying and selling of land was prohibited. A ban that now independent Ukraine reintroduced in 2001, to prevent the super-rich and foreigners from taking their farmlands. As a result of those bans, farmers could only lease agricultural land and that hindered its development.

President Volodymyr Zelenskiy, who took office in 2019, wants to boost the Ukrainian economy by making agricultural land available again to landowners. From July 1, all Ukrainians will be able to buy and cultivate a maximum of 100 hectares of agricultural land. That could increase gross domestic product (GDP) by 1,5 percentage points per year in the coming years, the Kyiv School of Economics expects.

'World-class event'
"This reform is a world-class event, because it is important not only for Ukraine, but for the whole world," said Oleg Nivievskyi of the Kyiv School of Economics. "For the Ukrainians it's extra export income, but for the rest of the world it's extra food." Ukraine is already in talks with the Gulf States and Saudi Arabia, which have little agricultural land of their own but do have the money to buy the proceeds of Ukrainian agriculture. Or the ground itself. “We will ensure at every stage of this process that Ukrainians are protected from the greed of magnates and corrupt officials,” said Roman Leshchenko, agriculture minister, this spring. "The government never loses sight of the central idea that Ukraine's agricultural lands are the nation's greatest asset."

Ukraine's potential agricultural area is 40 million hectares, writes Bloomberg and is as big as more than 20 times the Dutch agricultural area where one hectare costs between €70.000 and 120.000 while a new buyer in Ukraine is ready for around €1.500. For €15 million you can buy 10.000 Ukrainian hectares, in the Netherlands you can buy at most 150 hectares for that amount on the best soil, 67 times more expensive.

Not fulfilling promise
But will Zelenskiy be able to give this land back to the Ukrainians for better farming? History shows that Ukraine is failing to keep its promises time and again. Corruption is rampant in the country, something Zelenskiy promised to tackle when he took office.

For the time being, the plans do not immediately inspire confidence among the Ukrainian population. According to a majority, a referendum on the agricultural plans is desirable. But in such a referendum, two-thirds already say they will vote against. If the step in Ukraine is successful this time, the production prices for Western European agriculture will come under serious pressure with open borders. Just like countries in Eastern Europe, Ukraine can produce significantly cheaper than Northwestern European farmers who are among the most expensive in the world.

This article is part of the content collaboration between Boerenbusiness en foodlog.

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