This page contains a Flash digital edition of a book.

Ukrainian cereal exports (thousand tones) Cereals

wheat barley maize*

2004/05 ME 4 182,99

4 271,88 2 300,88

2005/06 ME 6 464,97

3 952,02 2 507,56

and the level of taxes to be paid is based on the price paid. Baker Tilley considers this level to be too low, citing the example of Poland where during a ten-year period before joining the EU the average price per hectare rose from US $250 to US $3,500.

Baker Tilley considers there to be several

negative aspects to the current land market in Ukraine:

2006/07 ME 3 311,68

5 144,28 1 032,79

2007/08 ME 893,16

1 037,26 2 057,78

for Ukrainian land, which is a favourable situation for medium to long-term investors.

Another factor is the annual loss of soil

from Ukrainian fields, which averages 15 to 20 tonnes per hectare. More than 30 million hectares of agricultural land has been recognised as degraded, and for some 14 to 17 million hectares the erosion is described as hazardous. Given that the total area of farmland

2008/09 ME 12 637,24

6 334,21 5 516,14

2009/10 ME* 9 687,28

5 991,97 6 649,15

*marketing year (ME) lasts from September to August

turn, the maintenance of effective agricultural production will require a manifold increase in quantities of fertilisers to replenish the ground and this will support significant growth in the chemical and transportation industries.

Activities that facilitate increased

productivity of private holdings, purchasing of new equipment, the need for increased production and storage capacities - will all stimulate the revival of construction in rural areas, as well as increased demand for regional construction companies. Consequently, the outbreak of free sale land trading will certainly attract serious money in the agricultural sector of the economy. But the lion’s share of the funds, especially at first, will go to the companies serving agriculture, and thus initially these are the parts of the agricultural sector who will profit.

Complex vertical investments are forecast The ban on free land trade (discussed above)

and the lack of a complete legal framework for the land market.

If we assess the value of a hectare of land

in terms of payback period on investment, the payback period may reach 15 years in relation to the fall in wheat crops in recent years and a parallel increase in the price per hectare of land. Larger crop yields can only be achieved where there has been appropriate investment for decades.

In predicting the cost per hectare it is also

necessary to consider the fact that at the start of land trading there will potentially be six million inexperienced sellers of prime land – for that is how many farmers are due to receive land certificates. It is estimated that one third of children who inherit these land certificates will have been living in cities for a considerable time, and in most cases, they do not need land to carry out their occupation, but no doubt will always need money. In addition, within villages there is unfortunately a high percentage of people will not be eligible to be given any kind of property. Consequently, there is a high probability that the first year of trading will record significantly lower values

in Ukraine is about 42 million hectares (or 70 percent of the country), of which arable land is 33 million hectares, the conclusion is that almost all agricultural land in Ukraine has been degraded. In Ukraine, unlike in the EU, fields are not left fallow (removed from production, eg left in grass to restore nitrogen levels, and so improve fertility).

Government officials play different roles in

this process. If crop rotation and leaving fields fallow were established in Ukraine, which is thought very likely, it could be that a long term land investor could face the need to sow his field with daisies for five or ten years and breed rabbits on it. As a result, current and future investors will be given the opportunity to buy land more suitable for extraction of clay or construction of a brick factory, rather than for growing corn or building a pig farm.

Potential agricultural sector investors should

also to consider the alternative of investment in agricultural services, rather than the land itself. There are important requirements for domestic agriculture in terms of new technology, which guarantee a serious increase in the need for production of machinery, especially in the first year of free land trading. In

22 UkraineBusiness insight October/November 2010 An unusual aspect of investing in agricultural

land in Ukraine is that before purchasing, it is advisable to carry out an inspection of the land for radioactive and other pollution, and evaluate whether it is viable to produce environmentally friendly and economically profitable agricultural products. However, the ‘less pure land’, which can be used for biofuel production, will be cheaper. Many believe that given its immense potential and development prospects, the time is now ripe for Ukraine’s agrarian sector to take its rightful place in European and world markets. UBi

Contributed by Nataliya Polyanskaya, Partner, Valuation Advisory, Baker Tilly Ukraine AC E-mail:

to be the most successful, ie the investment not only in the cultivation of crops, but also in their storage, processing, sale, and manufacturing of machinery and fertilisers. Such agro-industrial co-operation pays off in other countries and allows management of costs of production through the entire chain, from field to consumer. This integrated model reflects the economic structures of the former agro-industrial complexes which remain.

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44
Produced with Yudu -