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Ukraine taking on bigger export role
With U.S. agriculture struggling to break out of a 19-year drought cycle, global competitors are casting a growing export shadow. In Eastern Europe, Ukraine is giving world grain markets a run for their money.
Based on corn alone, Ukraine’s production has risen from 272 million bushels to 1 billion bushels this year – driven partly by growing modernization and partly by attractive corn prices.
Ukraine’s domestic corn usage is growing just 3% a year, leaving an expanding amount of corn to export. Ukraine now exports more corn annually (650 million bushels) than it was able to grow just 10 years ago.
Advanced by an aggressive export policy, Ukraine’s agriculture ministry has increased its forecast for this year’s grain harvest to an all-time high of 57.9 million metric tons.
“We see the Black Sea area as a rising force,” says Ross Korves, an economic and trade policy analyst for Truth About Trade & Technology (truthabouttrade.org).
Ukraine, which is about the size of Texas, often is referred to as Europe’s breadbasket. Traditionally known for its winter wheat and rapeseed crops, vast tracts of Ukrainian acres have been transformed into corn and soybean production in the past decade to meet the demand from China, Africa, and the Middle East. Ukraine is expected to harvest 26 million tons of corn in 2013 and to export some 16 million tons of that during the 2013-2014 marketing year.
Iowans to Ukraine
The name of the game today in Ukraine is its giant agri-holdings – farms so large that some are equipped with
helipads. International money and foreign know-how are keeping these large farms running profitably.
Its capital, Kiev, is headquarters to an impressive concentration of world-class agribusiness managers who pull strings behind the scenes as they manage millions of acres of prime Ukrainian farmland for global investors.
In an effort to assess the competitiveness of Ukraine, the Iowa Farm Bureau sent a 20-person delegation to the Black Sea region this past summer. The group traveled 2,000 miles by bus, visiting some of the top growers and equipment suppliers.
Tour members were hosted by Iowan Jeffrey Rechkemmer, 59, director of farm operations at FarmGate, in Ukraine’s fertile corn belt where he manages roughly 17,500 acres of corn, soybeans, wheat, barley, and rapeseed.
“We’re a small agri-holding,” he says. “There are a lot of 250,000-acre and 500,000-acre groups around us here.”
The Ukrainian harvest season runs from July 1 to December 15, seven days a week, mostly 24 hours a day. Due to rampant theft, Rechkemmer says equipment left in the field is guarded by its operator until the next shift begins.
Ukraine is renown for its Chernozem belt, a massive black-soil area that stretches from Serbia into northern Bulgaria and southern Romania, to northeast Ukraine, southern Russia, and as far as Siberia. It’s one of only three high-fertility, black-soil regions on the planet. The other two areas are located in Argentina and the U.S. Midwest.
“They have all the natural resources we have in Iowa,” says Ben Bader, 27, who raises corn, soybeans, and hogs on 1,500 acres in east-central Iowa’s Black Hawk County. “When we talk topsoil, we’re talking inches. They’re talking feet.”
Iowa Farm Bureau district director Doug Groneau agrees that Ukraine is a serious competitor.
“After fighting erosion my entire career, their superb soil and the vastness create tremendous efficiency,” he says. “I’m envious about that.”
To bring more stability to its farming and exports, Ukraine would like to join the 28-nation European Union, but government leaders in Kiev fear the move might strain relations with Russia, Ukraine’s biggest grain customer. With U.S.-EU trade talks under way, Ukraine views EU membership as a launching pad to propel its productivity and customer base into the modern age.
Ukrainians more upbeat
Ukraine already has made significant progress. Bill Horan, 65, a former Iowa Corn Growers Association president, visited Ukraine about 20 years ago and traveled there again this summer with the Iowans. He noticed a big difference in the Ukrainians’ attitudes.
“When you talked to them [in the 1990s], they stared at their feet,” he says. “They were whipped. Today, they seem positive about their future. There’s a totally different attitude.”
In addition to its highly productive black soil, Ukraine’s modern port facilities lower its costs through improved efficiency. Odessa is the major port in Ukraine.
The Iowa group also visited Romania, including Constanta, the largest port on the Black Sea. Export officials there know they need to fill freighters with clean grain in order to compete on the world stage. Iowans were impressed with the cleanliness of the grain-handling facility at Minmetal, a Romanian terminal gearing up to handle 4 million tons of grain annually.
“It’s not a pharmacy, but I run it like one,” says administrative director Silviu Radulescu, who wrote his graduate thesis on dust control.
Groneau, who farms in west-central Iowa, traveled home with real concerns. “This is a real warning shot to us,” he says. “Our biggest competitive factor is our infrastructure and our ability to deliver grain. Our grain can’t get delivered, we’re letting our locks and dams crumble, and we’re not keeping up our roadways. We must keep our infrastructure intact and strong. You don’t think much about it until you see the alternative.”
But Ukraine falls behind other modern grain exporters in farm-to-market roads.
“It’s a question of whether or not the government is stable enough to invest in infrastructure,” Bader says. “Just getting the grain to market is an issue.”
He noted another problem. “There’s no pride of ownership, because the government doesn’t let you buy or sell ground,” he says. “It’s tough when you don’t have the right to buy or sell your own ground.”
Impressive Black Sea ports
Carlton Kjos, who farms in northeast Iowa, was impressed with the crops.
“Their corn production is terrific,” he says. He points out that Ukraine sells to the same countries as the U.S. “Our competitor is in our consumers’ backyard,” he says.
That’s because all Black Sea exports – whether Ukraine, Russia, or Romania – enjoy a freight advantage over the U.S., due to their proximity to buyers in Asia, the Mideast, and North Africa.
Horan echoes a warning about Ukraine’s potential to become a global grains competitor.
“I was impressed with the Odessa and Constanta ports after having visited most of the key U.S. ports through the years,” he says. “Some of our ports aren’t as modern as what I saw on the Black Seas.Their equipment was new.”