ODESSA, UKRAINE — Ukrainian grain production in 2019-20 will surpass the record of last season, but delivery to the ports remains a challenge, according to experts at the IV International Grain Ukraine Conference, May 24-25 in Odessa, Ukraine.
About 500 people from 10 countries participated in the event, which was organized by the TIS group of companies.
Grain production will increase by 1% compared to last season and reach 70.8 million tonnes, said Olga Trofimtseva, acting minister of Agrarian Policy and Food of Ukraine. Wheat and barley yields will increase by 1.8 million and 900,000 tonnes, respectively. At the same time, a reduction of 2 million tonnes of corn production is expected.
Another sign of improvement is the large mergers and acquisitions. Such changes signal the entry of Ukraine’s agricultural sector to a new level and the globalization of the Ukrainian agricultural business.
Representatives of international financial institutions operating in Ukraine said at Grain Ukraine that they were able to adapt their strategies to existing risks and so far do not plan to reduce investment. This, in particular, was confirmed by the deputy head of the EBRD in Ukraine (infrastructure and energy) Marina Petrov and the head of IFC activities in Ukraine Olena Voloshyna. One of the largest investment projects of Ukraine in recent years has become a successful case — the construction of the grain terminal MV Cargo, which was financed by both structures.
Although international banks have provided funding to small and medium agribusinesses, the agrarian policy ministry believes the states need to redistribute state support in their favor.
In general, conference experts agreed that the Ukrainian agricultural market seeks greater civilization and a way out of the gray zone. Farmers are expected to switch from selling grain “from the field” for cash to selling the harvest to world traders and to work independently with other countries.
In addition, the reputation of Ukrainian grain in international markets is improving, and quality standards are approaching European ones. This was confirmed by the senior trader of Promising International Trading Co. DMCC Saker Hazem during the trade panel. This year his company did not receive a single complaint about Ukrainian wheat.
The export picture is also positive in terms of expanding the geography of Ukrainian grain sales. The analyst of the agrarian markets of the Black Sea region Refinitiv Svetlana Malysh noted a record export of domestic maize associated with its record harvest. However, there is a downside: prices on the world market will not grow due to high yields and fierce competition.
The problem of logistics remains — and the more exports grow, the sharper the challenge becomes. Deputy Minister of Infrastructure of Ukraine for European Integration Viktor Dovgan noted the future parliament will be more populist and left-wing. Therefore, the issue of land market and private traction is not likely to be raised, and agrarian companies will have to increase efficiency in the existing framework.
In such conditions, a constructive dialogue with the state is necessary, which can lead to finding effective organizational and administrative decisions.
The rail fleet is old, with 70% of grain carriers more than 20 years old. There is also a chronic shortage of locomotives.
A separate problem is the level of tariffs. At the conference there was a discussion about the convergence of tariff plans for the transport of different classes of cargo, which was initiated by the President of the Ukrainian Grain Association Nikolay Gorbachov.
Logistical problems of the industry got the understanding from the financial community. Marina Petrov indicated that the EBRD is working to finance an increase in the grain car park of Ukrzaliznytsia and expressed the hope that the locomotive problem will start to be solved. The bank also agreed to finance the project of electrification of the branch leading to Nikolaev and Kherson ports. Finally, projects are being considered to develop alternatives to rail transport, in particular, river navigation.
General Director of Terminal Group Risoil S.A. Maxim Shirokov actualized the need to restore order in the port sector: the introduction of a free port regime; removal of the financial burden on additional services for businesses; targeted use of port charges for infrastructure improvement.
In general, as the conference participants noted, the delivery of grain to the ports remains the main challenge of the Ukrainian agricultural sector, along with a moratorium on land.