"In 2—3 years the land will rise in price to 55,000-60,000 UAH per hectare," Taras Vysotskyi, First Deputy Minister of Agrarian Policy

Author

Valery Moiseev

According to the results of 2021, Ukraine exported potatoes for the first time in three years—previously it was not enough for domestic consumption, so it had to be imported. The same is with buckwheat: for the first time in five years, there is no shortage of it in Ukraine. This result was partly achieved due to the government assistance to the producers of these crops. Taras Vysotskyi, the First Deputy Minister of Agrarian Policy, stated this at a press conference on December 24. During an interview with him, asked not only about the harvest, but also about food prices, land market, agrarian raiding and much more.

A record grain harvest has been gathered in Ukraine this year. What has facilitated this?

- There are several factors here, the importance of which is nearly the same. First, the weather conditions. Last fall, which is important for winter crops, and this spring, they were very favorable for the development of grain crops. The second is technology. An increasing number of agrarians are beginning to use the best world practices of growing grain crops: fertilizers, means of protection, seeds, and modern equipment. The third is the government policy. In this case, this refers to the fact that we did not have any restrictions or regulatory measures that distort or reduce the motivation of most agrarians to develop their business. Our policy was aimed at supporting agricultural producers and reducing the cost of loans for them. I believe that the influence of these three factors had a synergistic effect in the form of a high yield.

Food prices on the world markets are now high. How will the Ministry of Agrarian Policy find a balance between exports and supplies to the domestic market?

- Over the past few years, a memorandum with manufacturers has proven to be an effective instrument. It clearly sets out the volumes that are needed for domestic consumption and the volumes of exports. We will continue this practice of agreements with the market participants. We do not see any threats of the current memorandum violation yet. For example, wheat export volumes are now decreasing every month.

Politicians and various experts say that Ukraine can become one of the leading suppliers of agricultural products in the world. In your opinion, is this specialization justified for Ukraine?

- This specialization already exists partly. The agricultural sector forms about 20% of Ukraine's GDP and at least 40% of export earnings. We manufacture products in quantities sufficient to meet the food needs of 280 million people. If we compare the yield in Ukraine and that in the leading countries, then we still have a reserve of 15—20% that can be realized through technology and better use of resources. So the strategy of increasing agricultural exports remains relevant both for the government policy and for the producers themselves. Many of them are now actively developing their export infrastructure.

The frequent reference to the need to improve the processing of agricultural products is made in connection with the export development. In your estimation, is something changing in this area?

- It changes. The change is most rapid in the export of the oilseeds. Sunflower is almost completely exported as oil, and 30—40% of soybeans are processed. For rapeseed, this figure is lower, but there the share in the export of oil and biofuel is growing as well. The level of grain processing is still low. But now three factories are being built to process corn grain into different products. We almost completely meet the domestic demand for wheat flour.

Of course, we would like to speed up such processes. To do this, we have recently launched a program of state support for the processing enterprises. They can take out soft loans at 5% per annum in hryvnia, they are compensated for up to 50% of the investments in construction, reconstruction, or modernization of the facilities. We expect that this program will be popular with the processors in the new year, and the number of such companies in the country will increase.

The agricultural land market has been operating for more than six months. How did the chosen market model show itself during this time?

- Let me remind you that this model was the result of a public compromise. Thanks to this, there were no mass disturbances or protests after launching the market. With the beginning of the land sale, we do not see the risks that many of those who opposed the market mentioned as the inevitable ones. The sales volumes are small, there are no land sales by their owners, the foreigners or large landowners do not buy land bypassing the law.

We expect the main economic effect from introducing the market in 2024 when legal entities with Ukrainian owners will be able to buy land, invest in irrigation systems, etc.

Changing the existing market model is now impractical. The society calms down, the business processes are being adjusted, the notarial procedures are being developed. In two years, a new stage of the land market will begin, and then, perhaps, some adjustments will be required.

According to your observations, what is the price dynamics on the land market now and what will happen to the prices shortly?

- Now the average price is about 38,000 UAH per hectare. We expect that in two or three years it will grow to 55,000—60,000, and then everything will depend on the economic situation in the country, GDP growth, and other indicators that are not directly related to the land.

I understand that the prime cost of growing wheat varies widely. The head of one of the largest foreign agricultural companies recently stated in an interview that the total cost of growing wheat in Russia is $600 per hectare, in the USA—$900, and in Germany—$1,800. Can you give a similar figure for Ukraine?

- The prime cost can vary greatly depending on the region, yield, and company. I think that such a figure for wheat in Ukraine averages about $850 per hectare.

Agricultural raiding. How relevant is this matter now?

- We see a steady trend towards an improvement of the situation. The most difficult period was in 2017—2018 when the facts of raiding became known almost weekly or even several times a week. The situation has changed with amending the legislation and improving the ways of responding. The facts of raiding in the agricultural sector remained, but their frequency is now not higher than in other areas and sectors of the economy. The situation is improving following the industry infrastructure upgrading and the judicial system getting back on track.

Recently, the Verkhovna Rada passed a law to support horticulture and viticulture. Commenting on this event, the Minister of Agrarian Policy emphasized the importance of horticulture development, as it is important in the context of the Ukrainian lands depletion. How serious is this depletion now?

- According to our estimates, about 1 million hectares of agricultural land are depleted in Ukraine. This is about 2.5% of the total amount, which is 40 million hectares. The share seems to be small. But 1 million hectares is a large area. A lot of European countries have that much agricultural land in general. So there is a problem. We are now working on a concept for land protection. Among other things, it implies that the depleted lands will be taken out of circulation, somehow mothballed, including given over to perennial plantations in order to preserve the land fertility as much as possible.

The farmers and large agricultural holdings. In your opinion, what ratio between them should be in the agricultural production structure in Ukraine in order for it to be sustainable and as efficient as possible?

- For the last seven years, the proportion has remained almost unchanged. Medium-sized production enterprises that cultivate up to 5,000 hectares are about 60% of the land area. About 25% are large enterprises, agricultural holdings. And about 15% are small producers (up to 1,000 hectares). The stability of this division that was actually formed as a result of self-regulation gives us reason to believe that this proportion is optimal for the current state of the market. The same can be said about the existing specialization: export, animal husbandry, fruits and vegetables, etc. Therefore, we do not consider any state intervention in these processes to be expedient.