Black Sea Grain – 2013: Will investments come into Ukrainian agriculture?

KIEV, Ukraine - April 26, 2013 - PRLog -- Agriculture has been gaining more and more attention over the past few years. It has become clear that current demand for agricultural commodities is growing at a higher rate compared to the production rates. Such tendency leads to the situation when growing demand leads to increase in prices for agricultural commodities, thus making agricultural business increasingly popular amongst entrepreneurs, investment institutes and private individuals that are looking for ways to allocate their cash.

UkrAgroConsult (http://www.blackseagrain.net/) is a specialized consulting agency, operating on the agricultural markets of Ukraine and CIS region for the past 20 years. We have gathered enough experience and factual data to confirm such tendency and state that the gap between production volumes and demand will be increasing in the future. Financial performance of the businesses involved in ag. sector in general and foreign investments that they are able to attract in particular indicate development stage of the agriculture. That was the main reason for us to include the topic of “Investments in Agriculture” as a part of one of the largest global conferences: Black Sea Grain Conference (http://bsg.blackseagrainconference.com/en/). It was 10th Conference held in Kiev, at Intercontinental Hotel by UkrAgroConsult.

Investments in Agricultural Sector Discussion panel stirred a lot of interest. We were able to share and discuss our views and opinions with our audience. Elena Voloshyna, Head of Representative Office of International Finance Corporation in Ukraine, Jean-Jacques Herve, Counselor to the Board of Agriculture on Credit Agricole Bank (Ukraine), Aleksander Plotnikov Advisor at Arzinger and Nikolay Orlov, General Director of Law Firm OMP and Alex Morgun, Financial Analyst of UkrAgroConsult presented their views on past and current state of investment climate in agricultural sector of Ukraine.

According to observations of the dialogue between the speakers and the audience, we noted three main tendencies in terms of investment climate.

First, Ukrainian Agricultural Sector is dominated by large, vertically integrated agrarian holdings in terms of performance and funds attracted over the past years.  

Second, these large corporations have a wide variety of tools that enable them to attract those investment funds and use them for further growth and development;

Third, small and medium-sized businesses in Ukraine struggle against these large companies and while they are able to compete on the domestic scale to a certain extent, their funding is extremely limited.

However, it is clear that medium and small businesses still constitute a majority of agricultural sector and it is their development that is essential in the future for dynamic and balanced development of agriculture as a whole. Combination of the three factors, mentioned above is the main reason IFC is currently actively looking into developing new tools for financing small and medium businesses in agriculture. For the same reason Credit Agricole is active in terms of providing loans to smaller companies.

It has been stated multiple times during the discussion panel within the conference that presentation of company’s performance is very important to gaining access to those external funds. Without the knowledge and understanding of company’s performance status, operations, plans and goals, it is very unlikely that any investor would look at this business as a potential investment project.

Funding has become very limited over the past year. Even large companies are forced into markets with secured interest payments, despite their performance status and ambitious future goals. Investor relations that have failed miserably with Ukzernoprom (MCB Agricole) last year and Agroton this year have made confidence in Ukraine even weaker than it’s been before, leading to additional risks that are associated with this maket. We are looking at 2013 as a year of opportunity for those that manage their operations well and communicate their policies well, yet a harsh year for those that fail to do so.

We hope that knowledge of these facts will be helpful for your future endeavors in tough agricultural business.