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INTERVIEW: Agriculture in Ukraine – what does the future hold?

An agricultural powerhouse and major global food supplier, Ukraine is keenly watched by the international community. The country is in the midst of a major drive to upgrade and modernize its farming practices, along with the policies, laws, and value chains that affect producers and consumers alike.

Raimund Jehle, Regional Strategic Programmes Coordinator for FAO in Europe and Central Asia, is guiding FAO’s work in the group of United Nations and other international partners helping Ukraine to achieve its immense potential in the food and agriculture sector. On the occasion of World Food Day (16 October, the anniversary of FAO’s founding in 1945), Jehle talked about the future of Ukrainian agriculture with FAO regional communication officer Sharon Lee Cowan.

Ukraine has a history of agricultural production on a massive scale. Can small-scale family farms compete?

You might be surprised to learn that in Ukraine, 90 percent of fruit and vegetables and 80 percent of milk are being produced by small farms and households. Of course, a small-scale farm in Ukraine can be anywhere between 5 and almost 3,000 hectares. In any case, Ukrainian farms in general are operated by experienced farm managers or families, and they have an important share of the market.

They do face challenges, though. One big issue is access to land – because at present, policy and laws regulating the land market do not exist. In fact, there is a moratorium on selling land until this situation can be set right.

A second big challenge for small-scale farms is access to finance. The readiness of banks to lend to smallholders is limited. This is not unique to Ukraine, it is a problem faced by small farms in many countries.

Then, there is the infrastructure issue: lack of storage facilities and market infrastructure that effectively prevents smaller producers from competing on the export market.

Another hurdle is meeting the food quality and food safety standards for export – to the European Union, for example.

The good news is that Ukraine’s Ministry of Agriculture is now emphasizing support for smallholder development. In the past, the focus was on large, agro-industrial production, but the shift is happening. A support scheme is now in development for certain categories of small farm.

There are thousands of farms in the conflict areas of Donetsk and Luhansk. How are they faring?

The situation is very difficult for farms on both sides of the conflict line – but for different reasons.

Those in the Government-Controlled area have lost the Russian market, and have lost the consumer markets of Luhansk and Donetsk cities. They have had to either downscale their activities or look for markets elsewhere in Ukraine. Since most of Ukraine is relatively unaffected by the conflict, it has not been easy for the farmers from the conflict affected areas to redirect to new domestic markets because of existing competition.

Farms in the Non-Government-Controlled Area of course have lost the Ukrainian domestic market. They can sell to the large consumer markets of Luhansk and Donetsk cities, but that does not fully compensate for what they have lost. These farmers have also lost access to the international markets. Another problem for them is that they have become disconnected from their normal supply of seeds, fertilizer, insecticide, and other inputs that are produced in other parts of Ukraine. Many of these farms have had to downscale and shift their production to staple crops, to serve the immediate needs of the surrounding area accessible to them.

There has been a sharp increase in backyard farming, as people struggle to cope with shortages and reduced incomes in the conflict-affected eastern parts of Ukraine. FAO has supported these households with its emergency response effort – providing live chickens, seeds, and other farming inputs. I would add that on average, diets have become poorer and studies are revealing a variety of vitamin deficiencies among people residing in the conflict areas.

Ukrainian dairy producers are struggling to find markets right now. Your thoughts?

The rest of Europe is facing the same problem: we have an oversupply of dairy products. In many European countries, producers today are getting 50 percent of the farm-gate prices they were getting two years ago, and many are being driven out of business. In Ukraine, we also have the issue of transition of farms and thus the process to make them efficient and using efficient production technology. It is a painful process that needs to happen. Why? To be cost-effective.

Let’s compare the current milk yields per dairy cow in Ukraine to other countries with a sophisticated dairy sector. Ukraine produces on average around 4,900 kilos of milk per year per cow, while the USA produces around 10,000, and the EU around 7,500. This means the productivity in Ukraine is still very low.

Most Ukrainian dairy farmers cannot make the necessary investments for competitiveness if they continue to struggle on their own. There needs to be investment in infrastructure, sperm banks for breeding material, artificial insemination and breeding programmes.

When it comes to dairy products, the domestic market could still be expanded with the development of new dairy products. The average per capita consumption in Ukraine is only 220 kilos compared to 260 in the EU countries. Look at the dairy aisle in a Carrefour or Tesco supermarket. It goes on and on with scores of different types and flavours of yoghurt, cheese and dairy beverages. The variety of products could be further expanded and thus also additional national markets explored. I see potential there. In addition, Ukraine should also be able to identify new foreign markets, to replace the Russian market that has been closed off. Finally, Ukraine still has lower labour costs compared to EU countries, and that will help when it comes to the cost of products it wants to offer on the global market.

Are environmental issues going to be serious for Ukraine?

Yes, there are serious concerns. Land degradation and erosion, for example, due to badly maintained forest windbreaks. Irrigation infrastructure is aging and technologically outdated, which means water resources are being wasted. Then there is polluted water because of problems with sewer management, and polluted soils and water because of improper management of agrochemicals.

Ukraine is one of the biggest markets for illegal pesticides. The use of these could lead to pesticide residues in the soil or water, and ultimately in the agricultural products. This affects saleability.

The country needs a strategy for climate change, and this means two major areas of action. One, adapting agriculture to cope with the warmer temperatures and other effects of climate change. Two, changing agricultural practices so that the sector contributes less greenhouse gases to this global phenomenon. FAO is working with Ukraine and many countries on Climate-Smart Agriculture, Conservation Agriculture, low- or zero-tillage technology, for example. These are changes that can be difficult for smallholders.

FAO has sounded the alarm on nutrition in this region. Are Ukrainians malnourished?

Micronutrient deficiencies are definitely an issue. Vitamin A deficiency, for example, or anaemia in children under five. If we compare with other countries, the situation comes into focus. Vitamin A deficiency in Russian Federation occurs in about 14 percent of the population, while in Ukraine it’s 23 percent. In Germany, 12-13 percent of children under five are anaemic, while in Ukraine it’s 23 percent.

Overweight and obesity are also forms of malnutrition, and they are definitely an issue here. With 53 percent of the population overweight or obese, Ukraine is ranked seventh among the countries of Europe and Central Asia for prevalence of obesity. That’s lower than the USA, but similar to Germany. Overweight is an important issue because of the health problems that come along with it.

With the deteriorating economic situation and family income levels, people’s consumption of protein and fat has decreased compared to a couple of years ago. In the conflict areas, where access and availability of food is difficult, the effects are even worse. We are working with the government now on a policy and strategy for developing school feeding programmes to address these nutritional issues.

How do you see the long-range future for Ukrainian agriculture?

Ukraine has 30 percent of the world’s black soil resources, and this is an enormously positive starting point. Agriculture will continue to be one of the key drivers of the economy. Everything linked to the agricultural sector – processing, trade, input supply – has a huge potential. In dairy, production potential is still very high. In grains, an even greater volume can be produced than at present. In sunflower, Ukraine is already the world’s number one producer.

To remain competitive and expand sustainably, though, Ukraine needs infrastructure, research and development, adequate extension systems, seed multiplication operations, and policies that encourage agriculture. Producers will need a land market that is straightforward, and access to rural finance.

Focusing solely on large-scale producers would be a mistake. What would happen to rural areas? If we have only large-scale farmers, we’ll have deserted rural towns, unemployment, and out-migration. Support to smallholders is an important strategy for maintaining life in rural areas.

The Ministry of Agriculture today should make further efforts in concentrating on providing the necessary policies and the legal framework, instead of being active itself in production with various state enterprises. The overall strategy is to privatize state enterprises, and adjust the role of the Ministry and related institutions. Among other things, this will mean a significant downsizing of the Ministry.

In spite of all the challenges, I am extremely optimistic about the future of Ukrainian agriculture. By 2050, we expect to see a world population of 9 billion, and Ukraine will be a key player in contributing to global food security. I have no hesitation in saying it: without Ukraine, we would be in trouble.

13 October 2016, Kiev, Ukraine

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