The following is the transcript of the interview Ukraine's Minister of Agriculture Oleksiy Pavlenko gave to BNS at the Agroforum Mare Balticum conference on April 15.
Q: What is the current agricultural situation in Ukraine and what can we expect in terms of harvest?
A: First of all, last year we had record figures, 63.8 million tons of grain production and we also had good export numbers of about 30 million tons of grain. This year is more difficult, firstly due to Russian aggression in Donetsk, Lugansk and Crimea, we estimate that we lost on the level of 1.5 million tons of grain. Several big companies have lost their assets: for example, Cargill lost a sunflower seed crushing facility in Donetsk, it was bombed and destroyed.
The winter wheat conditions were quite good, we now estimate about 99 percent of last year's levels. The moisture conditions in the soil are also very good. But we are faced with the lack of financing. We are now stabilizing the economic crisis, but our banking system lacks the ability to finance agribusiness. An example of the cost of finance is that if a small farmer wants to take a loan, there is 30 percent interest. It is very expensive and many farmers are now trying to buy cheaper seeds, less fertilizers and less crop protection, and it could also affect the yield in the end. But we don't estimate a radical decline in production yield, at this moment everything depends on the weather.
Q: You recently signed an agreement with Canada and Israel for investments and aid. How important is financing from the international community to Ukraine?
A: Yes, we signed an agreement for 20 million Canadian dollars for technical support for small and medium enterprises in the south of Ukraine. It also includes consultations, technology and an education program for more than 7,000 farmers.
We are very happy to say that we have now received four-year financing from the International Monetary Fund. There is a comprehensive program of reforms we must follow and we receive a package of loans that gives us the opportunity to stabilize our banking system and foreign currency exchange rates, so it's the first step towards helping business grow. In the context of agribusiness, we work with foreign financial institutions to revise the limits and financing; with American businesses we have in the pipeline an estimated 1 billion dollars' worth of machinery, tractors, harvesters, driers. The Americans are ready to sell, but for that we need insurance and financing. That can be a very big help, because it allows farmers to for example buy a tractor on five-year leasing with 7 or 8 percent of interest, instead of 30.
Q: So the agricultural industry is lacking proper capital?
A: Right now, our agri-industry is undercapitalized. We somewhat lack working capital and machinery, but also railways and infrastructure, as well as irrigation systems in the south. With proper levels, I am sure we can double our exports in the next three years.
Q: So the status and position of Ukraine as the "granary of Europe" is coming back?
A: It is coming back and it has come back. We are number one worldwide in sunflower oil and seed exports, number three in grain exports and number seven in poultry exports.
Our trade with Russia and former Soviet Union countries has declined by 31 percent, but we have increased trade with the European Union and also our biggest market, Asia. We are substituting the decline with new markets. For example, the Customs Union market is now the same size as the African market for us.
Q: Economic and agricultural cooperation between Ukraine and the Baltic states is very important for all of us. In which sectors and segments do you see opportunities and potential for further cooperation?
A: We are now working closely with the fishery industry of Estonia. We sell around 10 million dollars' worth of agricultural goods here and see big potential in the export of sunflower oil and grain and in fishery products on the imports side. The quality and also the market of Estonian products is very strong. You have customers who prefer your products in supermarkets – sprats, for example. We see big potential for both sides.
We also see potential for Estonian investors to invest in Ukrainian land. We started big reforms and deregulation. We would like to be in the top fifty in ease of doing business, and for that we started the land reform and introduced a seven-year land lease program. We also minimized the bureaucratic procedures for registering land lease agreements. So we are also inviting investors from Estonia who would like to come and take a plot of land and do agribusiness – and not only agribusiness, but also processing, for example.
We are also undergoing a privatization process: we expect 254 different agricultural enterprises will be privatized by the end of this year, from the alcohol industry, agrarian industry, small farms and so on.
We are also now synchronizing our legislation to that of the European Union, for example food security rules. This year, the milk industry wants to open to Europe and sell dairy products to the European Union."
Q: We are now working closely with the fishery industry of Estonia. We sell around 10 million dollars worth of agricultural goods here and see big potential in the export of sunflower oil and grain and fishery products on the imports side. The quality and also the market of Estonian products is very strong. You have customers who prefer your products in supermarkets – sprots, for example. We see big potential for both sides.
Q: How do you see Ukraine in regards to the global food cycle?
A: Ukraine was, is and will be very important for global food safety and security. Despite the state of war and Russian terrorist aggression in Donetsk, Lugansk and Crimea, Ukraina is playing a very active role worldwide in food balance. In Russia, they have oil and gas, in Ukraine we have land and corn.