Editor's note: Scroll to the bottom to watch a video summarizing trip highlights with footage shot on the tour. Or visit our Ukraine video page to see this re-cap video and individual segments.
Contact: Bob Boehm, 517-323-7000 ext. 5334
Ukraine Agricultural Study Mission participants' first two days were spent insulated from the conflicted realities of the countryside. In back-to-back presentations, American and Ukrainian government officials painted sweeping vistas with broad brushstrokes, barely able to capture the complexities of a nation still getting acquainted, sometimes reluctantly, with its own independence.
Throughout the remainder of the week, the 27 study mission participants struggled to decode the nearly incomprehensible web of challenges hampering Ukraine from realizing its potential.
If you can find Polkovnyche with your favorite online mapping site, turn on the image layer and you'll see a blurry satellite-eye-view that, were it crisper, could appear in any high school geography book near the paragraphs about Old World village morphology. It's a curved line of walled homesteads, each with a tiny strip of cultivated land stretching out back.
On the western edge of town, along the road that goes out to the main north-south road connecting Kiev and Odessa, there's a complex of large buildings that are home to Ropa-Ukraine, the German implement builder's branch office in this conspicuously fertile part of the world. They sell and service massive farm machinery, but also do a little farming on the side. Ropa manager and tour host Yuri Petrenko explained that the crop production sideline raises sugar beets, soybeans, rapeseed, winter wheat and sunflowers on 3,750 acres leased from Polkovnyche's current and former residents.
When the land was semi-privatized after Ukraine gained its independence in the early 1990s, villagers who previous worked the old collective farms suddenly found themselves granted equal land shares of 5-10 acres. They can't buy or sell that land, but they are allowed to lease their land shares to another entity.
"The land law is not clear," said Randall Hager, USDA's agricultural attaché in Ukraine. "Land ownership is murky—there's a lack of legal clarity regarding ownership."
Ropa pays each of Polkovnyche's 750 shareholders 50 Euro annually per hectare. After a few conversions, that equates to about $27 per year for some of the most fertile farmland left on Earth, with six feet of rich, black topsoil, 17 inches of annual precipitation and a choice climate.
That's the going price in that part of the country, Petrenko said, adding that the government sets a minimum land price, but local conditions of soil quality and competition also factor in. Leases are paid annually and average 10-15 years in duration, but they don't lock rates in—prices aren't fixed and can vary considerably from one year to the next.
According to Hager, Ukrainian farmland is valued in the neighborhood of $400 per acre, although he admits it's nearly impossible to determine an accurate value when land is never actually bought or sold—when there is no actual land market to better define such a figure.
"U.S. type of farm ownership and management doesn't exist here," said Vitali Sablyuk, a spokesperson for Ukraine's agriculture ministry. "Usually it's a company that farms in Ukraine."
Leasing is the norm, and foreign-based multinational corporations have swept in over the past two decades and negotiated land leases with tens of thousands of villagers for up to 50 years. In that short 20 years of independence, that trend has international interests controlling much of Ukraine's national land bank.
The state started implementing reforms in 1995, but discussion continues on how to better formalize the land market. One of the sticking points, Sablyuk said, is how to encourage and support small landholders while not disengage the multinationals that flex a potent lobby in the government.
There is concern about the social implications this influx of "big agriculture," Hager said—concern about the potential "depletion of rural society and village life," and the depletion of opportunities there for native Ukrainians.
"The main discussion nationwide is how to finalize the tax and land market reforms" and more throughly privatize the land market," Sablyuk said. "It should be a choice for every owner to work himself, to rent it out or to sell it, but for now they aren't allowed to sell land."
And the Ropa example is relatively small potatoes. Several other stops during the weeklong study mission better illustrated the grip multinational holding corporations have on the Ukrainian countryside.
AgriCore Holding leases 124,000 acres in the northern Chernigiv region. Ukraine Milk Company—the nation's largest dairy farm—leases 25,000 acres. Hermit-crabbed into an old Soviet collective facility, the Corporation of AgroIndustrial Enterprises leases 22,000 acres to grow sugar beets, grain, oilseeds and forage crops to feed its cattle and hogs. On the sweeping flatlands of the dry, southern Kherson region, AgroTechnological leases 10,600 acres—800 from the state and 9,800 from 500 shareholders in the nearby village of Brastkya.
Atlantic Farms, the production side of Kiev-Atlantic, leases 25,000 acres for corn, soybeans, wheat and barley production. Lease terms vary; sometimes money is exchanged, sometimes equipment is traded.
"What they're paid for rent depends on the size—one to five percent of its value for small parcels, five to eight percent for medium, eight to 12 percent for large," explained Irina Bulavka, Kiev-Atlantic's operations director. "The real value of land is highly subjective; there is no consistent valuation process."
Modernizing Ukraine's infrastructure would go a long way toward boosting overall agricultural prosperity.
Grain storage is problematic. Most on-farm storage amounts to little more than piling loose grain on a cement floor inside a sprawling pole barn. The old Soviet-era grain elevators no longer operate, and the few privately owned elevators are woefully inadequate and few in number. Most substantial grain storage facilities are owned by transnationals, as are an estimated 90 percent of export facilities.
Then there's transportation. Some farmers have their own fleet of trucks for transporting raw commodities off the farm, but most hire independent companies to haul grain. The existing railroad network is sparse and inadequate—and still a state-run monopoly.
Barge traffic on the Dnieper River appears mostly non-existent, and talk about investing in improving Black Sea port facilities rarely progresses beyond the discussion stage.
"Ukraine is still not very stable," economically nor politically, Sablyuk said, and the government seems almost paralyzed for lack of a clear starting point from which to continue Ukraine's transformation toward a more European-style system. Politicians express support for the farm sector, but actual policies remain a murky quagmire.
"There is limited government support and it doesn't always get to who needs it," Hager said, referring to the state's an apathetic indifference to the third of its population that lives in rural areas. "There is some government regulation of prices and production, but no drive to make producers more efficient."
Household-level agriculture is still mostly unregulated; household farmers don't pay taxes and there are few controls on the quality of their products.
"Our very small peasant farms produce a very unorganized market, but are trying to sell their surplus in an organized market," Sablyuk said. "How do we 'legalize' this?"
Every level of local and municipal government insists on micromanaging plans for new buildings and projects (these are often opportunities for bureaucrats to skim off a little profit) but seem unconcerned about the wasteful inefficiencies and barely monitor security and safety of village-level food production.
The farm sector bears tremendous potential for growth, but with interest rates pushing 30 percent, borrowing money is a financial tightrope if not outright suicide. Between prohibitively expensive credit and poor market access, some perfectly viable farmland isn't even being used.
Government funds fundamental university-style research, but neglects business-sector marketing.
"It's coming," Sablyuk said, "but it needs more investment and help from outside countries and companies."
That same "help from outside" has already proven to be a two-edged sword, as foreign interests have descended upon Ukraine and seem to have opportunistically taken advantage of its underdeveloped policies.
Half of Ukraine's total agricultural production now comes from large-scale corporate enterprises. Commonly referred to as "holdings," they dominate the production of big-acreage crops—grains, oilseeds and sugar beets. The biggest of them, ambiguously named AgriHoldings, is said to be the country's no. 1 oilseed producer and may already control half of the country's agricultural land base.
AgriHoldings seems untrusted by the Ukrainian people and little understood even by industry insiders—sometimes described as a faceless transnational corporation, sometimes rumored to be owned by high-placed governmental officials. Dykun Lyubomyr, manager of the fledgling Ukrainian Dairy Association, described it as a "union of farmers" so large and powerful that it has nothing to gain from nor contribute to an association like his.
The enterprise's shady aura was only reinforced when the mission group's request to tour a massive AgriHoldings grain storage facility was coldly declined, and participants' attempts to take pictures from across the road were met with dismissive hostility.
"We're looking to implement a farm bill to define how government will serve the agriculture industry, trying to follow European models," Sablyuk said. "We're also looking for a mechanism for combining both sectors," he added, referring to the gap between the burgeoning large farm sector and the village-based household farmers.
As the nation continues struggling to modernize and tighten up its farm policy—taxation, regulation, land use and ownership—forces from beyond its borders continue to steer its potential and amass control over its most valuable resource: the native land under the feet of the Ukrainian people.