World farming – Farming a land of plenty

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Agriculture in Ukraine is on the up. CPM gains an insight into the ‘bread basket’ of Europe, where size is everything and full production potential is yet to be fulfilled.

It’s going back to basics and it’s exciting.

By Lucy de la Pasture

Although Ukraine’s economy is undoubtedly struggling, agriculture’s the one sector providing growth and attracting investment.

The country shot into the limelight in late 2013 when political unrest erupted in the streets, leading to the deposition of the then-President. At the heart of the crisis was a set of trade deals – one with the European Union and the other with Russia which marked a choice of Cold War importance. Ultimately Ukraine aligned with the West, signing an Association Agreement which has led to reduce and suspend tariffs on trade with the EU and increased quotas for selected items from Ukraine.

But despite the subsequent annexation of Crimea and the ongoing turmoil in the south-east of the country, Ukrainian agriculture is booming. Britain Mike Lee works as a freelance consultant, agronomist and crop-touring blogger, providing independent information on farming, agri-business and associated issues in the Black Sea region, including Ukraine, Russia, Belarus and Kazakhstan.

While the conflict in the east of Ukraine is serious, it doesn’t impact that much on the day to day life across the rest of the country, he explains.

Deep, fertile soils

Known as the ‘bread basket’ of Europe, Ukraine boasts deep, fertile soils and some 32 million ha of prime arable land. More than half the soil is ‘chernozem’, a black coloured soil that contains a very high percentage of humus (3-15%) along with phosphoric acids, phosphorus and ammonia.

With soils up to 1.5m deep, Ukraine can grow almost any crop producing around 60M tonnes of grain and is one of Europe’s leading producers of wheat, with 26M tonnes harvested in 2016, he reports.

For the adventurous minded and agribusinesses, Ukraine offers a wealth of opportunity, believes Mike Lee. He has a long association with Eastern Europe, having managed large farming operations in Ukraine and Russia and he currently operates a Black Sea ‘crop tour’.

The crop tour isn’t exactly a bus load of farmer tourists, more an appraisal team which scouts the potential of crops in the ground by travelling a route across the country, planned to give a representative flavour from the different cropping regions, he explains.

This autumn, wet weather has hampered drilling, with the wheat area 1.4 million ha down on the initial forecast figure, according to the latest figures. One of the problems with forecasting yield in Ukraine is that the crop can be greatly affected by winter weather conditions, explains Mike Lee.

“Winter kill rates are difficult to assess with certainty but it’s generally accepted they’re normally around 3-5% although they can be as high as 10 or 15% in a difficult year.”

Because the flow of accurate information from official sources can be scarce – typical of a former-Soviet Union country – accurate reporting of crop condition and production prospects is largely lacking. That’s why the crop tour provides such valuable feedback for his subscribers – largely commodity traders – on the state of the crops in these Black Sea countries, where weather conditions can have massive influences on production, he explains.

Agriculture in Ukraine is pyramidal in structure, with a few large businesses (agro-holdings) farming land banks which make the largest UK estates look like mere plankton in the agricultural pond. Typically, agro-holdings lease land banks from 10,000-500,000 ha in size – it’s farming on a scale that’s mind-blowing.

A step down from these massive farming companies are holdings more comparable in size to the largest UK enterprises but at the other end of the spectrum. “There are still peasant farmers who operate them with horse and cart and are largely self-sufficient,” he explains.

At first glance, the dichotomy that exists between Ukrainian farming businesses appears surprising for a former Soviet-block country, but it’s that heritage that makes it possible to have farm holdings that are vast in size.

Moratorium on land sales

When the collective farms were closed down in the 1990s, after Ukraine gained independence, the seven million former farm employees were given a pai or land share, on average around 4ha. There’s a long-standing moratorium on land sales in Ukraine, recently extended to 2018, which means land can’t be brought or sold. But in spite of this, the majority of land has fallen into the hands of a few because of land leasing, which in effect means land is easy and cheap to come by.

“Anyone could go farming in Ukraine tomorrow, leasing land at a pittance in comparison to the cost of land in the UK. Land leases cost key money in the region $200-600/ha and run for a minimum of seven years, with the leaseholder having the right to renew and the first right to purchase. Annual rents are payable at approx. $100/ha but is often paid to the local landlords in grain rather than cash.”

Mike Lee believes Ukraine promises an exciting adventure for western Europeans prepared to leave their western business values at the door.

“There’s a lot of talk about corruption in Ukraine, but it’s not a problem if you take local advice and build a rapport with the local administration,” he explains.

“When I managed a holding in Ukraine, I soon learned to employ a Ukrainian national to deal with the local administration. It wasn’t unusual to be visited by the fire brigade and be presented with a spurious and enormous fine. When you get to know how things work, the real reason behind the visit was the local administration were short of funds to pay their wages bill, so were trying to bridge the gap,” he explains.

It’s a very different business culture, but if you’re prepared to help out the local community and administration, then you’ll find they return the favour, he explains. “You’re more likely to receive a phone call when one of the tractor drivers has evidently had a little too much vodka than find they’ve been carted away by the police.”

One of the things Mike Lee loves about farming in the Ukraine is that it makes you think. It’s not a case of just transferring the agronomy practiced in the UK, but more about using its fundamental principles to find solutions.

“Local agronomists are a step-up from a tractor driver in Ukraine. It’s a legal responsibility to employ one agronomist per 5000ha and they’re responsible for spray application. It’s very different to the type of agronomist we have in the UK.”

As a consequence, over-application of pesticides has been common practice and it’s a problem Mike Lee has come across. He discovered the locally trained agronomists would apply insecticide each year when a May bug swarmed into wheat crops in the spring.

“When the bug arrived, I went into the crop and watched. I saw that most of them were actually mating, with very little crop damage from grazing. So I made the decision that it wasn’t necessary to spray and could justify that decision on the basis of my observations and agronomy experience. It’s going back to basics and it’s exciting,” he enthuses.

Oilseed rape was being routinely sprayed in the autumn for phoma and light leaf spot because the culture was to see the disease in the field and spray. There was no concept of thresholds, so a lot of spraying being done wasn’t necessary.

“Because of the importance of the flag leaf timing in the UK it’s easy to apply the same thinking here. But in Ukraine, septoria isn’t the same yield robber because it gets very dry in the summer. On the other hand, one of the major threats to wheat is fusarium ear blight because of the mycotoxins they produce.

“We’re currently debating whether the T3 spray is more important than the T2 and we’ve done trials looking at the margin over fungicide costs to help us decide where to best target spend,” says Mike Lee, adding that crop producers are going to get even savvier with their agronomy over the next few years.

In recent years, crops have improved and spray applications are becoming more targeted. “When I started working in Ukraine, I was frustrated by the lack of progress in crop production, but they’ve transformed production systems in the past few years. Many people like to think that it’s US, Canadian and Western European companies and their advisors who’ve made this difference, but I think that it’s Ukrainians doing it for themselves.”

One things for sure, Ukrainian agriculture has been punching well below its weight, but things are moving forward now in a very positive way, believes Mike Lee.

Policy decisions

“The Ministry of Agriculture seems to have got its act together and are making good policy decisions. Ukraine is struggling economically but when money does eventually come into the country from foreign investors, the yield potential is here,” he says.

He firmly believes agriculture in Ukraine is only going to get bigger and better. “Ukrainian growers are currently producing wheat yielding averaging approx. 3.5t/ha. But some of the better growers are achieving 6-7t/ha, which gives some idea of the potential production.  Water availability will be the limiting factor, so growers have to be careful not to overspend,” he adds.

Keeping a close eye on costs of production is an important part of agricultural business thinking, believes Mike Lee.

“I work with a farmer in the south of the country who has come over from Australia, so he’s familiar with growing crops in a dry climate. He reports his yields in terms of Kg per mm of available water, so he’s able to calculate his yield potential in relation to water availability. He can then adjust his inputs accordingly during the season to take this into account. That means he keeps control of his costs of production when water is limiting and maximises his return.”

The lower yields in Ukraine are offset by the costs of production which are comparatively low, and a move towards low or no-till systems is further reducing costs. Big land areas warrant big hunks of machinery – huge 500-600hp tractors, 12m seeders running in tandem and fleets of the biggest Claas Lexion combines, one behind the other, together cutting a 100m swathe at a time.

Many farms are investing heavily in technology and machinery because of a recent change in tax policy by the government, explains Andrei Botnari, Househam’s export manager. Any profits are now going back in to the farm to avoid being taxed.

Househam’s have been working in Ukraine for the past 4.5 years and are expecting sales of sprayers to continue to grow. One of his observations is that the most successful foreign businesses working in Ukraine all employ local nationals.

“It’s important to understand the language and the culture to make sure you can fully understand the needs of Ukrainian businesses. We’ve modified our sprayers for the Ukraine so that they fit the needs of the farmers. Because sunflowers and corn are widely grown, the main requirement is for high-clearance equipment. The OSR varieties being grown also tend to be tall,” he adds.

“There’s a niche for every sized sprayer in Ukraine but the most popular self-propelled machines (approx. 70%) have a 3-4000 litre capacity, with twin-fold 27m or 30m booms. But some large holdings have massive boom widths of 54m and sprayer tanks holding 8-10,000 litres.

It’s may be a tyre-kickers paradise but the sheer size of farming operations highlights a crucial factor in crop production – the power of logistics. One of the strengths of Ukrainian farming is they understand what needs to be done and how to get a job done on time.

Efficiency at heart of farming giant

The Mriya Agro Holding land bank is 175,000 ha, with land in six regions of western Ukraine – Ternopil, Khmelnytsky, Lviv, Ivano-Frankivsk, Chernivtsi and Rivne regions – and employing a staff of 2000 people. The company also owns seven modern elevator complexes and four grain storage facilities.

Mriya grows winter wheat and OSR, with a planned planted area of 94,400ha, and the remainder due to be sown with spring crops –-sunflower, corn, soybeans, barley and potatoes – in 2017. Sugar beet is also set to join the rotation, with an area of 3000ha.

The company aims to simplify the logistics of managing such a large area by grouping the different crops into clusters.

“There’ll be about 10-12,000ha of each crop in a region, rather than pockmarked fields and a “chessboard” effect, and there’ll be one crop per area which will take turns,” explains Victor Kuharchuk

“By structuring the rotation this way, I think we can add approximately 60% to the machinery output efficiency. It’s more efficient for logistical purposes and we’ll be able to gain more advantages from it. The better we can do our field work the more intensively yield will increase.”

Talking to Victor Kuharchuk, it soon becomes very clear that his business is structured with lowering the costs of production as the major emphasis.

“The main challenges we face are uneven surfaces and weeds. These are simple basic things that if resolved, will allow us to reduce production costs,” he says. “For the second consecutive year, we’re intensively working on levelling the fields, because an uneven surface makes producing high yields impossible.

“We made a decision to create a land leveller, which is proving to be very efficient. It works by cutting the ground from the ‘hills’ and moves it along the field, filling in any ‘holes’ along the way. The land leveller works across the field 3-4 times in different directions and, as a result, we get almost perfectly flat field surfaces with the added advantage that the Mriya leveller is very economical and doesn’t require costly repairs,” he says.

There has been increasing drought in Western Ukraine over the past two years. Even rainfall events or periodic reductions in temperature can’t compensate for the extremes that accompany climate change, believes Victor Kuharchuk.

“We consider it isn’t appropriate to plough or work soil at a depth as primary tillage, because of the lack of moisture in the ground and the consequently higher costs of repair to the equipment because it’s working such dry land. We can’t allow a reduction in machinery performance or loss of soil moisture, which impacts on the yield.

“So, we’re looking for the best combination of technologies which can add value and we’re considering the possibility of using strip-till or precision planters. Last year, for the first time in the history of Mriya company, we started using min-till and no-till technology.

“We seeded winter wheat with spreaders, and then seeded spring barley in the same way but we’ve gone even further. We’ve just scattered grain around and didn’t disc it after seeding, so the seeds were just lying on the ground surface. They turned out to be some of the best fields for the company. But if you choose a non-traditional technology, it’s very scary.”

But crop production in the Ukraine isn’t just about costs, it’s about people, says Victor Kuharchuk.

“The responsibility of people has the greatest impact on efficiency. Regardless of the amount of money invested into technology, irresponsible people will always bury it firmly and deeply. Everything is possible with the right people.”