Vertically integrated structures perform more than 20% of agricultural production in Ukraine. How did they arise? What factors influenced their establishment?

The first five-year period of active development of agricultural holdings continued from 2005 to 2010. During this period, the land bank of vertically integrated structures increased approximately 4-fold, reaching 4 million hectares, and the share in the structure of agricultural lands that were in use of agricultural enterprises increased to 18,1%. Average annual growth of land used to reach more than 30% annually. Land bank was often increased chaotically that did not allow to cultivate land effectively, but this was not the only purpose agricultural holdings existed for. The typical scenarios of large agricultural companies included accumulation of land, raise of funds and termination of business - these were typical stories of large agricultural companies. System players that considered agribusiness as a long term perspective could be counted on the fingers.

There are different reasons for the establishment of agricultural holdings. The most mentioned are growing demand for agricultural products on the world market and willingness to optimize production costs and increase profits, but now, turning to the past years and the facts, it appears that the main objectives of consolidation were just attracting external funds and/or further profitable sale of consolidated assets.

The first companies were sold very successfully, but the crisis of 2008 made some adjustments in the plans of investors, so at this stage it was decided to wait and sell the companies during the period of economic growth.

It became quite popular among agricultural holdings to place shares on the world stock exchanges. In 2005-2010 Ukrainian agricultural companies raised about quarter of the capital (1.4 bln. USD) of all Ukrainian public offerings. MHP and Kernel received the most - 322 million US dollars and 302 million US dollars correspondingly. 6 out of 16 companies that made IPO to 2010, have already left the market: they either bankrupted or were reorganized, or merged.

After this the period of active development of holding structures in Ukrainian agribusiness moved to a planned and steady pace with a focus on technology and efficiency. The next five years of agricultural holdings in Ukraine are to be considered in the following press releases of the association "Ukrainian Agribusiness Club", and the results of their development and future prospects will be discussed in details at the VI International Conference «Large Farm Management» which will be held on September 16-18 2015 in Kyiv.