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29 March 2024

News

04.08.2015

The second five-year period of agricultural holdings: increase of efficiency

The second five-year period of agricultural holdings: increase of efficiency

Development of agricultural holdings in 2010-2015 was characterized by the transition from the chaotic accumulation of land to the thoughtful management.

In the first five-year period of agricultural holdings in Ukraine, which lasted from 2005 to 2010, their rapid growth took place. It was accompanied by large-scale, sometimes chaotic accumulation of land bank and increasing production through extensive development. However, in a later period, this trend has changed. From 2010 to 2013 land bank of agricultural holdings increased by 2 mln ha to 6 mln ha (+ 51%), on the contrary by 2015 the total amount of land in their lease fell to 5,6 mln ha. In 2014 the reduction was caused mainly by decrease of land bank of agricultural holdings that leased land in Crimea and in the East. Other losses were caused by a significant rise in production resources and difficult conditions of access to financing, and the concentration of land in the regions of holdings.

In addition to reducing land bank this period was characterized by the consolidation of markets. In particular, in 2013 holding companies produced over 60% of poultry, 50% of sugar beet and eggs, 40% of corn  and soybeans. Despite large production volumes, the profitability of these companies is mostly lower than of independent enterprises, due to higher administrative expenses. Agriholdings also bear higher depreciation costs on machinery and equipment. Given the level of intensification of production in vertically integrated structures, their advantages manifest themselves in a period of high food prices. It was clearly seen in 2010-2012. For example, according to the results of 2012 agricultural holdings earned on cereals 12.6% per hectare more than independent entities. Thus the period of the increase of agricultural holdings began.

Attracting external resources through placement of shares on international stock exchanges continued, but only 5 companies made the IPO in 2010-2015, while in 2005-2010 there were 16 of them, and respectively, the amount of borrowed funds decreased in 5 times.

After the first defaults of large agricultural companies foreign investors started losing trust to Ukrainian agriculture significantly, and in 2014 during the crisis the situation got only worse. Against the general economic recession access to financing was significantly complicated and external borrowing markets were closed. It became clear that domestic agricultural companies would have no access to international stock exchanges in the nearest years.

This situation caused a change in the perception of agribusiness companies by their owners. Agriholdings started to be considered not as assets that can be sold relatively quickly after accumulation of resources, but as long-term projects that should be developed.

The future prospects of development of agriholdings in Ukraine are to be considered in the following press releases of the association "Ukrainian Agribusiness Club". These issues will also be discussed in details at the VI International Conference «Large Farm Management» which will be held on September 16-18 2015 in Kyiv.

Association "Ukrainian Agribusiness Club" 

3 floor, 146 Zhylianska Str.

01032 Kyiv, Ukraine

Phone/Fax: +380 44 2362097/79

feschenko@ucab.ua 

Anna Feshchenko

www.ucab.ua

The Association "Ukrainian Agribusiness Club" (UCAB) www.ucab.ua was founded in 2007 to protect the economic and professional interests of players of agribusiness in Ukraine. UCAB is a unique platform in Ukraine for establishing business contacts between the leaders of agribusiness, improvement their work and dialogue with the government. UCAB actively supports Ukrainian producers in establishing and maintaining international business relations. The Association consists of the largest producers and processors of agricultural products in Ukraine.

 




  • Baker TILLY
  • Agroresurs
  • AMAKO
  • Limagrain
  • Zeppelin
  • Amazone
  • LNZ Group
  •  Agricom Group
  • horsch
  • uahk
  • Сygnet
  • Syngenta
  • Agco
  • Agroregion
  • Eridon
  • MHP
  • Maschionet
  • Maisadour
  • DuPont Pioneer
  • Agroscop
  • Agrimatco
  • NCH Advisors
  • Continental farmers Group
  • credit agricole
  • claas
  • john deer
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