For Ukrainian agricultural holdings the third five-year period began with unfavorable economic and political conditions inside the country and low prices on world markets. In this regard, analysts consider several possible scenarios of development.

The unpredictability of the political and economic situation reduced the period of decision-making by management of companies to three months, and limited financial resources led to investing in current activities. The main objective of agricultural holdings for the period of instability and low prices on the world market was to survive by reducing operating and production costs and increasing the efficiency of the company.

Constant expectation of legislative and tax changes made no positive impact on strategic planning for agricultural companies and investment in agribusiness in general. Despite statements about the reduction of the tax burden, taxes in fact increased, in particular, VAT on exports was abolished, so the industry lost USD 1-1.5 bln that could be used for the development of enterprises. But the problem is that the market participants do not have the vision of sustainable agricultural development strategy and qualitative, transparent business environment. Corruption, which was not managed to overcome after the change of the government, also has its influence on this situation.

The main tendency of the previous period of agricultural holdings also changed — the era of increasing land banks came to an end. Companies moved from increase of their land bank to concentration on production costs. Moreover, in some cases enterprises optimized the land which was located far from main production assets, and focused on reducing production costs and improving the use of technology.

The market of foreign borrowings — bonds, IPO, etc. — will be closed for Ukrainian issuers at least for another three or four years, because international investors need time to recover from a number of bankruptcies of Ukrainian agricultural companies, to reevaluate their capabilities and expectations. The opening of a land market could become an impetus for the renewal of external funding, but this issue has no clear support in society. If the land market is not opened in the near future, there is no use to expect Ukrainian agricultural companies to enter foreign borrowing markets; moreover, investors are simply not ready for that.

"There are several possible development scenarios for agricultural holdings in Ukraine. One of them is the transformation of companies into agricultural cooperatives where some central functions (financial, commercial and legal) will be concentrated in the central office, and the rest will be transferred to regional offices. Thus the companies will hold decentralization so that their enterprises participate in income distribution of the holding", — the head of UCAB expert group Igor Ostapchuk says.

The specialization of agricultural holdings is among other changes that are announced by UCAB experts. Enterprises will focus on the main directions — growing crops, livestock breeding or trading, while others will be considered as extra. This will allow them to build a strategy for the future so as to increase their competitiveness not only in domestic but also in foreign markets.

Market participants and market analysts are going to discuss prospects of agricultural holdings in Ukraine and possible development scenarios 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.