"The Future of Agribusiness Belongs to Strong Market Leaders that Are Ready to Change and Invest in Growth"

The agricultural sector is the top economic field in Ukraine that is attractive for international investments. Unlike China, Ukraine is on the EU border, and our products can reach the EU in just a day. Following the opening of the land market, i.e. the right to buy and sell land in Ukraine, our country expects other big changes. A co-founder of a large agricultural enterprise Rozdolne in the Kherson region Andriy Plakhotnyuk in the interview with Alexei Prokhorenko talks about the promising areas of agriculture, modern technologies, achievements of domestic breeders, and the revival of the port on the Black Sea coast.

- Andriy, one of the high-priority issues for agriculture now is state support. Do you think there is enough of it now?

- Our government is making vital steps towards the farmers now. If it continues in the same way, we will feel positive changes in the future. In 2021 the government has allocated 4,5 bln UAH ($167 mln) to support the agro-industrial complex. It includes partial compensation of machinery costs, decreasing interest rates on loans, insurance of farm products and crops, support for irrigation, and organic production. But most importantly, the land market has been launched, which has turned the land into a real asset.

- What do you think of the opening of the land market? What are the prospects for Ukraine? According to some farmers, it may end up in the complete collapse of small and medium-sized farms that will not be able to buy leased land.

- I am one of those who see agribusiness as a long-term game. Competent steps in the opening of the land market will only contribute to this. In any case, the inevitable process has been set in motion. I believe it will give agribusiness confidence in the future and a desire to make large-scale investments. Irrigation systems, the building of workshops, and the purchase of new machinery require huge investments. Farmers are more willing to do it on the land they own. In any case, I see more pros than cons so far. I judge by the experience of other countries, where the land market launched long ago. We regularly attend agricultural conferences and talk to foreign farmers who observe positive changes in the start of the Ukrainian land market, although they were initially wary of it.

Transparent land reform can significantly capitalize Ukraine, in general, and agribusiness in particular.

- Has the interest of foreign investors in Ukrainian land increased, and what niche do they want to take now?

- The agricultural sector in Ukraine remains one of the most attractive areas for both domestic and foreign investment. This sector is the driving force of the Ukrainian economy. Ukraine exported $20 billion worth of agricultural products in 2020, which brings the farm sector's share to 45% of the total Ukrainian exports. The amount of investment in Ukrainian agriculture has increased by 81% in recent years. It proves the high investment potential of the industry. Currently, the agrifood sector is the best option for investments in Ukraine. The land market opening will boost the interest of investors towards Ukrainian agribusiness and lead to the rise of the land price.

Highly profitable branches of agriculture are cattle breeding, vegetable growing, horticulture, and viticulture. Production of fruit and berry products now reflects the globally growing demand for fresh and processed fruits, berries, and grapes. The climatic zone in the south of Ukraine best suits their cultivation.

Of course, there is an interest among foreign investors, and it is significant. These are vegetables, orchards, shrubs, alfalfa production, and more. We see an increased demand for berry farms, greenhouses, grain terminals, and elevators, particularly with access to water. Now foreign investors are actively working with lease contracts. Their interest will only grow when the political situation settles down, and the land market will work at full power.

- What is the most expensive part of agribusiness, and what requires the most investment for you?

- The secret of a good harvest is a well-thought-out irrigation system. On average, it costs about $2k per hectare. Now, we mainly use self-propelled machines in Ukraine. Naturally, new technology will enable us to harvest crops more effectively and with less loss. The costs differ significantly, and it ranges from hundreds to thousands of dollars. As for cultivation, we are supporters of No-Till technology. Its essence is the rejection of plowing the land with traditional equipment. The crushed crop residues fertilize the soil.

This method better preserves moisture and prevents soil erosion. It has been actively used by the largest agrarians in the world.

- Where do you buy seeds, and how feasible may be the cultivation of Ukrainian crops abroad?

- We have an excellent base of seed production enterprises in our country. We buy crops and oilseeds from domestic producers only. The seeds adapt well to our weather conditions, and their price is reasonable. Foreigners buy niche crops such as flax, amaranth, and spelt. Seed breeding can become one of the most promising branches of agriculture. It will not only provide domestic needs in quality seeds but also boost the export potential of Ukraine. Achievements of our breeders and seed producers can compete with foreign companies, but it requires elaboration of the legal field to implement it correctly.

- What are the main trends of agribusiness development in the next five years?

- The future is for strong market leaders that are ready to change and invest in growth. Now a large-scale transformation of the entire agricultural sector has been launched. The next several years will show how it will evolve for all market players. Naturally, the cultivation technology will develop faster. There will be a significant modernization because the agricultural market is actively being conquered by drones now. We expect the arrival of high-power wide-cutting equipment, driverless self-propelled seeders with sensors of precision seeding. The whole purpose of the latest equipment is to minimize crop losses. Thus most efforts in the coming years will be invested in this direction. Meanwhile, it is high time to upgrade the metering and accounting systems and work out the logistics channels. Precision farming and maximum process optimization lie ahead of us.

The subsurface drip irrigation, when water and fertilizers are supplied directly to the root systems, is also actively being examined now. It allows the lean use of resources, but it is still hard to implement on large land areas. Now it is used on 100 hectares though I am sure they will find a way to use the above technology in larger land areas.

- Did you feel the impact of the corona crisis? How did the pandemic situation affect your enterprise?

- Nothing has changed for us literally, but it goes to show the great prospects for agribusiness at all times. The nature of our business is that the number of staff and business contacts in the agricultural sector is much less than in retail and service. But our products are always in demand.

- How do eco-trends affect your business? Tell us about the processing of the harvest

- Consumers are interested in the purest possible products today. Even without an eco-certificate, it is always clear what substances have been used for processing and fertilizing. In 2020 the European Commission adopted the requirements of the regulation 2020/1085 regarding the maximum level of residues of chlorpyrifos and chlorpyrifos-methyl in agricultural and food products supplied to the European market. The European Food Safety Authority (EFSA) deemed the above substance toxic and unacceptable for use. We use agents with minimal toxicity that pose no danger to people. A crucial process is spraying, where we use the minimum necessary amount of the substance. Drones are an optimal tool that allows using the exact amount of fertilizer, not a drop more.

- As far as we know, you have vast experience in growing crops from customer's raw materials. Tell us about your successful cases.

- We have a very appealing example of the cultivation of milk thistle for one of our customers. We have been working with this customer for several years. His main business is the production of cold-pressed oil from this medicinal plant. We are given seeds for planting 55 hectares of land, and the client gets the harvested material for the production. These are unique seeds in terms of variety and quality. They do not spill out during ripening, and our climate helps crops absorb more sun and get all necessary nutrients from our Kherson (town in southern Ukraine) soil. The benefit for our client is that he gets a genuinely unique product not available on the market. They receive a custom selection of seeds that begets the excellent oil.

As for the other crops, we have the resources to grow grain crops with returns of about $400 per hectare, niche crops (like flax or mustard) at about $1k per hectare, medicinal herbs with returns of $1,5k per hectare. These numbers do not account for irrigation. The yields may rise by as much as 2-2,5 times with the use of irrigation. In this regard, a very efficient business is an apple orchard. Its profitability is about $10 thousand per hectare.

- Your agricultural complex has certain services for foreign investors. What exactly can you offer?

- We are located on the shore of the Black Sea. There are great opportunities for big business here. Gardens, vineyards, opening a tourist reserve with a recreation center or a modern hotel with a winery. On top of that, our sunny region is perfect for alternative energy sources, specifically for solar panels. It is an ecologically clean area where it is possible to grow crops with a minimum of fertilizers. The port of Horla is 10 kilometers away, which allows the crops to be transported directly to any part of the world. We are ready for fruitful work and will take care of all issues in the legal field. Just about 120 years ago, the entrepreneur Sofia Falz-Fein founded the port on a small island in the Kherson region, which had no equals on the entire coast. Unfortunately, the stunning success was destroyed by the socialist revolution, but we intend to repeat the past success and surpass those achievements many times over.

Summary