How the Association Agreement will affect Ukraine’s grain growers
October 13, 2013
If Ukraine signs the Association Agreement with the European Union, domestic grain growers will be able to consolidate their presence on the European market. This would stimulate a new round of growth in Ukraine’s grain industry through access to cheaper loans and high-tech equipment, says Oleksandr Odosiy, Director of Derzhzovnishinform, a state enterprise and think-tank that monitors international commodity markets.
Given that the farm sector is one of the strongest sectors in the domestic economy, Ukraine’s farmers are probably looking forward to the signing of the EU Agreement even more than others, Odosiy says. The Ukraine-EU Association Agreement would yield many advantages for Ukrainian grain exporters, the main one being secure export volumes of grain and grain products to the EU. Odosiy also points out that Ukraine has a good chance of increasing grain yield to 100mn tonnes.
In order to take advantage of these opportunities, several issues need to be addressed and they can only be resolved with the help of additional investment.
“First of all, there’s the deficient infrastructure, which currently meets exporters’ requirements and no more,” says Odosiy. “It will soon prove insufficient if grain production goes up. In 2012, Ukraine had more than 750 certified grain silos with total capacity of 33mn t. Additional grain storage with a capacity of 15-16mn t is either incapable of providing the necessary storage conditions or simply is too outmoded for long-term storage. Even with this year’s grain harvest of 58-62mn t and oilseed crop of 12-13mn t, for a total of over 71mn t—the shortage of storage capacity is being felt.”
Another issue is the limited elevator capacity of Ukraine’s ports. Today, these ports are capable of handling about 35mn t of grain a year, which is enough based on current export potential of 28-30mn t of grain. Should grain export volumes be increased to 40-50mn t, domestic port elevator capacity will have to be boosted by 25-40%—and that means serious additional investment.
According to Odosiy, liberalizing trade between the EU and Ukraine would give domestic agribusiness a chance to modernize ports and increase elevator capacity, to revitalize the transport system by building new grain cars as cheaper loans became available. This, in turn, would improve the investment climate and allow upgraded European equipment to be imported.
Source: delo.ua
Tags: EU, grain
Ukraine
