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January 2009 This report was produced for review by the United States Agency for International Development. It was prepared by Robert Fries of ACDI/VOCA, Ryder Rogers of USAID/Kyiv, Jason Wolfe of USAID/EGAT/PR/MD, Stephen Wright of MEDA, and independent consultant Tamara Zykova. 1. DRAFT VERSION OPPORTUNITIES FOR USAID ASSISTANCE TO AGRICULTURE IN UKRAINE

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Page 1: 1.1 Recommendations

January 2009

This report was produced for review by the United States Agency for International Development. It was prepared by Robert Fries of ACDI/VOCA, Ryder Rogers of USAID/Kyiv, Jason Wolfe of USAID/EGAT/PR/MD, Stephen Wright of MEDA, and independent consul-tant Tamara Zykova.

1.DRAFT VERSION

OPPORTUNITIES FOR USAID ASSISTANCE TO AGRICULTURE IN UKRAINE

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DRAFT VERSION

OPPORTUNITIES FOR USAID ASSISTANCE TO AGRICULTURE IN UKRAINE

Robert Fries, ACDI/VOCARyder Rogers, USAID Regional Mission to Ukraine, Moldova & BelarusJason Wolfe, USAID Bureau for Economic Growth, Agricul-ture & TradeStephen Wright, Mennonite Economic Development Asso-ciatesTamara Zykova, Independent Consultant

DISCLAIMERThe author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

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TABLE OF CONTENTS

1. Executive Summary..............................................................................................1

2. Background...........................................................................................................32.1. USAID’s Trends in Agricultural Sector Programming..................................32.2. About the Scope of Work..............................................................................4

3. Development Challenge........................................................................................5

4. Opportunities for Intervention..............................................................................54.1. Wholesale Markets........................................................................................54.2. Sound, Market-Oriented Agricultural Policies..............................................74.3. Grain and Oilseed Market Development.....................................................104.4 Support for Crimean Agricultural Enterprises through Access to Finance 144.5 Concluding Observations and Implications of Findings..............................19

5. Recommendations...............................................................................................21

ANNEX A. Individuals and Institutions Consulted................................................24

ANNEX B........................................................................................................... Works Consulted29

TABLE OF FIGURES

Figure 1 Number of Farms by Land Area...............................................................11Figure 2 Share of Agricultural Land by Farm Size.................................................11Figure 3 Agricultural Loan Portfolio for Ukraine’s Leading Banks as of January 1,

2009..........................................................................................................16Figure 4 Agricultural Loan Portfolio as Percent of Gross Loan Portfolio for

Ukraine’s Leading Banks as of January 1, 2009.....................................17

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ACRONYMS USED

ACM Agro Capital Management

AMDI Agrarian Markets Development Institute

CIDA Canadian International Development Agency

DCA USAID Development Credit Authority

EBRD European Bank for Reconstruction and Development

FAO United Nations Food and Agriculture Organization

FY Fiscal year

GDP Gross domestic product

GLOBALGAP Global Good Agricultural Practices (originally developed and re-quired by European supermarkets)

GOST Gosudarstvenniy standart (state standards)

GUAM Georgia, Ukraine, Azerbaijan, and Moldova

HACCP Hazard Analysis and Critical Control Point

LINC USAID Local Investment and National Competitiveness project

MEDA Mennonite Economic Development Associates

UCF Ukrainian Credit Fund

UHDP Ukraine Horticulture Development Project

USAID United States Agency for International Development

UAH Ukrainian hryvnia (approximately 8 UAH = 1 USD)

VAT Value added tax

WTO World Trade Organization

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1. EXECUTIVE SUMMARY

While Ukraine’s Agricultural sector has seen steady growth and remained stable during the financial crisis, agricultural production remains far below its potential. USAID was on track to phase out of agricultural assistance to Ukraine in 2009, however the global economic crisis, the Russian Georgia conflict, and global food shortages have all called attention to Ukraine’s significance as a transitioning economy and highlighted its potential to contribute to global food security. USAID/OEG received supplemental funds in FY 2009 to address the financial crises, plans for phase out were suspended, and future funding is projected to in-crease.

This Agricultural Assessment was undertaken in order to evaluate the effectiveness of previous development efforts while helping to shape the next wave of USAID’s agricultural assistance to Ukraine. The assessment team talked to numerous stakeholders including Ukrainian government officials, trade associations, think tanks, both small and large producers, traders, exporters, and other US govern-ment agencies. Throughout the course of the assessment the team examined four broad areas: (1) wholesale markets, (2) agricultural policies, (3) grain and oilseed market development, and (4) Crimean agribusiness development.

Wholesale markets in Ukraine are widely seen as underdeveloped with the notable exception of the Shuvar market in Lviv, which is frequently cited as a model. With support from Shuvar and the Agrarian Markets Development Institute (AMDI), the Verkhovna Rada recently passed a law on Wholesale Markets that will grant legal status to wholesale markets, and authorize government subsidies for the establish-ment of new wholesale markets. The Shuvar model, while providing an alternative market outlet to bazaars and grocery stores, is not sufficient for increasing private farmer linkages to the market. Wholesale-retail mechanisms and facilities in rural areas are required to improve consolidation and marketing options for farmers.

While Ukraine has undertaken many primary agricultural reforms, there is a sub-stantial need for secondary reforms. The Agrarian Markets Development Institute (AMDI), a non-partisan think tank primarily funded by USAID, has been highly en-gaged in policy analysis and reform for agricultural development. The assessment team looked at many policy issues affecting agricultural growth including agricul-tural land markets, subsidies, tax issues, cooperatives, and standards, while also looking at the overall effectiveness of AMDI as a driver of policy reform.

Despite the recent rise of agriholdings, small and medium farms continue to play a significant role in Ukraine’s agricultural production, particularly in Crimea. How-ever, constraints to increasing productivity and production amongst these produc-ers include limited access to knowledge, technology, and credit along with a lack of price transparency.

1.1 Recommendations

The assessment team presumes that the objective of future USAID assistance is to increase agricultural growth and competitiveness in Ukraine in a manner that is both sustainable and broad-based. Increased competitiveness will rely on improve-

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DRAFT VER-

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ments in yields, which require access to more efficient technology and improved efficiencies in moving products from the farm to markets. The team found broad consensus that private farmers, operating on farms of up to a few thousand hectares in size and managed by families and individuals engaged in production, are and will remain an important source of agricultural production into the future. Given the challenges that they face in terms of productivity, including access to knowledge, technology, finance and efficient market access; USAID can add value by organizing its interventions around efforts that target these private farmers and expand their access to knowledge, technology, finance, and market linkages.

1.1.1 Farmer Strengthening

One component of the Mission’s agricultural strategy should be private farmer strengthening. The objective of this component will be to increase the productivity and profitability of private farmers in selected geographical areas and value chains, in order to provide a demonstration effect for small and medium scale farmers more broadly. To achieve this, the component should address gaps in knowledge, technology, finance, and market linkages. Potential interventions in-clude a wide range of technical assistance to facilitate access to inputs, training in “the farm as a business,” training through demonstration plots for high yielding technologies, and technical assistance to assess and improve university research and education. The team recommends focusing resources on private farmers in Crimea and if feasible, in Southern and Western Ukraine.

1.1.2 Wholesale Markets and Storage Facilities

Another promising area for investment is in market infrastructure including whole-sale markets and storage facilities. Providing alternatives for producers to market their products to wholesalers would require parallel investments in rural market facilities, run by producer cooperatives or associations, that would offer both regu-lar and cold storage space. Improvements are also needed to increase the trans-parency and competitiveness of grain storage facilities. This component could in-clude interventions such as short-term technical assistance to wholesale market development projects, developing relevant construction financing products, assess-ing grain warehouse facilities to evaluate issues of mistrust in the warehouses, and researching why grain warehouse receipts are not being utilized. Grants and tech-nical assistance to warehouses could be used to improve transparency, effective-ness and competitiveness of services.

1.1.3 Policy Environment

The team recommends placing less focus on big policy wins and more on regula-tory improvements and effective public-private mechanisms for communication. As a component of a future USAID project, resources can be used through a mecha-nism to tap AMDI for targeted tasks, such as fine tuning of warehouse receipt leg-islation to allow the creation of an indemnity fund or to address constraints identi-fied by the assessment in the field, a legal gap analysis to identify barriers to pre-harvest financing as currently being supported by EBRD, or conflicts that exist be-tween grain warehouse receipts and grain market legislation.

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1.1.4 Access to Finance

A fourth promising component of future assistance would be to increases access to financing for investments in technology and equipment that increase productivity and competitiveness. Diversification into fruit and vegetable production often re-quires significant up-front investment and USAID, in collaboration with other stakeholders can help to enable this value chain diversification. Given the absence of a few financial institutions committed to expanding agricultural lending, inter-ventions in this component will need to be facilitated around promising and spe-cific economic opportunities. They could include combining technical assistance and liquidity or guarantee facilities for a range of financial institutions and agribusinesses that demonstrate significant interest in financing priority upgrades.

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2. BACKGROUND

Agriculture comprises around 10 percent of Ukraine’s GDP and employs 23.1 per-cent of the total work force or 3.3 million Ukrainians. In the 2008/2009 season Ukraine was the world’s fourth largest exporter of grain and the top exporter of sunflower oil.

The agriculture and food industry has served as an economic pillar of stability as one of the only economic sectors to continue to grow during the global economic crisis, overtaking the economic lead from the steel and chemicals industry in the third quarter of 2008. Agriculture is likely to continue to lead Ukraine until there is sustained economic recovery.

Growth of the sector began in 2000 following significant agricultural land privati-zation, which dissolved collective and state farms and transferred control to pri-vate business. At this time the government discontinued its supply of inputs and replaced them with subsidies in the form of cash transfers and subsidized interest rates.

Agricultures’ steady pace of growth masks the sector’s underperformance. An ex-ample of agriculture’s lackluster performance is its average 3 percent per annum growth since 2000 while the remainder of the economy grew on average of 6 per-cent over the period. Further, rural areas are now predominately, over 75 percent, populated by people over 60 and less than 17 years of age, as those capable of working have migrated to large urban centers or left the country. The 2008 grow-ing season was the first year since 1992 that large scale commercial farm produc-tion outperformed household plots in terms of value of production. Of Ukraine’s 42 million hectares of agricultural land less than 3 million hectares are farmed using current farm technology and over 7 million hectares are idle.

A 2008 FAO assessment indicated that Ukraine would be a critical player over the next three to five years as a food producer that could significantly ameliorate the global food crisis. Development of the sector can help to further diversify Ukraine’s industrially oriented economy by reducing imports and increasing rural incomes.

2.1. USAID’s Trends in Agricultural Sector Programming

USAID was on track to phase out assistance for most of its economic growth pro-gram areas by 2012. Agriculture was the first area to be phased out, with program-ming scheduled to end on September 30, 2009. However, the global economic cri-sis called attention to Ukraine’s lingering need for structural and economic re-forms while the 2008 Georgian-Russian conflict highlighted Ukraine’s significance as a transitioning market economy and democracy. Additionally, global food short-ages have highlighted Ukraine’s potential to contribute to global food security while strengthening its own economy.

USAID/OEG received supplemental funds in FY 2009 to address the financial crises, including funds for value chain, business enabling environment and land re-form assistance for Crimea. Plans for phase out were suspended, and future fund-ing is projected to increase. The renewed emphasis on agriculture in Ukraine has provided an opportunity for fresh thinking on agricultural assistance. This assess-ment took stock of many of USAID’s previous agricultural assistance projects while considering possible areas for future work.

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Agricultural sector assistance can play an essential role in achieving the FY 2010 Mission Strategic Plan (MSP) goal of helping the Ukrainian Government foster pri-vate sector economic growth and develop an investment climate favorable to for-eign and domestic capital by fostering the agricultural enabling environment and creating market linkages. This will help to achieve the long-term stability, indepen-dence, and prosperity that the U.S. seeks for this region. It will also help Ukraine complete its transition to a market-based, open economy and live up to its consid-erable economic potential.

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2.2. About the Scope of Work

The Agricultural assessment was tasked with examining four main areas: (1) WHOLESALE MARKETS, (2) AGRICULTURAL POLICIES, (3) GRAIN AND OILSEED MARKET DEVELOPMENT, and (4) CRIMEAN AGRIBUSINESS DEVELOPMENT. The guiding questions for exploration in each of these areas are outlined below.

1. Wholesale Markets Does Ukraine’s recently adopted wholesale markets law provide an adequate

regulatory framework for development of wholesale markets? How could a project best facilitate the establishment of a wholesale market? Is the environment right to assemble investment groups in places like

Odessa or Simferopol to stimulate development of wholesale markets and is it wise to match investments funds to facilitate the investment?

What is needed in terms of capacity building to support wholesale markets? Are there opportunities for credit enhancements, such as a DCA, to facilitate

the startup and success of a wholesale market?

2. Develop Sound, Market-Oriented Agricultural Policies What are the top agricultural reforms that need to be addressed in order to

ensure a more competitive sector that adds to Ukraine’s economic security and integration with the European Union?

What are the various stakeholders’ roles in each of these reforms? What is the role of the Agrarian Markets Development Institute (AMDI) and

what is their capacity? What is the capacity of AMDI’s public private dialogue mechanisms?

3. Greater Food Security through Grain and Oilseed Market Development Can Ukraine become a major contributor in the efforts to ensuring global

food security? How is the Grain Warehouse System functioning in Ukraine and how does it

enable farmers to obtain credit? What are the overall constraints for increasing the supply of grain from

Ukraine? What other avenues exist for cooperation with EBRD to improve access to

agricultural credit?

4. Support for Crimean Agricultural Enterprises through Access to Finance How is finance accessed within various agricultural sectors? What banks and credit unions operate in the agricultural sector and what is

their capacity? What are the opportunities for value chain financing? What is the capacity of the MEDA leasing facility and does it represent an

opportunity for investment?

In addition to theses specified areas for investigation, the team was given a broad mandate to look at other possible opportunities for USAID intervention that may not have been considered. Some of these findings will be discussed later in the pa-per.

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3. DEVELOPMENT CHALLENGE

The assessment team formulated the following development challenge to guide field research and prioritize opportunities for USAID support of Ukrainian agricul-ture: PROMOTE AGRICULTURAL GROWTH AND COMPETITIVENESS THROUGH IMPROVEMENTS THAT ARE BROAD-BASED AND SUSTAINABLE.

This development challenge implies that USAID support should incorporate all of the following dimensions: GROWTH: stimulating growth and competitiveness within agricultural subsectors

as well as maximizing agriculture’s overall contributions to national economic growth

EQUITY: ensuring that growth opportunities involve and benefit as many Ukraini-ans as possible without further exacerbating income inequality that is prevalent in Ukraine

SUSTAINABILITY: securing local leadership, ownership, and investment in strate-gies to assure that results continue beyond the life of USAID’s assistance

4. OPPORTUNITIES FOR INTERVENTION

4.1. Wholesale Markets

The assessment team formulated and tested the following hypotheses based on US-AID/Ukraine’s guiding questions: Wholesale markets are a missing critical link between small producers and

larger buyers in Ukraine. The recently adopted law on wholesale markets unlocks opportunities for ex-

panding such markets in Ukraine.

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Producers and middleman can operate directly from their trucks selling in bulk to individuals, as well as some restaurants and smaller markets.

Cold storage facilities add value to re-tailers of meat, fruits, and vegetables; vendors can rent the amount of space needed.

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Investment is the primary constraint to establishing more wholesale markets in Ukraine.

4.1.1.Types of Wholesale Markets

Generally, wholesale markets are physical spaces or structures for buyers and sell-ers of specific products to interact, discover prices and negotiate transactions. Such markets typically play aggregation and/or disaggregation roles enabling ex-ternal traders to purchase and consolidate loads from local suppliers or to sell off their incoming loads to localized buyers, often in smaller volumes until their stock is depleted. The four types of markets that can be found in Ukraine are listed be-low.

Type of Market Locations

1) Rural retail and assembly markets Widespread, primarily on major roadways

2) Urban retail markets (“bazaars”) Spread throughout major cities 3) Urban “wholesale markets” (in re-

ality a large combined wholesale & retail market)

Large urban areas including Sim-feropol, Sevastopol, and Zapor-izhzhia

4) Regional wholesale market Kherson

Type (1) (wholesale assembly) predominates. Conducted in informal settings, these are spot markets where price is the central determinant of the sale. Type (1) mar-kets also supply the other market types described hereafter. Value addition (prod-uct uniformity, standards, and packaging) is absent. The limitations of spot mar-kets for farmer and buyer alike are well known. Type (2) is not a wholesale market but rather a retail market. Vendors may be farmers or traders. In Type (3), also a spot market, ‘wholesaling’ trade is generally completed in the morning hours (pro-viding time for the goods traded to be transported to other locations in time for re-tailing later in the day. Morning wholesaling gives way to retail trade later in the day on the same site. Situated in or very close to major urban centers, wholesale trade in these markets involves both disaggregating large incoming loads destined for retailing in the city and aggregating large loads that are shipped ‘regionally’ to other ‘disaggregation markets’. Trade at type (4), also a spot market, is predomi-nantly of large incoming and outgoing loads, reflecting mainly wholesale trade and reshipment of all goods to other final markets.

4.1.2.General Roles of Wholesale Markets

The major role of wholesale markets in agriculture is the consolidation of produce from numerous smaller producers into saleable quantities demanded by larger buyers outside of the immediate area. A variety of structures and arrangements can facilitate this consolidation function, including cooperative marketing through formal or informal producer groups, sales agents or brokers acting on behalf of producers or buyers, and conventional traders who purchase at the farmgate. Wholesale markets clearly play a major role in reducing costs and increasing mar-keting efficiency, primarily by reducing search costs for buyers. The key benefit for suppliers is access to a pool of potential buyers. The importance of wholesale mar-kets in developed countries ranges from as little as 25 percent of total trade in the UK to higher amounts elsewhere. In developing countries the importance of whole-

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sale markets are expected to continue for quite some time until more formal supply networks and arrangements develop. In many places, the rise of supermarkets is putting the role of wholesale markets into question; for instance, EBRD has stopped lending for them in favor of funding retail expansion. In Ukraine, however, supermarkets have low market penetration and a generally poor reputation among consumers. Nevertheless, wholesale markets are widely seen as underdeveloped with the notable exception of the Shuvar market in Lviv, which is frequently cited as a model.

Shuvar is a well developed and functioning facility with very good logistics, infra-structure (including some cold storage), a range of services, and a diverse combi-nation of wholesale and retail operations. Their target consumers are institutional buyers (such as restaurants), smaller retailers in Lviv and nearby municipalities, and households seeking quality products at a good value. Transactions occur in much smaller batches than other wholesale markets around the world with typical purchases ranging from a box to a pallet of produce. In this respect, Shuvar cur-rently operates more as a consumer-oriented wholesale retailer (trucks come in, boxes go out) rather than a traditional producer-oriented wholesale market (boxes come in, trucks go out). While this may be an appealing and effective business model for Shuvar’s investors, it offers fewer benefits to producers (in terms of the consolidation function) than expected. Rather than increasing competition for farmer’s products and aiding producers in price discovery, this model benefits pro-ducers less directly by providing a new type of outlet for fresh fruits and vegeta-bles, one that can increase demand and offer a premium for locally grown products of higher quality.

Apart from the Shuvar model, a range of wholesale markets does exist throughout Ukraine (including Crimea), though most are informal and inefficient.

4.1.3.Wholesale Markets Law

The Verkhovna Rada recently passed a new Law on Wholesale Markets with sup-port from Shuvar and the Agrarian Markets Development Institute (AMDI). The main provisions of the law are (1) to grant legal status to wholesale markets, and (2) to authorize government subsidies for the establishment of new wholesale mar-kets. The new legal status is intended to facilitate land acquisition for constructing markets, as local governments reportedly had difficulty classifying land for this purpose. State funding, if actually made available, would most likely flow to munic-ipalities for investment in new markets. AMDI has suggested that joint ventures between municipalities and private developers would be good models for putting these resources to use.

It is not completely clear whether the legal status afforded by the law will, by it -self, make available new land for wholesale markets in urban areas. The subsidies authorized by the legislation will require budget appropriations and secondary policies to make these funds available. Given the austere budgetary environment, the team seemed skeptical that the GOU woul dreally be able to afford these subsi-dies. Moreover, there seem to be few models (as highlighted by AMDI) and weak incentives (noted by private developers) for public-private partnerships between municipalities and the private sector to develop wholesale markets in this fashion.

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4.1.4.Investment for Wholesale Market Development

Access to long-term funds for investment is one of several constraints to expanding wholesale markets in Ukraine. Other donors, such as FAO and the World Bank, have had a longer history than USAID of supporting wholesale market develop-ment in the E&E region. Their collective experience points to the following general success factors: Location is everything – market locations must relate to transport routes, poten-

tial markets, and convenience for buyers. Key traders may be reluctant to shift to new markets. Buy-in from local authorities is critical, which may explain private sector reluc-

tance to date Don’t build too much too soon; the debt overhang will be impossible to cover

with revenues. For instance, the Renk market in Poland is operating at only 30 percent of its capacity.

Long-term financing can be difficult to secure at the best times, much less in the wake of the financial crisis in Ukraine. Private developers pursuing wholesale mar-ket opportunities (including Shuvar) have devised their own strategies to address this issue. Their general approach is to develop markets in an incremental or mod-ular fashion as they are able to access tranches of investment funding. While per-haps not ideal, the advantage of this method is that it aligns very well with past lessons learned from developing markets in other locations. Developers consulted in this assessment demonstrated little interest in partnering with local authorities to invest in wholesale markets as they have little confidence in government motiva-tions or capacity; they would prefer to rely on private investment even if it pro-longs the development process. Their most pressing request was for technical as-sistance, especially from more established wholesale markets in the region, rather than debt or equity financing.

4.2. Sound, Market-Oriented Agricultural Policies

The assessment team formulated and tested the following hypotheses based on US-AID/Ukraine’s guiding questions: The significant but incomplete structural reforms begun in 2000 have not fully

unlocked agricultural potential: further policy reform is required. The public-private dialogue mechanisms established by USAID have been effec-

tive. AMDI has been, and should continue to be, an instrumental local partner in pol-

icy reform.

4.2.1.Needs for further policy reform

While Ukraine has undertaken primary reforms of many key policies affecting agri-culture, there is a substantial need for secondary reforms. According to Ukraine’s policymaking process, primary reforms involve the legislative actions taken up by the Verkhovna Rada that provide direction and authority for government initia-tives. In many cases, however, further policymaking is required by the Cabinet of Ministers and/or within specific line ministries to implement or administer the re-quirements of primary legislation. Reforms of these secondary policies are fre-quently incomplete, ambiguous, or weak.

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The following policy issues present the most significant constraints related to agri-cultural growth and competitiveness in Ukraine: AGRICULTURAL LAND MARKETS. Ukraine has maintained a moratorium on the buy-

ing and selling of agricultural land since the breakup of collective farms in 2000. The only recourse for agribusinesses looking to consolidate land for pro-duction and rural non-farming households seeking to derive value from their land is an informal, and often corrupt, market for leasing land. Many farms are formed from hundreds of leases, yet there is no standardization of lease agree-ments. These leases can range from year-to-year, informal agreements to 49-year contracts that allow for the eventual purchase of the land if the morato-rium is lifted. There is however a minimum annual amount that must be paid for these leases (currently 2.5 percent of the land’s value as determined by the gov-ernment). These assessed values however, may distort the true value of the land, which can vary greatly according to location, soil content, and other fac-tors. Some small farmers support the land moratorium because they doubt their own ability to purchase the plots they current lease. Others oppose the morato-rium because of the inefficiencies and corruption it introduces into agricultural production. Politicians inevitably invoke land issues as a political tool to garner electoral support and disparage their rivals, resulting in widespread misinfor-mation, uncertainty, and apprehension. The general consensus is that the land moratorium will be lifted in the next three years out of financial necessity, but the timing is very difficult to predict.

SUBSIDIES. Ukraine frequently uses government regulations and resources to ar-tificially control the terms or outcomes of market interactions, notably demon-strated through the wheat export quota of 2007, ongoing price controls for bread (as well as new price controls for meat and dairy products), and purchas-ing surplus grain to support farmgate prices. While public subsidies are a com-mon component of agricultural policies, Ukraine’s use of subsidies is frequently driven by political purposes rather than economic or scientific evidence and with little consultation with the private sector. Unlike other policy issues, the application and discontinuation of subsidies in Ukraine often seems arbitrary and unpredictable so that the private sector cannot adequately absorb their ef-fects into their business models. This climate of uncertainty introduces exten-sive inefficiencies in private sector operations and discourages some longer-term private investments in the agricultural sector.

VAT REFUNDS. The government significantly under-budgets for VAT refunds to Ukrainian exporters as a means to balance the overall national budget (e.g., 20 billion UAH budgeted for VAT refunds in FY2010 against projected refund re-quests of 53 billion UAH). This issue affects grain exporters in particular given their large export volumes. Given the extraordinary shortfall in VAT refunds available, there are substantial incentives for corrupt practices to secure a re-fund. Exporters who do not receive refunds will pass these costs on to small farmers (the producers) in the form of lower purchasing prices for grain.

COOPERATIVES. The Verkhovna Rada is expected to pass a law on non-profit co-operatives to augment the legal status of cooperatives and intensify govern-ment promotion of cooperatives in Ukraine. Allowing cooperatives to form as non-profit entities would remove perceived problems with double taxation for cooperatives (where taxes are applied both when members sell products to the cooperative and when the cooperative sells products to external buyers). How-ever, non-profit entities in Ukraine face a range of other taxation issues related to ambiguous interpretations of “profit” and burdensome tax-reporting proce-

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dures that force these entities to limit their financial reserves. The planned surge in government support for establishing and developing cooperatives (re-portedly in the billions of hryvnia) is expected to distort incentives for coopera-tive formation. Successful cooperatives need to meet a demonstrated economic need of their members, require investment and buy-in from members, and apply democratic practices of management, governance, and decision-making. The opportunity to secure large subsidies from the government is likely to under-mine these principles and yield a new generation of unproductive cooperatives that provide little value and few services to their members.

STANDARDS. Ukraine’s recent accession to the WTO has prompted a spate of re-forms to bring the mandatory health and safety standards of its food products in line with international conventions. WTO guidelines assert that national food safety systems “should be no more restrictive of trade than is necessary to achieve the required level of protection” for public health. Ukraine inherited its system of standards and monitoring (known as GOST) from the Soviet era, which defines criteria for each specific product and requires virtually constant testing of each production batch or shipment. GOST has not been updated in 20 years and is widely considered to impose unnecessary costs on business without achieving public health and safety results. International standards have shifted to more process-oriented standards and risk-based monitoring procedures. A number of efforts are underway to reform and harmonize aspects of this sys-tem, reflecting the scale and complexity of required reform in standards. More-over, a range of voluntary standards required by specific industries (such as GLOBALGAP and HACCP) can be a significant barrier to accessing higher-value export markets. A closer review of existing support is required to determine if USAID can add value to the efforts with a targeted intervention that comple-ments European assistance.

Despite these pressing needs for further policy reform, it is not clear that sufficient constituencies and political will exist to support such changes in the near-term. Many of these policy issues are highly politicized and are popular tools among can-didates for public office, particularly in light of presidential elections expected to be completed in February 2010 and parliamentary elections expected to follow soon thereafter. Political constituencies are likely to be fragmented and polarized over the near term with politicians focused on consolidating their electoral victo-ries and fulfilling campaign promises rather than making difficult policy decisions. Opportunities for engagement, dialogue, and reform are expected to emerge over the next three years, but at this time it is difficult to outline a concrete reform agenda that has good prospects for traction with a new government.

4.2.2.Public-Private Policy Dialogue

Through AMDI, USAID facilitated the creation of four public-private dialogue mechanisms, know as “advisory councils”, to boost private-sector participation in developing agricultural policies. These advisory councils correspond to four branches of government involved in all levels of the policymaking process: the Verkhovna Rada, the Presidential Secretariat, the Council of Ministers, and the Ministry of Agrarian Policy. Each of these governmental bodies influences different policies, and the Ukrainian system of checks and balances brings about complex in-teractions between these entities.

The advisory councils are convened as an instrument of their respective govern-ment bodies with members drawn from professional associations, NGOs, and

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academia. Their role is to vet proposed policies and to provide feedback on newly implemented policies at the request of the government. They do not have an auton-omous mandate or role to mobilize their members to formulate or advance policy agendas from the private sector. Their most notable success to date was overturn-ing the grain export quotas in 2007.

Apart from these councils, independent private sector mechanisms to advocate for policy reform are fragmented and weak. Where they do exist, advocacy organiza-tions are set up along horizontal or functional lines, a situation which dilutes their influence, promotes dissension within industries, and encourages rent-seeking be-havior. For instance, the grain subsector features organizations of producers (As-sociation of Farmers of Ukraine, Agrarian Confederation) and traders (Ukrainian Grain Association) but no entity representing the interests of the entire industry. Greater vertical coordination and organization, more member-oriented services, and stronger financial sustainability would significantly increase the effectiveness of these institutions.

4.2.3.Local Partners in Policy Reform

The Agrarian Markets Development Institute (AMDI) was established in 2005 by a team of experts experienced in Ukrainian agricultural policy issues. As a non-parti-san think tank, AMDI is highly engaged in policy analysis and reform for agricul-tural development. As an advocate for private sector and broader civil society par-ticipation in the policymaking process, AMDI has played a key role in advancing public-private dialogue mechanisms.

AMDI has a strong track record of performance. In the past three years, AMDI has actively pursued targets of opportunity for policy reform and had success in ad-vancing a range of issues from wholesale markets and the warehouse receipts sys-tem to grain export quotas. Moreover, AMDI was instrumental in establishing the four private-sector advisor councils engaged in agricultural policies and continues to facilitate their operations. AMDI has made less progress in tackling other policy issues, such as privatizing Khlib Ukraina and moratorium on agricultural land mar-kets, but it is arguable that few organizations could have made much more head-way with these entrenched issues.

The preponderance of AMDI’s efforts have been funded by USAID. Though AMDI continues to diversify its funding sources among a variety of donors, its institu-tional sustainability could be further strengthened by tapping a broader market. Given the institute’s focus on policy issues of interest to the private sector, it could prove worthwhile for AMDI to build a larger funding base among the local and multinational agribusinesses.

Beyond AMDI, the most influential players in agricultural policy reform seem to be the many professional associations representing private sector interests. As noted previously, the fragmented nature of these groups dilutes their potential influence. However they speak for important constituencies that can advance policy agendas. While this time of political transition in Ukraine obscures the prospects for a con-crete policy agenda, bolstering the capacity and sustainability of these entities, in-cluding AMDI, could build a solid foundation for advocacy and reform as opportuni-ties begin to emerge.

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4.3. Grain and Oilseed Market Development

In developing the scope of work for this assessment, the Mission asserted the fol-lowing hypotheses:

1. Ukraine, by increasing grain and oilseed production, can contribute to global food security.

2. The Grain Warehouse Receipts system developed in Ukraine contributes to in-creased credit and productivity, and more efficient trade. Expanding this sys-tem through the development and harmonization of the system in GUAM will make grain trade in the Black Sea Basin more efficient and more insulated from government intervention.

3. Building on the groundwork laid by the Grain Warehouse Receipts system, it may be useful to collaborate with EBRD in its desire to support the develop-ment of a product and legal framework for pre-harvest financing, adapting posi-tive experiences in Brazil.

4.3.1 Contributing to Global Food Security

The assessment team’s findings confirm the first hypothesis. Ukraine can contrib-ute to global food security by increasing its production of grains and oilseeds. Ukraine is a significant producer of these crops in the world market, with signifi-cant potential for increasing both yields and area of production. According to FAOStat, in 2007 Ukraine was the world’s second largest producer of sunflower seeds, the fifth largest producer of potatoes and rye, the seventh largest producer of barley, the ninth largest producer of canola, and the eleventh largest of corn. At the same time, it has significant room for expanding its production. Yields are sig-nificantly lower than yields in Europe and North America. According to a recent FAO/EBRD study, average yields for grains in Ukraine were 2.4 tons per hectare, compared with 6.4 in the United States, and 6.7 in Western Europe. (FAO/EBRD 2008) Yields within Ukraine vary significantly, as well. According to a major sun-flower seed processor and exporter, yields range from 1 metric ton (MT) per hectare for many of the small to medium scale producers, up to more than 4 MT per hectare on the most efficient farms, which tend to be managed by agricultural holding companies. Furthermore, the same FAO/EBRD assessment estimates that Ukraine can increase the area under production by 21%.

In addition to the potential for increased productivity, Ukraine has the potential for increasing production by extending its cultivated area. According to FAO, Ukraine’s area of agricultural production declined by 3 million hectares since the break-up of collective farms, and roughly half of that area, or 1.5 million hectares, could be feasibly recovered in the short-term.

While production by large agricultural holdings has increased in recent years, pri-vate farmers account for significant areas and levels of grain production. Agricul-tural production in Ukraine is carried out by four distinct types of producers: Household farmers – Individuals or families that farm on their own property

less than 5 hectares (that they obtained through the privatization of collective farms) who are not registered as farm enterprises.

Private farmers – Farm enterprises registered by farmers who received approxi-mately 50 hectares of land through the privatization process, who also lease plots from other landowners and rely on family labor. These producers may have several hundred or up to three or four thousand hectares in production.

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Corporate farms – Farm enterprises owned by incorporated groups of private farmers, which constitute several thousand hectares.

Agricultural holdings – Production units owned by a group of investors, often in-cluding foreign investors, comprising very large amounts of leased land—tens of thousands of hectares, and operated with a professional management team and modern technology, equipment, and inputs.

As illustrated in Figures 1 and 2, farms between 5 and 3,000 hectares in size ac-count for 85 percent of all agricultural entities and 58 percent of cultivated land. While accounting for 12 percent of farm entities, farms up to 5 hectares in size ac-count for only 0.1 percent of the agricultural land of registered entities. Con-versely, farms larger than 10,000 hectares, while only 0.2 percent of all farm enti-ties, occupy more than 8 percent of the land.

Given the magnitude of grain produced by private farmers, the amount of land to which they have access, and the relatively lower yields they have vis-à-vis agricul-tural holdings, investments at that level within the chain can contribute to signifi-cant increases in Ukraine’s production of grains and oilseeds.

Figure 1 Number of Farms by Land Area Figure 2 Share of Agricultural Land by Farm Size

Source: State Statistics Committee of Ukraine, 2008

Source: State Statistics Committee of Ukraine, 2008

Constraints to increasing productivity and production by this segment of the value chain include:

Limited access to knowledge and technology (equipment and inputs) for obtain-ing higher yields and maintaining quality

Limited access to credit that facilitates investments in technology

Limited transparency in prices offered to farmers combined with high degrees of distrust toward traders and warehouse elevator operators, hampering consol-idation and providing disincentives to producers to change their practices

Each of these constraints is discussed in further detail below.

KNOWLEDGE. Actors throughout the value chain cited inadequate access to knowl-edge. Producers interviewed by the team demonstrated knowledge of international prices of grains and oilseed traded internationally, but expressed confusion and frustration over the gap between those prices and the ones received for their prod-uct. The failure of the government to reliably refund the 20% VAT payments made by exporters results in significant downward pressure on the price ultimately of-

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fered to producers. The non-refunded taxes are factored in as a cost of business by exporters. This was acknowledged by exporters, traders, and some producers.

In addition to these challenges to clear market signals, interviewees cited a num-ber of factors constraining the dissemination of technical information that could in-crease yields and reduce losses for grain producers: Outmoded methods of research and education at the university level, resulting

in ineffectively trained extensionists A lack of budgetary resources to allow extensionists to reach the large number

of producers A reluctance on the part of associations and other non-profit sources of informa-

tion to charge fees for their services, compounded by tax policies which insure that these organizations have no cash on hand at the end of a quarter, under-mining the development longer term budgeting and sustainable services

A value chain with many buyers and a preponderance of spot market transac-tions, minimizing the incentives for suppliers and buyers to embed the provision of inputs and extension into their services.

As a result, farmer access to critical information for increasing the quality and yields of their grain production is spotty. Associations, innovative farmers, and the internet are sources of information for some producers. For example, one of the larger members of the Crimea Producer and Landholder Association has developed a Ukrainian-language website to disseminate information on no-till technologies.

TECHNOLOGY. A CIDA-funded grain program observed that many producers rely on outdated and nearly obsolete farm implements and equipment. These items, origi-nating from collective farms, are at the end of or beyond their useful lifespans. When this equipment ceases to operate, producers will be forced to invest in new equipment, or face lower levels of productivity. Farmers interviewed in the Crimea are using homemade equipment for their low and no-till production because of lim-ited access to investment resources. These pieces of equipment are less productive than the manufactured equipment they are modeled on. Use of high-yielding seeds, fertilizer and pest management inputs is constrained by farmer access to working capital. For larger producers with greater access to capital, investments to the land that could enhance yields, such as more effective grading, are discouraged by dependence on leased land as a result of the moratorium on the sale of agricultural land.

Investments are also needed off-farm in order to facilitate increased productivity, and to manage the handling and flow of increased production. Theoretically, cost-effective sharing of equipment can be facilitated by reliable service cooperatives, though few viable cooperatives currently exist in Ukraine. Storage equipment is demanded by farmers, as an alternative to elevators. Increased production will re-quire significant increased storage capacity by elevators and port facilities. Li-censed elevators and port facilities are operating at full capacity, resulting in lim-ited competition for elevator services, which in turn undermines farmer confidence in the effectiveness of their services and fairness of their prices. If Ukraine in-creases its production to a consistent level of 80 MT of grains and oil seeds, as cur-rently set forth as a Ministry of Agrarian Policy target, elevators and ports will need to further increase their storage capacity. This increased production will also require investments in transportation: trucks, rail cars and barges with the capac-ity to move this increased volume.

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ACCESS TO CREDIT. The financial crisis that first hit Ukraine in the last quarter of 2008—characterized by a rapid and significant devaluation of the hrivna, a deterio-ration of the loan portfolios of and the dramatic tightening of liquidity by banks and credit unions—has virtually eliminated credit for agriculture. However, even prior to the crisis, private farmers had very limited access. This topic is discussed in detail in Section 4.4.2 below.

4.3.2 Warehouse receipts

While this hypothesis is logical, it is at best premature. The assessment team found that the warehouse receipts system developed in Ukraine contributes marginally to credit and productivity. The basic reason for this marginal benefit is the fact that the warehouse receipts system is operating on a very limited scale.

With assistance from USAID and EBRD programs, Ukraine has put in place most of the legal, regulatory and operational elements of a functioning warehouse receipts system. The regulatory environment recognizes the validity of a warehouse receipt as a security. Selling or signing over the receipt to a new owner entitles the new owner to the grain that the receipt backs. There is a network of certified ware-houses, with a state entity charged and staffed with 625 inspectors to certify ware-houses, and to inspect them for compliance on an on-going basis. Starting with 282 certified elevators in 2004, there are now 762. An additional 34 have lost their cer-tification because of violations. There is also a registry, managed by a government-owned enterprise that allows warehouses to register deposits and receipts, and al-lows banks and traders to verify the validity of deposit tickets and warehouse re-ceipts. A final piece of the system, an indemnity fund into which each elevators pays in order to ensure the system against fraudulent acts (other risks such as fire are covered by insurance policies required by certified elevators), has not been put into place, as the enabling legislation has not been enacted. While this final piece of the system could be an assurance to banks and traders relying on the validity of warehouse receipts, its absence has not been identified as a significant constraint on the use of warehouse receipts. In fact, banks are accepting these receipts on a limited basis.

The more significant issue is that depositors in the elevators are not readily de-manding warehouse receipts, but are instead relying on a ticketing system similar to the system that was in use under Soviet times. These tickets document the fact that a deposit has been made. They are cancelled when the deposit leaves the warehouse. They are less formal documents, and do not carry the weight of a ware-house receipt as a legal title to ownership. Unlike warehouse receipts, tickets do not enable grain deposits to be used as collateral for accessing credit. Yet they ac-count for most of the transactions that take place in certified warehouses. In 2008, 5.3 million MT of grain was certified by 4,280 receipts. In the first 10 months of 2009, 5.6 million MT were certified by 5,627 receipts. The registry could not spec-ify the total volume of grain that had been deposited in the system because multi-ple tickets can be issued to reflect the same grain deposited in the system. 1 How-ever, to provide some point of reference, in December, 14 million MT of grain was being stored. Most producers, traders and buyers interviewed did not understand the difference between a ticket and a receipt and the concept of a receipt as a se-curity was not broadly appreciated. Since the ticket system was simpler to imple-ment, and more similar to the Form 13 which was used in the Soviet era, it re-

1 For example, if a producer or trader deposits 5 MT in the system, and them removes 2 MT for a sale, the elevator cancels the first 5 MT ticket and issues a new ticket for 3 MT.

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mains the documentation of choice. While not stated, the ticket has one advantage for buyers of deposits, as well. The depositor must use the ticket to remove the grain before it is sold, so the buyer does not have to take on the risk of making pur-chases sight unseen.

A lack of confidence in grain elevators was a repeated theme. Producers view the price of services as extremely high and essentially cost-prohibitive for most of them. There are service charges for entry, sorting, storage and drying. Com-pounded with currently high interest rates, most producers interviewed avoid de-positing their grain in elevators. They also have little confidence in getting a fair weigh-in or a fair assessment of grain quality. Buyers also expressed skepticism on the reliability of elevators. One large oilseed processor has invested in a network of its own elevators and a team of its own inspectors to verify the quality of private elevators. They do not rely on the certification process as guaranteeing a basic standard of service and reliability.

4.3.3 Pre-harvest Financing Mechanism

The basic concept behind this mechanism is to establish a collateral instrument that, like a warehouse receipt, is easy for a bank to execute in the case of default. In the case of Brazil, this instrument linked a crop pledge, which has been ac-cepted within the legal framework of Brazil since the 1800s, with a promissory note. Under a promissory note, a lender has the right to foreclose on a borrower without going through time-consuming court procedures. This mechanism has been used in Brazil to facilitate an estimated $5 billion per year in lending for agri-culture.

Given the constraints faced by Ukrainian producers in using land as collateral, the EBRD is interested in facilitating the development of a similar product, and a regu-latory framework that supports it, in Ukraine. The idea is to build on the progress made through warehouse receipts. If crops could be used as collateral before har-vest, and not just after being deposited in certified warehouses, producers could access financing for longer terms, and banks could expand the crops they use as collateral. In our discussions with the EBRD, they also expanded the concept to in-clude the possibility of linking the collateral documentation to forward sales, with buyers and producers agreeing to future transactions at pre-established prices.

In 2010, the EBRD plans to program a study visit to Brazil for stakeholders—gov-ernment officials, bankers and traders. They would welcome complementary tech-nical assistance funded by USAID in order to support needed legal reforms. While the benefits of expanding options for collateral and the terms of associated loans are potentially significant for private farmers in Ukraine, the assessment team has a number of reservations about its near term feasibility.

As one buyer approached by the EBRD expressed it, this is an elegant concept but it assumes away many operational challenges. There is limited use of the ware-house receipts documents, which allow crops that are safely stored by a third party to serve as collateral. The idea of implementing this becomes more complex when you recognize that producers may not get a pledge on the crop coming from all of his farmland. This will raise the transaction costs and risks for a buyer, who will be unsure whether the crop has a lien placed on it or not. But ultimately, this may be addressing the wrong constraint. It is less a lack of collateral that is keeping pri-vate farmers from accessing loans than it their limited ability to quantify and docu-ment the cash flow and profitability of their operations. Bankers make their loans

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based on screening up front. Collateral only serves as security for loans that go bad. But if the book-keeping skills, ownership structures and documentation of farmers do not allow banks to assess the risks of a loan application, collateral is not an issue.

4.4 Support for Crimean Agricultural Enterprises through Access to Finance

In developing the scope of work for this assessment, the Mission asserted the fol-lowing hypotheses:

1. Access to finance is a critical constraint to the competitiveness of agricultural enterprises in Crimea.

2. A range of financial institutions exist in Crimea to serve agricultural enter-prises.

3. Value chain financing is an opportunity to expand access to finance for Crimean producers.

4. The new Agro Capital Management leasing facility is an innovative new model for agricultural finance in Crimea.

4.4.1 Comparative Advantages and Constraints to Competitiveness

Farmers in the Crimea face a number of unique conditions when compared with other parts of Ukraine. The size of grain producing farms in the Crimea is rela-tively smaller. 1,500 hectares of land under grain production is considered large in the Crimea but considered small in most other regions of the country. There is no significant influence from large agricultural holdings in the Crimea, reflecting both the size of the farms and the fact that drier climatic conditions result in lower yields of grain. However, the same climatic conditions contribute to higher quality for some grains. Wheat grown here has high gluten contents required for bread production. Agroclimatic conditions in the Crimea also allow farmers a longer growing season, particularly for fruits and vegetables. They begin planting ap-proximately two weeks earlier than other regions in Ukraine, and the growing ex-tended by approximately two weeks in the autumn. While more distant from large markets in Kiev and Russia, fruit and vegetable producers have a summer market among the restaurants and hotels serving the region’s beach resorts. Because of these conditions—farm size, location, and climatic conditions, small and medium scale grain producers have added incentives to diversify production and invest in higher cost but more profitable horticulture.

Unfortunately, the private farmers of the Crimea also share in the constraints faced by grain producers in other parts of the country. As outlined in Sections 4.1 and 4.3 above, they have very limited access to knowledge (from tilling and horti-cultural production techniques to business management skills), technology (quality seeds, new equipment from tractors to irrigation and greenhouses), and market linkages (from price information to wholesale markets and reliable storage facili-ties). They also have very limited access to finance, whether for improving produc-tivity, replacing equipment, or investing in diversified production. Without ad-dressing these constraints, small and medium producers in the Crimea are unable to take advantage of the comparative advantages they enjoy.

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4.4.2 Access to Finance

A number of factors have constrained banks’ interest in lending to agriculture, not only in the Crimea, but throughout Ukraine. As in many countries, these factors in-clude: The risks inherent in financing agricultural production Limited sources of collateral, exacerbated in Ukraine by the moratorium on the

sale of agricultural land A history of government interventions, from government-run agricultural banks

and attempts to control agricultural prices, to programs to reduce and subsidize interest rates to farmers

A general appreciation that risks were lower and returns higher in financing other sectors of the economy

These factors have resulted in limited lending to agriculture. In 2008, banks made 15,000 loans to agricultural enterprise totaling 13.5 billion UAH. In 2008, the Statistical Yearbook for agriculture reported just over 59,000 agricultural enterprises. In 2009, the banks made 1,700 loans to these enterprises, totaling only 4.3 billion UAH, to agricultural enterprises. These loans tend to reach larger scale operations. In 2009, the average loan was 2.5 million UAH, or more than $300,000. In 2008, assuming most of the loans were made prior to the rapid devaluation against the dollar, loans averaged 900,000 UAH or approximately $200,000. As of October 2009, agriculture loans accounted for 6.4% of the banks’ total loan portfolio. Availability in Crimea, despite the significance of agriculture in the region (60% of its contribution to GDP) was even more constrained, with agricultural loans accounting for 3.08% of the banks’ total loan portfolio. (FINREP Snapshot Analysis)

USAID’s FINREP project provided analysis of these aggregate amounts, identifying the banks with more significant lending to agriculture, both in absolute terms and as a share of their overall portfolios2. Recognizing these limitations, the data seems to indicate that, among the top 38 financial institutions (these institutions account for more than 85 percent of banking sector assets), the largest lenders to agriculture are: Financial Initiatives and Raiffaizen Aval Bank, each with more than 3 billion UAH in outstanding loans to agriculture; and, PrivatBank, OTP Bank, UkrExim Bank, PromInvest Bank, Unicredit, and Pivdenny, each with more than 1 billion UAH.

As Figures 3 and 4 illustrate, the volume of loans for five of these larger lenders to agriculture is more a reflection of their overall size in the banking sector than a strategic focus on agriculture. Of the eight banks with the largest agricultural loan portfolios, only Financial Initiative, Unicredit and Pivdenny have agricultural loan portfolios that account for more than 7 percent of their gross portfolios.

Figure 3 Agricultural Loan Portfolio for Ukraine’s Leading Banks as of January 1, 2009 Source: USAID

2 As the report points out, there are some elements in the data reporting that make it vulnerable to overstatement and inconsistency. These factors include banks that label loans as belonging to more than one sector, so a loan made to a company with a limited amount of agricultural activity could still be labeled as an agricultural loan; or banks that include loans for land purchase, food process-ing, or some restructured loans as agricultural loans.

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Capital Markets Project

3 1302 151

1 9721 744

1 6661 565

1 140990

889862838

596505490461

424370

313280268

243134126

8171

3312330

3 257

0 500 1 000 1 500 2 000 2 500 3 000 3 500

Financial InitiativesRaiffaizen Bank

PrivatbankOTP Bank

UkrEximBankProminvestbank

Unicredit BankPivdenny

Savings BankFinance andUkrSotsBank

ForumUkrgazbankUkrSibBank

VTB BankING Bank Ukraine

Alpha-BankRussia Sberbank

CreditprombankFUIB

Rodovid BankDongorbank

KreschatikIndustrial Bank

VAB BankSw edbankKredobank

Universal BankErste Bank

Pravex BankCity Bank Ukraine

UAH mm

Financial Initiative appears at the top of both figures and warrants more analysis. However, as a smaller over-all bank with a more limited branch network and more rapid growth in agricultural lending in 2008 (nearly 150 percent, compared with growth rates that kept up with or trailed devaluation rates for other leading agricultural lenders), Financial Initia-tives’ name did not surface in field interviews.

Conversely, Raifaissen/Bank Aval’s presence in the market has been significant for a longer period of time and its name frequently surfaced in field interviews with producers and buyers alike. The assessment team interviewed members of Raifais-sen/Bank Aval’s corporate and agricultural lending team. They estimated their agricultural portfolio at 5 billion UAH (a significant increase over the January 2009 figures, larger than their stated objective of keeping their portfolio constant against inflation), with loans to 5,000 agricultural producers. This would make their average loan balance smaller than the national average, at approximately $125,000. However, by policy they do not reach smaller farmers. They reported in-creased interest rates over the last year, from an average of 15 percent to a cur-rent range between 21 percent and 26 percent.

To manage risks, they do not lend to agricultural entities with less than 1,000 hectares. As far as collateral, they use both equipment and grain, but prefer to use stored grain as it is highly liquid in the event of foreclosure. They use warehouse receipts. At the same time, they indicated their portfolio in agriculture has per-

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formed better than in other sectors. Still, their strategy is not to increase it faster than the rate of inflation.

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Figure 4 Agricultural Loan Portfolio as Percent of Gross Loan Portfolio for Ukraine’s Leading Banks as of January 1, 2009

20,11%15,85%

13,78%12,42%

7,22%7,00%6,80%6,33%6,26%

5,66%5,53%5,20%4,61%4,51%3,90%3,60%

2,89%2,66%2,59%2,00%1,94%1,69%1,31%0,95%0,90%0,50%0,17%0,10%0,05%0,00%

72,04%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Financial InitiativesUnicredit Bank

Russia Sberbank FUIB

PivdennyForum

ING Bank UkraineProminvestbank

UkrgazbankOTP Bank

Raiffaizen Bank AvalFinance and Credit

Industrial BankDongorbank

UkrEximBankKreschatik

Savings BankPrivatbank

Rodovid BankCreditprombank

VTB BankUkrSotsBankAlpha-BankVAB BankKredobankUkrSibBankSw edbank

Universal BankErste Bank

Pravex BankCity Bank Ukraine

Source: USAID Capital Markets Project

In order to facilitate expanded access to financial services for farmers, they identi-fied the following developments:

An end to land moratorium Technical assistance in the development of loan products suitable for small

farmers Guarantees Insurance products Legal changes that will allow for more expedited collateral proceedings

As one of the major players in agricultural lending, Raiffaissen does not appear ea-ger to expand its agricultural lending or to deepen its services with loans to smaller players.

With most of the top banks’ agricultural loans accounting for less than 5 percent of their loan portfolios, their relative attention to the sector is still better than the credit unions, which average 3.1 percent of their lending reaching private and household farmers. However, there are a few farmer-oriented credit unions in the Crimea and southern Ukraine that should be analyzed for their fit as potential part-ners. Producers in the region identified Chikasa, Ismael and Gramada as notable exceptions to the credit unions’ limited lending to agriculture. The Chikasa credit union is also one that has received training and wholesale loans from the Ukrainian

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Credit Fund (UCF), a Lviv-based finance company regulated by the National Com-mission for the Regulation of Financial Service Markets. UCF is a small entity originally launched with USG support that provides loans and training to credit unions in order to expand financing to agriculture. With a limited asset base of Hr 1.3 million, it targets credit unions with the strongest ability to lend to farmers. While small, UCF has built a reputation in the market with the Netherlands-based Oikocredit approving a loan to them to expand their operations.

In addition to these entities, farmers interviewed in the Crimea mentioned recent developments by ProCredit Bank, which was launching a loan for small equipment. Raifaissen Bank was cited as a traditional lender that, during the crisis, was not ex-tending loans to new or smaller clients. State programs and subsidies were identi-fied as currently illiquid, unreliable, or not functioning.

4.4.3 Value Chain Financing

Given the financial sector’s limited interest in credit, businesses that supply to and buy from farmers are a potential source of financing. As with the financial institu-tions, access to these financial services is limited. Netafim, an international sup-plier of farm inputs and equipment—including irrigation and greenhouse equip-ment—offers partial financing to its dealers and the larger clients it services di-rectly. Smaller farmers buy their equipment from dealers. Some of these dealers also provide sales on partial credit. However, a small percentage of their clients re-ceive financing. Access to financing and guarantees are a constraint to expanded lending, along with a lack of trust. The businesses are reluctant to lend to cus-tomers they do not know, and building up a loyal customer base takes time. Be-cause of its international standing and financial position, Netafim was able to ob-tain a guarantee from a European Bank and use this guarantee to sell a loan port-folio to a Ukrainian bank. The portfolio consisted of loans to tomato farmers for seed and equipment. This mechanism, which combines international and domestic actors with guarantees and factoring, could be one appropriate for other interna-tional agribusinesses in their attempts to manage risk and expand access to fi-nance.

There are however risks associated with value chain financing. One example is provided by a large buyer of tomatoes that also became a source of financing for tomato producers. Pre-financing for inputs was included in a package of services to farmers entering into annual products with the buyer, a processor in southern Ukraine. The contract also established purchase prices for production, according to quality standards. Faced with reduced and delayed production due to weather, the processor was forced to offer higher prices than those defined by the contract defined. Otherwise they feared the producers would side-sell their harvest to other buyers.

Another buyer interviewed by the team has decided that the cost of managing loans to farmers is not worth the benefit. A large sunflower seed processor and ex-porter had offered pre-financing in the past. The credit was covered through a 10 percent discount on the price paid for seed delivered to them after harvest. The cost involved in pursuing side-sellers prompted them to cease lending. They noted that since stopping the pre-financing, they have encountered no problem in secur-ing their needed supply of seeds.

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These examples underscore both the limited availability of credit through agribusi-nesses and the factors that make it more likely: relationships and mechanisms that can manage risks, as well as the proper incentives needed for agribusinesses to find the credit delivery worthwhile. Value chains with more pronounced and con-sistent links between buyers and sellers, and the need to protect these relation-ships over time, are more likely to offer this financing alternative. Entities with unique capacities to manage risk—through their international presence or a strong market position—are the actors more likely to consider it.

4.4.4 Leasing Facility

Agro Capital Management (ACM) is a new company established in 2009 by MEDA (Mennonite Economic Development Associates). ACM has the mandate to provide financial services, similar to a leasing company, to clients of the Ukraine Horticul-ture Development Project (UHDP). ACM products include Table Grape production packages for table grapes and berries, and tunnel plastic film for greenhouses. Client payments are based on a variable cash flow schedule. At the end of the con-tract term the assets are owned by the clients. Financial costs built into the prod-uct represent less than 2% per month. Under the current structure, farmers who pay off their contracts on time receive a rebate, reducing the financial costs.

ACM shows a great deal of promise. In its first season of operations last fall, it had $370,000 in sales. Sales this spring are expected to exhaust much of its $1.4 mil-lion in initial investment. Continued expansion will require additional investments, and time is needed to verify the quality of the portfolio. This promising launch of activities warrants further monitoring. As it grows, ACM should also consider modifications in its pricing, its use of the CIDA guarantee fund (currently struc-tured as a 100% guarantee against losses), and in its ability to qualify as a licensed leasing company once its capital reaches minimum requirements.

4.5 Concluding Observations and Implications of Findings

4.5.1Wholesale Markets

It is in the interests of farmers and buyers alike to develop alternatives to spot markets. Larger commercial farmers and buyers seeking stable supply of large vol-umes of uniform product are establishing one-to-one trading relationships (load collection at the farm-gate). Smaller farmers lack sufficient volume (individually) to attract stable buyers. While offering an alternative to supermarkets and bazaars, the model illustrated by Shuvar does not provide maximum benefit to small farm-ers, either, due to its urban location and its focus on institutional buyers, small re-tailers and consumers.

Accordingly, there is a general need to establish new wholesale-retail markets in rural, under-served locations. While blended ‘wholesale-retail’ markets exist, these are few in number. Most retailing is ‘roadside’ and technically illegal. A mod-est effort by municipal leadership to designate open air locations with easy con-sumer access as occasional farmers retail markets (e.g.: block off a specified sec-tion of road on Wednesday and Saturday mornings) would be a significant improve-ment on the status quo. For creating more formal alternatives, private investors

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are unlikely to enter business joint ventures with public entities to co-own such markets. Farmer partnerships, through cooperatives, associations, or corporate structures may be a more promising alterative. Private farmer-entrepreneurs are trying to establish privately-owned and operated assembly points. Buyers like this approach because currently supply volumes are too small. The farmer-en-trepreneurs concerned want to aggregate farm produce from other farmers and consolidate uniform loads to meet their large buyers’ demand. This kind of invest-ment leads to stable trading patterns that, in turn, open up opportunities for adding value to products handled and, over time, achieve higher returns to invest-ment and labor for suppliers along the chain including smaller farmers.

Rather than making a significant investment to promote additional wholesale mar-kets like Shuvar, USAID efforts to improve the linkages between small farmers and large buyers would be more effective if focused on assisting promising farmer groups in organizing rural wholesale-retail markets and assembly facilities. Mar-ket linkage development could also be promoted with targeted short-term techni-cal assistance to address related policy, market and finance constraints, e.g. ones designed to facilitate advocacy and education on targeted issues related to the management and taxation of cooperatives, to develop and disseminate pro-forma market business plans, and to increase the availability and facilitate the delivery of construction finance.

4.5.2Policy Initiative

For an effective program, it is imperative for USAID to maintain linkages with key policy stakeholders, and with entities that research policy issues and promote pub-lic-private dialogue. Effective and targeted advocacy on constraints to efforts on the ground in such areas as cooperative legislation, property registration, and reg-ulations that limit or enable the introduction of new financial products can expand the impact of interventions with the private sector to promote agricultural growth, A project focused on big policy wins at the national level does not look promising at this point in time, however, due to the entrenched, politicized nature of key is-sues like the land moratorium and the VAT tax. Furthermore, changes in the regu-latory environment while necessary, are not sufficient for broad-based growth if the changes are not adopted in the field. AMDI’s significant achievements in creat-ing an enabling environment for warehouse receipts is one example where techni-cal assistance to actors in the field can help Ukraine take fuller advantage of past improvements in the enabling environment.

4.5.3 Grain and Oilseed Market Development

The assessment team concurs that Ukraine has the potential to contribute to in-creased global food security. However, in order to contribute to this objective, US-AID should consider the most cost-effective mechanisms for increasing private farmer access to knowledge, equipment, finance, and improved relationships with other market players that increase the farmers’ access to market linkages, consoli-dation services, and opportunities to enhance income.

Concerning Ukraine’s warehouse receipts system, a solid groundwork has been laid. However, understanding and implementation on the ground lag behind the development of this framework. In order to be effective, education, improved or more transparent practices and pricing, and increased competition between eleva-

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tors is necessary. Continued policy work is advisable to instill an indemnity fund, since progress on the ground could be undermined by a damaging case of fraud. Additional adjustments that would allow for a more user-friendly registry system, particularly in the process for indicating liens against receipts, are also advisable. However, attempts to take the Ukrainian system to the next level through a syn-chronized warehouse receipts system for each of the GUAM member countries are premature. Until the system is functioning in practice, and not just in the policy, the team asserts that USAID support of a GUAM initiative does not promise mean-ingful results.

Expanding collateral is necessary, but not sufficient to expanding private farmer access to financing. A legal analysis that identifies the gaps in existing legislation that prevent the implementation of a pre-harvest financing makes sense, in terms of scale and potential benefit. It would spell out the changes that eventually would be needed. However, in light of the current operational issues related to the ware-house receipts system, investing significant resources in legal reforms for pre-har-vest financing is also premature.

4.5.4Support for Crimean Agricultural Enterprises through Access to Finance

The Crimea, due to its comparative advantages, has significant potential for ex-panding a diversified production unit for small and medium-scale private farmers, one that mixes high value horticulture production with the production of higher quality grain. To pursue these opportunities, private farmers require increased ac-cess to knowledge, technology, and market linkages, as well as finance.

Given the limited credit reaching the sector at this point, and the absence of a sil-ver bullet partner or financial product, facilitating credit in order to expand the productivity of private farmers will require a flexible and opportunistic set of inter-ventions. There is no obvious partner, as both banks and credit unions remain cau-tious in lending to agriculture, and agribusinesses are hesitant to lend on any sig-nificant scale. Technical assistance is required for innovative products: Ones designed for banks and credit unions that have demonstrated a greater

willingness to lend to agriculture, in order to finance working capital needs of private farmers.

Loan, leasing and factoring products (like one developed for larger customers of the equipment supply firm) that tap relationships with suppliers and facilitate needed upgrades in equipment.

Construction loans for elevators and storage facilities Land purchase loans, which will be critical for private farmers to maintain their

production areas with the lifting of the land moratorium Guarantees and long-term credit lines offered by international players (e.g.,

DCA, EBRD) that allow financial institutions to buy down the risk and match the terms associated with these new products.

5. RECOMMENDATIONS

The team presumes that the objective of future USAID assistance is to increase agricultural growth and competitiveness in Ukraine in a manner that is both sus-tainable and broad-based.

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Increased competitiveness will rely on improvements in yields, which require ac-cess to more efficient technology, and improved efficiencies in moving products from the farm to ultimate markets. Investments by holding companies in huge farming units are one way to bolster production and productivity. These invest-ments are proceeding, taking advantage of Ukraine’s fertile soil, available land (via lease arrangements), and a strategic location on the Black Sea. There is little value that USAID can add to the private funds and investors in this area.

The team found broad consensus that private farmers, operating on farms of up to a few thousand hectares in size and managed by families and individuals engaged in production (rather than by more complex management structures used by the holdings) are and will remain an important source of agricultural production into the future. Increases in productivity for private farmers can have a significant im-pact on productivity and competitiveness that reaches a broad base of Ukraine’s agricultural producers. In 2008, private farmers managed more than half of the production area for grain and oilseeds. Their average yields ranged between 2 and 3 MT per hectare, compared to more than 4 MT on the largest units.3 Private farm-ers play an even more significant role in fruit and vegetable value chains, where even the largest production areas are significantly smaller. Given the challenges that private farmers face in terms of productivity—access to knowledge, technol-ogy, finance and efficient market access—USAID can add value by targeting pri-vate farmers.

Given their large numbers and USAID’s limited resources, it will be important to focus assistance on strategic interventions with a high likelihood for substantial impact as well as on synergies with the investments and resources of other donors on the ground. In order to increase the sustainability of the interventions’ results, the interventions should use a private sector development approach, as opposed to more traditional government-led models.

With this in mind, one component of the Mission’s agricultural strategy should be private farmer strengthening. The objective of this component will be to increase the productivity and profitability of private farmers in selected geographical areas and value chains, in order to provide a demonstration effect for small and medium scale farmers more broadly. To achieve this, the component should address gaps in knowledge, technology, finance, and market linkages. Potential interventions in-clude: Technical assistance to facilitate development of market relationships that en-

hance farmer access to inputs and markets in the most promising value chains, through cooperatives and associations, or expanded links to lead firms and farmers

Training in “the farm as a business,” focusing on bookkeeping and basic busi-ness plan development

3 46 percent of the area, accounting for 56 percent of production, was on farms averaging 2400 hectares. These farms accounted for 6 percent of farms engaged in grain and oilseed production. Their average yield was 4.3 MT per hectare. By contrast, 25 percent of the area accounting for 24 percent of grain and oilseed production, was on farms aver-aging 966 hectares. These larger private farms, with average yields of 3.35 MT per hectare, accounted for 8 percent of the farms engaged in grains and oilseeds. The next most productive group of private grain and oilseed farms, representing 20 percent of area and production, operated on an average size of less than 200 hectares. Combined, these producers account for 2/3 of grain and oilseed farms, and 99 percent of production. (Agriculture of Ukraine Statistical Yearbook, 2008, p. 85)

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Training and demonstration plots in higher yielding technologies Technical assistance to assess and recommend improvements to university re-

search , extension and agronomic education

We recommend focusing resources on private farmers in the Crimea and, if feasi-ble, in oblasts in south and western Ukraine. In these areas, private farmers are engaged in producing both grains/oilseeds and fruits and vegetables. Opportunities for diversification are important for Ukraine’s small and medium scale private farmers. Further collaboration with EBRD, CIDA and USAID’s LINC Project will be critical in selecting geographical areas and partner institutions, in order to opti-mize the impact of these interventions.

A second promising area of USAID’s investment in agriculture is in the area of market infrastructure. Two key areas are wholesale market and grain storage facil-ities. As we indicated in our earlier findings, the wholesale market model we saw in Lviv and under consideration in Odessa provides an alternative for urban con-sumers and small retailers, and has the potential for increasing the demand for quality fruits and vegetables in Ukraine. It does not, however, offer a significant al-ternative to producers for marketing their products to wholesalers. This would re-quire parallel investments in rural market facilities, run by producer cooperatives or associations, that offer space and cold storage facilities. We also observed that improvements are needed to increase the transparency and competitiveness of grain storage facilities. In order to improve the capacity and efficiency of market infrastructure, this component could include the following interventions: Short-term technical assistance to wholesale market developers and local gov-

ernments, in order to map out effective business plans and funding strategies Incorporating in the access to finance component a series of specialized techni-

cal assistance interventions with policy makers, market investors, and financial institutions in order to develop relevant construction financing product

Assessment of three to five grain warehouse facilities in selected geographic ar-eas, both those with a high and a low use of warehouse receipts, in order to de-termine critical factors and constraints to the broad adoption of warehouse re-ceipts

Grant and technical assistance program with competitively selected warehouses to improve transparency, effectiveness and competitiveness of services

Collaboration with farmer strengthening component to integrate rural whole-sale markets assistance in cooperative/association development strategy

While the Mission has made significant investments in improved policies for agri-culture, and while important policy-related constraints exist, we recommend a more pragmatic approach to policy in the coming years, one more focused on regu-latory improvements and effective public-private mechanisms for communication than on big policy wins. Political factors beyond this program’s scope will dictate the timing of the end of the land moratorium. Large, multinational companies have incentives to improve VAT reimbursement and can, if they desire, contribute sig-nificant resources to the task. It would be a better investment of USAID resources, then, to develop a smaller project component that includes such interventions as: A mechanism to tap AMDI for targeted tasks, such as fine tuning of warehouse

receipt legislation to allow the creation of an indemnity fund or to address con-straints identified by the assessment in the field, conducting a legal gap analy-sis to identify barriers to pre-harvest financing as currently being supported by

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EBRD, or addressing conflicts that exist between grain warehouse receipts and grain market legislation

Collaboration and advocacy capacity building with key think tanks or value chain actors, in order to expand and maintain effective communication between the government and private sector on policies or legal matters that significantly constrain development of promising value chains

Including in an access to finance component specialized technical assistance for the development of land mortgage policies and products, so that, upon lifting of the land moratorium, private farmers have a source for financing land pur-chases

Targeted technical assistance, focusing on rural land, as needed to complement the pilot improvements in property registries being undertaken in the Crimea by the LINC project

A fourth promising component of a future assistance program is one that increases access to financing, especially for investments in technology and equipment that increase productivity and competitiveness. The equipment that farmers obtained through the privatization process is fast approaching the end of its useful life. Di-versification into fruit and vegetable production often requires significant up-front investment. As already mentioned, investments in land purchases or construction require new products and policies. There is no clear partner or pool of partners for developing and expanding products for these types of investments. It will be impor-tant to take an opportunistic approach to increasing agriculture’s access to fi-nance, with mechanisms that allow for close collaboration with actors in the other project components, and for partnering with a range of financial service providers, so that project interventions facilitate investments in key upgrades required to take advantage of the most critical value chain upgrades in the targeted program areas. Interventions in this component could include: Combination of technical assistance and liquidity or guarantee facilities for

range of financial institutions that demonstrate significant interest in financing priority upgrades, including banks, finance companies and credit unions

Specialized technical assistance to map out key policy constraints and propose practical follow-on interventions with government and financial institutions for introducing financial products for land purchase and construction

Facilitating relationships and agreements between key input providers (espe-cially farm equipment providers) or buyers in priority value chains and financial institutions in order to reduce costs, improve screening and manage risks of lending to private farmers

Collaboration with policy dialogue facilitators on key policy constraints and bar-riers to expanded financing

Technical assistance to the warehouse receipts registry and financial institution that addresses constraints to expanded use of warehouse receipts as collateral for loans

Collaboration with DCA, EBRD, the Ukraine Microloan program, and CIDA, to optimize impact of technical assistance, liquidity and guarantee mechanisms for promising financial institution partners

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ANNEX A. INDIVIDUALS AND INSTITUTIONS CONSULTED

Agrarian Markets Devel-opment Institute (AMDI)Kyiv

Victor AndrievskyDirector

T: +380 (44) 490 70 78M: +380 (50) 469 10 [email protected]

Aleksander BuryakDeputy Director

T: +380 (44) 490 70 78M: +380 (50) 358 53 [email protected]

Roman Korinets???

???

Natalia SeperovychConsultant

T: +380 (44) 490 70 [email protected]

Tamara OstashkoConsultant

T: +380 (44) 490 70 [email protected]

Vitally Volivach???

???

Yelena Protchenko???

???

Agro Capital Manage-mentSimferopol

Andriy VorobyovGeneral Director

T: +380 (65) 226 38 86M: +380 (67) 406 16 [email protected]

Allseeds GroupKyiv

Ljubomir MudricChairman of the Board

T: +380 (44) 568 57 [email protected]

Vladymyr VynnychenkoHead of Supervisory Board

???

Ton HulsFinancial Director, Sunflower Seeds De-partment

T: +380 (44) 238 65 65 [email protected]

Association of Farmers and Private Land Owners of CrimeaSimferopol

Sergey TourPresident

???

Nikolay GavrilyukVice President

T: +380 (65) 261 89 68M: +380 (50) 398 91 [email protected]

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Association of Farmers and Private Land Owners of LvivLviv

Yevgeniy StepkoPresident

T: +380 (32) 252 02 48M: +380 (50) 377 84 08

Bohdan Chomiak Con-sultingKyiv

Bohdan ChomiakPresident

M: +380 (67) 403 02 [email protected]

Canada-Ukraine Grain ProjectKyiv

Sergiy KurditskiyArea Manager, Rural Credit and Markets

T: +380 (44) 270 60 38M: +380 (97) 170 96 [email protected]

Cargill Grain & Oilseed Supply Chain EuropeSimferopol

Vassiliy Lysenko Regional Representa-tive in Crimea Region

T: +380 (65) 261 89 83M: +380 (50) 469 92 36

Dragon CapitalKyiv

Tomash FialaManaging Director

T: +380 (44) 490 71 [email protected]

European Bank for Re-construction and Devel-opmentKyiv

Graeme HutchisonDeputy Director & Head of Corporate Sec-tor in Ukraine

T: +380 (44) 270 61 32M: +380 (50) 443 75 [email protected]

Alina HavryshBanker

T: +380 (44) 270 61 32M: +44 (75) 40704 [email protected]

European Bank for Re-construction and Devel-opmentLondon

Peter BrydeDeputy Director, Agri-culture

T: +44 (20) 7338 6245M: +44 (7912) [email protected]

Food and Agriculture Or-ganization of the United Nations (FAO)Kyiv

Dmitry PrikhodkoEconomist, Investment Centre Division

T: +39 (6) 570 523 [email protected]

GoldblatOdessa

Oleg Khomenko T: +380 (48) 233 60 36M: +380 (50) 390 97 [email protected]

Government Agrarian Policy Coordination CouncilKyiv

Volodymyr De-myanchukExecutive Secretary

T: +380 (44) 278 58 [email protected]

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GUAM Organization for Democracy and Eco-nomic DevelopmentKyiv

Sabuhi TamirovProgram Coordinator, Economic Issues

T: +380 (44) 206 37 [email protected]

International Finance CorporationKyiv

Ebbe JohnsonProject Manager, Ukraine Fresh Fruit and Vegetable Project

T: +380 (55) 232 12 98M: +380 (50) 396 97 [email protected]

Oksana VarodiProject Manager, Vin-nytsa Fruit Project

T: +380 (43) 252 54 95M: +380 (50) 396 97 [email protected]

International Tax and In-vestment CenterKyiv

Alexander SavitskyAdvisor

M: +1 (703) 981 8282M: +380 (67) 408 15 [email protected]

Khlib UkrainaOdessa

Boris DvorkinGeneral Director, Khlib Export

???

Local Investment & Na-tional Competitiveness Project (LINC)Kyiv

Howard OckmanChief of Party

T: +380 (44) 425 47 47M: +380 (50) 416 97 [email protected]

Farhat Youwakim FarhatWTO Specialist

T: +380 (44) 425 47 47M: +380 (50) 698 35 [email protected]

Ken NachbarSenior Enterprise Com-petitiveness Advisor

T: +380 (44) 425 47 [email protected]

Allan SlipherLand Market Advisor & Task Leader

T: +380 (44) 425 47 [email protected]

Pavlo KulynychLand Market Reform Task Leader

T: +380 (44) 425 47 47M: +380 (50) 351 57 [email protected]

Local Investment & Na-tional Competitiveness Project (LINC)Simferopol

Daniel ThemenCrimea Field Director

T: +380 (65) 224 81 34M: +380 (99) 270 90 [email protected]

Oleksandr LekhnoAgribusiness Specialist

T: +380 (65) 224 81 34M: +380 (50) 398 66 [email protected]

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Borys ShadrinBusiness Process Spe-cialist

T: +380 (65) 224 81 34M: +380 (50) 175 73 [email protected]

Lviv Regional State Ad-ministrationLviv

Yaroslav PanyuraVice-Chairman

T: +380 (32) 299 93 05M: +380 (67) 671 12 [email protected]

Mennonite Economic De-velopment Associates (MEDA)Melitopol

Stephen WrightProject Manager, Ukraine Horticulture Development Project

T: +380 (61) 925 24 62M: +380 (97) 618 [email protected]

Sergiy Grygor’yevValue Chain Manager, Ukraine Horticulture Development Project

T: +380 (61) 925 24 62M: +380 (67) 613 72 [email protected]

Anatoliy MaksymyukFinancial Solutions Specialist, Ukraine Horticulture Develop-ment Project

T: +380 (61) 925 24 62M: +380 (67) 613 37 [email protected]

Dmitry LipchinPost-Harvest Techni-cian, Ukraine Horticul-ture Development Project

T: +380 (61) 925 24 62M: +380 (67) 613 76 [email protected]

Mennonite Economic De-velopment Associates (MEDA)Simferopol

Oleg OsaulyukCrimea Manager, Ukraine Horticulture Development Project

T: +380 (65) 261 89 90M: [email protected]

Vasfiye MamutovaSME Development Spe-cialist, Ukraine Horti-culture Development Project

T: +380 (65) 261 89 90M: +380 (67) 613 04 [email protected]

“Minimum” private farmOdessa

Alexandr TopolskyPrivate Farmer

???

NetafimSimferopol

Sergey SavranskySales Manager

T: +380 (67) 507 35 [email protected]

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Raiffeisen Bank AvalKyiv

Victor GorbachevDeputy Chairman of the Board Corporate Banking???

T: +380 (44) 490 [email protected]

ShuvarLviv

Oleksiy ChumakDirector, Wholesale Market

T : +380 (32) 295 36 06M : +380 (67) 674 39 [email protected]

SigmaBleyzerKyiv

John ShmorhunAgricultural Director

M: +380 (67) 344 57 [email protected]

State Registry of UkraineKyiv

Igor KhodakovskiyDirector

T: +380 (44) 400 96 [email protected]

Ukraine Micro Lending ProgrammeKyiv

Holger WiefelProgramme Manager Ukraine

T: +380 (44) 289 10 37M: +380 (50) 384 15 [email protected]

Ukrainian Agrarian Con-federationKyiv

Leonid KozachenkoPresident

T: +380 (44) 287 65 [email protected]

Sergii StoianovGeneral Director

T: +380 (44) 287 65 [email protected]

Ukrainian Agrarian In-vestmentsKyiv

Peter ThomsonChief Operating Officer

T: +380 (44) 594 94 40M: +380 (67) 404 66 [email protected]

Ukrainian Credit FundLviv

Ernest IshchukDirector

M : +380 (91) 300 25 [email protected]

Ukrainian Grain Associa-tionKyiv

Volodymyr KlymenkoPresident

T: +380 (44) 246 62 01M: +380 (50) 334 50 [email protected]

Ukrainian Ministry of Agrarian PolicyKyiv

Valentyna ZavalevskaDeputy Minister for Agrarian Policy

???

Ukrainian National Asso-ciation of Credit UnionsKyiv

Petro KozynechPresident

T: +380 (44) 501 18 [email protected]

U.S. Embassy to UkraineKyiv

Eric SalzmanEconomic Officer

T: +380 (44) 490 [email protected]

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USAID Regional Mission for Ukraine, Moldova and BelarusKyiv

Paul RichardsonActing Director, Office of Economic Growth

T: +380 (44) 537 46 [email protected]

Terence MillerActing Deputy Direc-tor, Office of Economic Growth

T: +380 (44) 537 46 04M: +380 (50) 441 69 [email protected]

Kevin McCownPrivate Sector Advisor, Office of Economic Growth

T: +380 (44) 492 71 [email protected]

Evgenia MalikovaProject Management Specialist, Office of Economic Growth

T: +380 (44) 492 71 [email protected]

Natalia BerezhnaProject Management Specialist, Office of Economic Growth

T: +380 (44) 537 46 [email protected]

Ryder RogersPrivate Enterprise Offi-cer, Office of Economic Growth

T: 380 (44) 537 46 [email protected]

Peter LuzikProgram Development Specialist, Office of Program Co-ordination & Strategy

T: +380 (44) 537 46 [email protected]

USAID Bureau for Eu-rope & EurasiaWashington, DC

Glenn RogersDirector, Office of Democracy, Gover-nance & Social Transi-tion

T: +1 (202) 712 [email protected]

USDA Foreign Agricul-tural ServiceKyiv

Ann MurphyAgricultural Attaché

T: +380 (44) 490 40 [email protected]

Oleksandr ArtiushynAgricultural Specialist

T: +380 (44) 490 41 [email protected]

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Zhytomyr University of Agriculture and EcologyZhytomyr

Vitaly ZinovchukDirector, Research and Education Institute of Economics and Agribusiness

T: +380 (41) 222 89 65M: +380 (96) 222 37 [email protected]

ANNEX B. WORKS CONSULTED

Artiushyn, Oleksandr. “Grain and Feed Update.” Kiev, Ukraine: USDA, 3 Sep 2009.Available: gain.fas.usda.gov/Recent GAIN Publications/Grain and Feed Update_Kiev_Ukraine_9-3-2009.pdf

Food and Agricultural Organization, FAO STAT, Rome, 2009. Available: www.faostat.fao.org

International Finance Corporation. “Doing Business 2010: Ukraine.” Washington, DC: IFC, 2009.Available: www.doingbusiness.org/Documents/CountryProfiles/UKR.pdf

International Finance Corporation. “Investment Climate in Ukraine as Seen by Pri-vate Businesses.” Kiev, Ukraine: IFC, 2009.Available: www.ifc.org/ifcext/uspp.nsf/AttachmentsByTitle/IC_report_2009_eng/$FILE/ IC_report_2009_eng.pdf

International Finance Corporation. “Reforming Food Safety Regulation in Ukraine: Proposals for Policy-makers.” Kiev, Ukraine: IFC, 2009.Available: www.ifc.org/ifcext/uspp.nsf/AttachmentsByTitle/Food_safety_report_eng/$FILE/ Food_safety_report_ENG.pdf

Kosodiy, Roman and Anna Bondarenko. “Value Chain Approach to Rural Finance.” Poster paper presented at IAMO Forum 2008. Halle, Germany: 2008.Available: www.iamo.de/uploads/media/4a.4_kosodiy_CD.pdf

Kutsenko, Alexei. “Agricultural Loans by Ukrainian Banks: Snapshot Analysis.” Special report prepared for the assessment team. Kiev, Ukraine: USAID Cap-ital Markets Project, 15 Dec 2009.

OECD/FAO. “OECD-FAO Agricultural Outlook 2009-2018.” OECD/FAO, 2009.Available: www.agri-outlook.org/dataoecd/2/31/43040036.pdf

State Statistics Committee of Ukraine. “Agriculture of Ukraine: Statistical Year-book 2008.” Kiev, Ukraine: State Statistics Committee of Ukraine, 2009.Available: www.eastagri.org/meetings/docs/meeting40/Agriculture_2008_Eng.pdf

Tarassevych, Alexander. “Ukraine Exporter Guide Annual: Ukraine’s Food Market in Crisis.” Kiev, Ukraine: USDA, 2 Oct 2009.Available: gain.fas.usda.gov/Recent GAIN Publications/EXPORTER GUIDE ANNUAL_Kiev_Ukraine_10-2-2009.pdf

USDA/FAS. “Agricultural Economy & Policy Report – Ukraine.” Kiev, Ukraine: USDA, Feb 2009.Available: www.fas.usda.gov/country/Ukraine/Ukraine Agricultural Economy and Pol-icy Report.pdf

USDA/FAS. “Grain: World Markets and Trade.” Circular Series FG 12-09. Washing-ton, DC: USDA, Dec 2009.Available: www.fas.usda.gov/grain/circular/2009/12-09/grainfull12-09.pdf

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USDA/FAS. “Oilseeds: World Markets and Trade.” Circular Series FOP 12-09. Washington, DC: USDA, Dec 2009.Available: www.fas.usda.gov/psdonline/circulars/oilseeds.pdf

Verzijlenberg, Wim, Wigle Vondeling, and Bjorn Schrijver. “Ukraine Agri-Finance Study: Analysis of the Potential Risks and Challenges of Agricultural Finance in Ukraine.” Utrecht, Netherlands: Rabo International Advisory Services, Apr 2008.

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