Social ills plague Ukraine's fields of dreams
While Ukraine saw its farming sector grow last year, a legacy of social ills and underfunding in the countryside is proving hard to overcome.Combine harvesters buzz across sunny fields of golden wheat -- a picture of rural bliss in Ukraine, a fertile former Soviet republic once known as the breadbasket of Europe.
But while Ukraine saw its farming sector grow last year despite its worst economic crisis since the collapse of the Soviet Union, a legacy of social ills and underfunding in the countryside is proving hard to overcome.
"Villages are dying, young people have all gone to the towns,” said Grygori Kovalenko, an agronomist at Ukrainian-Austrian farming company Zernyatko. “We've leased some land and bought harvesters but the manpower is missing."
The people harvesting Zernyatko's fields in Zhovtneve, a village some 220 kilometres (137 miles) north of the capital Kiev, are mostly seasonal workers brought in for short periods of time -- not year-round farmers.
Fedir Goncharuk, co-owner of another company, Dibrivka-Agroservice, based 170 kilometres south of the capital, paints an even bleaker picture.
"I bus in people from 18 places nearby, otherwise I wouldn't have any workers,” he said. “There's a distillery in the village. It's worse than a nuclear bomb -- most of the people here are alcoholics."
Despite these difficulties, the farming sector still managed to grow 3.8 percent in the first seven months of 2009 on a 12-month comparison, while industrial output plunged 31.1 percent in the first half of 2009.
Agriculture's share in Ukrainian exports, traditionally dominated by metals and chemicals, has also risen. Grain made up 9.4 percent of total exports in the first half of the year compared to 3.1 percent at the same time last year.
"Agriculture is the economy's main hope for its balance of payments," said Mykhailo Salnykov, an expert from investment fund Sokrat Capital. "It is preventing an even more severe devaluation of the national currency," the hryvnia, which has fallen some 40 percent against the dollar.
Weekly business news magazine Kontrakty put it more succinctly: "Agriculture was the only sector to grow in Ukraine this year."
Farming has also managed to recover in the past few years to make Ukraine the fifth biggest grain exporter in the world and the country in 2008 had its biggest harvest since the Soviet collapse of 1991 -- 53.3 million tons.
Experts, however, say the agriculture sector should be doing far better.
Ukraine has 42 million hectares of agricultural land, making up 22 percent of Europe's total. The climate is suited to farming and two-thirds of Ukraine is covered in "black earth" considered among the most fertile in the world.
Apart from the problems with manpower, producers also complain about the predominantly poor Soviet-era equipment and a lack of grain storage capacity, as well as broader inefficiencies in the grain market.
"We can't make forecasts, policy is changing all the time and prices too,” Goncharuk said. “We can never achieve what we've planned in our business plan. If the harvest is good, prices plunge. We buy barley seed for 3,000 hryvnias (360 dollars) per ton and after the harvest we can only sell it at 600 hryvnias. So what's the point of growing it?"
Goncharuk added the Ukraine does not benefit from state subsidises for agriculture that control the grain market, as many Western countries do.
The lack of silos for storing grain forces producers to accept any price offered by intermediaries and banks are reluctant to give companies credit to build new silos because of the economic crisis, Goncharuk said.
Ukraine has 650 to 700 silos with a total capacity of just 30 million tons.
The crippling economic crisis has also hit other aspects of farming. "Last year we were 150 using kilogrammes of manure per hectare and this year only 50 kilogrammes because of a lack of money," Kovalenko said.
Still the fertile soil appears to compensate for these problems.
The average grain yield in Ukraine rose to 3.5 tons per hectare in 2008 compared to 4.5 tons per hectare in the European Union and is still going up. Experts say the harvest in the next few years could reach 95 million tons.
Pointing to his luxury off-road Lexus car, Goncharuk smiled and said: "I won't tell you about our profits but look at my car and our American tractors and draw your own conclusions."