The Ukraine, a new agricultural gold mine?

While the downward revision of yield projections for Ukraine made a splash in the international grain market, another development in the former bread basket of the USSR is drawing the attention of international investors and speculators: the announcement of the upcoming liberalization of Ukraine’s agricultural property market.

The moratorium on buying and selling agricultural land, which has been extended countless times since it was established following the shared agriculture system the government launched in 2000, is expected to be lifted soon. “As the political decision-makers have agreed, starting in January 2008, Ukraine should be able to operate an agricultural property market,” announced President Viktor Yushchenko on May 22, 2007, before an audience of foreign entrepreneurs. Investments, both domestic and foreign, are already flowing in and speculation is well underway: we expect the price per hectare for the best land to increase from 500 to more than 5,000 or even 8,000 dollars1 !

Ukraine does have unusually high potential for agricultural production. The country holds one third of the black soil of Eurasia - the famous chernozems. This soil can be up to several meters deep, is extremely fertile because it is so rich in organic material, and is generally well watered because of the country’s continental climate. This year, however, there was a shortage of rain as crops were in their installation and growth stages, leading to lower yields.

But the debate over permanently liberalizing the property market is far from over: opening it fully would completely destabilize the traditional Ukrainian farming system, which currently coexists alongside the large agricultural companies. These companies were either born out of former large cooperatives or appeared more recently in the form of agricultural holdings covering as many as several thousand hectares. Supporting the liberalization of the property market, the number of agricultural holdings is set to increase tenfold with the reorganization of family farms. According to Jean Jacques Hervé, technical assistant for the French Ministry of Foreign Affairs in Ukraine,2 many national agricultural companies, often with long histories, are convinced that extending the moratorium yet again remains the best solution for rational exploitation of production potential without the dangers of speculation3 .

Lively debates on the subject will no doubt continue in the Rada - the Ukrainian parliament - after the elections scheduled for September.

The example of Ukraine is yet another illustration of the need to consider not only the commercial aspects, but also all of the societal and environmental implications of liberalizing the agricultural sector. With the agrofuel craze in full swing, property issues in Ukraine and elsewhere must therefore be treated even more sensitively, since they are central to the balance that must be struck between production for food and for energy.