Sunday, March 26, 2017

Ukraine's agricultral potential


Ukraine’s favourable geographical location; it’s extremely fertile black soil; decent infrastructure and relatively cheap labour force make the country’s agribusiness sector highly competitive. A lot has been achieved in the country over the past 25 years to enable Ukraine to live up to its status as the “breadbasket of Europe” and to help, at least partly, address the global challenge of sustainable food supply and food security.

As a result the agribusiness sector is one of the main drivers of the Ukrainian economy: it accounts for 17 per cent of the country’s GDP, 32 per cent of local employment and 31 per cent of foreign currency revenues. During the severe economic downturn of 2014/2015, the agrifood sector was the only one to increase its production and exports. In fostering Ukraine’s agribusiness potential, the EBRD has provided over € 2.2 billion of financing to the sector, to date, since the start of its operations in the country.

Over the last several years I have been increasing my long term investing into agricultural businesses. The world population is constantly growing while per capita farmable acres are decreasing.

As the emerging and developing markets continue to become wealthier the demand for sophisticated diets is also increasing. This is going to lead to continued pressure on the world's ability to provide food for its population. Sounds like a actionable investment to me.

I have been to Ukraine many times and ridden trains all across the country and seen acres and acres  under cultivation. However I have noticed that the place is starved for capital. Old machines, small plots, cows tied up to trees. It just looked like it was stuck in another time.

I think over time capital comes into the country and production will be maximized. An example is the recent acquisition of an additional 10% of Astarta, a Kiev based ag conglomerate by Fairfax Financial a Canadian based investment firm.

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