Opportunities, threats and factors facing farming in Ukraine

German-born farmer Sigmund Lampka swapped his homeland for Ukraine to gain a foothold in agriculture. In the second of two articles he sets out the potential for Ukrainian agriculture and looks at the political policies that are a challenge to its continued growth

The Ukrainian government has had a significant influence on agriculture and production has grown, over the past few decades, Sigmund suggests. In the early 1990s, almost half of the land was covered with weeds and left uncultivated. But now, if you were to travel the 1,400km journey from Lviv in the west, to Luhansk on the eastern border, you would see that all of the land is cultivated along the route, he says.

However, there is still more growth to come as Sigmund believes agriculture has still only reached 70-80% of its potential production. Much of the land area has a black “chernozem” soil recognized for its high fertility which, despite Sigmund’s concerns over climate change, is allied to predominantly good weather and creates excellent potential for further growth.

Are there any factors that could hold back this potential?

While the state has overseen the agricultural sector’s growth there are two regulatory issues that continue to cause difficulty - the land market and VAT.

The conditions of VAT refunds can encourage the development of some manufacturers while significantly worsening the financial state of others says Sigmund, who urges policymakers to ensure all farms are able to work on an equal footing. While he accepts there needs to be a system of tax exemptions to help small farms and private farmers compete there also needs to be a single policy that ends the situation where the government grants VAT for export to some farmers and not for others. Similarly, the system for land tax needs reform to create greater parity across all farming.

Meanwhile, the land market is currently closed, limiting opportunities to expand and develop agriculture. The state ownership of land does mean rents are kept low but at the same time, because farmers don’t hold the asset, there is little protection for the business, undermining confidence. Sigmund believes this means the land market has to open but he admits there has to be some limitation and the law needs to be written carefully so it does not spark a private land-grab.

What are the main differences between farming in the Ukraine and countries in nearby European countries?

When comparing business benefits in his native Germany and adopted home in Ukraine, Sigmund says he always replies that there are advantages and disadvantages in each country. Ukraine has excellent land and with good prices for land rent. In Germany, there is a good infrastructure, good services and good prices which are not matched in Ukraine. Ukrainian farmers don’t have the same access to money lending sources as their colleagues in Germany, France and Poland, so this limits development.

How important is agriculture in the Ukraine and how should it be developed?

Farming plays a key role in Khmelnytskyi Region, both as a financial asset and through the creation of a large number of jobs. Sigmund reckons that 35-40% of jobs in the Khmelnytskyi Region depend on farming. This includes representative offices, sugar factories, logistics companies, distributors, traders, equipment manufacturers, dairies and processing plants. The staff for these amount to a huge number of people involved in agricultural business. Sigmund urges the government to help establish and maintain communities around farms and to avoid seeing a situation develop he has witnessed in Argentina or Brazil. On visits to the countries Sigmund saw large-scale farms staffed by workers who lived many kilometres away in towns and cities and faced lengthy commutes.  This is not right, according to Sigmund who believes workers should live close-by to better understand where we live and what we do.

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Sigmund Lampka
German-born farmer Sigmund Lampka swapped his homeland for Ukraine to gain a foothold in agriculture
Lampka Agro has grown from 500 to 10,000 hectares
Sigmund’s company Lampka Agro has grown from 500 to 10,000 hectares in less than 15 years