13 March 2018
Great gamechanger: the Ukrainian market leaders’ opinions

The ice has broken: what the agrimarket leaders think about new trends

Modern technological advances in the agricultural sector change the business structure and food logistics. This news is both good and disturbing at the same time. Not everyone will survive to see the results. Those who intend to survive and even plan their development are already trying to apprehend the basics of agricultural innovations.

The concept of the Normalized Difference Vegetation Index (NDVI) is firmly entering the agronomist’s daily routine. Based on the NDVI indices, agribusinesses study occurring problem areas where certain crops conditions clearly (and not quite) manifest themselves. They also conduct diagnostics to reveal areas affected by diseases and pests. Based on this data, experts make recommendations. They refer to the proper choice of herbicides or their mixtures.

If we talk about the volumes of the agricultural technology market, we, more or less, reached the pre-war levels (more than $50 million). And in the Hryvnia equivalent, we even exceeded them.” However, Belenkov admits that this statistical data is incomplete. The IT agrimarket scale is difficult to estimate, and it is rapidly growing. Nowadays, innovative technologies are an indispensable element of any industry, including the agricultural sector

says Artem Belenkov, the founder of the SmartFarming Company

Agro 4.0

According to the Ukrainian Agricultural Business Club’s (UCAB) estimates, the agricultural products export provided more than $18 billion in 2017 for the first time in Ukraine’s history. As Alex Lissitsa, president of the UCAB, said, “the Ukrainian agrarian miracle” of the current decade has become possible due to the three main reasons:

  1. transition to modern technologies has been successfully accomplished;
  2. management efficiency has been improved;
  3. the agribusiness management system has switched from the collective-farming-based to the classical business.

field

However, the classical agribusiness margin is reducing now. According to Taras Vysotsky, the UCAB general director, the arable land rental price increased by 104% within the time span from 2014 to 2016, and by the end of 2017, it has added another 20%. Climatic changes have also become an insurmountable barrier on the way to super profits. Speaking in Kiev in December last year, Thomas Phillips, Swiss Re Corporate Solutions senior agricultural insurance agent, marked that high temperatures cause increased water evaporation from the sea and soil.

Inna Meteleva, the deputy chairman of the board of the Svarog West Group Corporation in the recent past, and now, the director of the British Charter House Corporate Partners investment group in Ukraine, presents more detail on the essence of the growing problem. Due to the increased environmental humidity, grain has to be additionally dried which leads to significant energy products consumption, e.g., gas.

Large agribusiness holdings and medium-sized farmers no longer sit twiddling their thumbs. Minimization of losses and control over expenses are on their agenda. Artem Belenkov explained that up until recently, agribusiness heads had worries mainly about the embezzlements issue, but now, they shifted their focus to business efficiency. High technologies and market literacy are now coming to the forefront.

How do IT technologies change the agrimarket priorities? Aleksey Pavlenko, chairman of the Ukrainian-Dutch Business Council and the former Minister of Agrarian Policy and Food of Ukraine (2014-2016), believes that cost reduction and potentially larger yields in the agricultural sector are possible due to proper data collection using innovative equipment, namely drones, sensors, and satellites. Agricultural works are becoming not only more efficient and easy but also, along with the increasing production, they allow ensuring the country’s inner food security, reducing imports, and to feed countries which are far removed from implementing innovative technologies.

Human resources is key!

According to the current investigation data collected by Baker Tilly International auditing company, 3.3 million people are involved in the industry. However, this is in no way a mechanical reduction – this is the “compression” under the pressure of innovation processes – what the aforementioned Lissitsa calls Agribusiness 4.0. The topic is new, but the trend is old. In the Soviet past, the farm employed 130 workers per 1,000 hectares. Now, this number is 20. Applied sciences move from universities to business structures. Universities will only host fundamental sciences the scope of study of which is limited to theoretical knowledge and laboratory experiments.

Large agribusiness holdings already admit students for training. Five years ago, the agricultural giant Kernel founded its own University of International Programs.

It is intended for graduates of agricultural colleges. All agricultural businesses of the country are gradually switching to such a model of “custom designed” staff education. The companies believe that IT specialists and cartographers (among other, no less important ones) will be the most demanded agro experts of the future.

Speaking of the nearest future potential amenities, Artem Belenkov noted that agricultural products made in Ukraine will replace imports on the shelves of Ukrainian stores due to the marriage of classical agribusiness and new technologies.

Besides, this or next year, another side trend will appear: first agribusinesses and then towns and cities will be supplied with electricity generated in the fields.

Electricity from fields

We are talking about biogas production. In 2017, agribusiness holdings brought a series of biogas plants to a high production capacity. Consequently, they increased the capacity of all Ukrainian biogas complexes from 30.3 MW in electrical equivalent to almost 37.6 MW. Such companies as Astarta-Kiev, Myronivsky Hliboproduct (MHP), and Ukraine 2001 are among the leaders in this direction.

поле

The race goes on. In the nearest future, Ukraine 2001 will triple its biogas capacities, and MHP will more than quadruplicate them. Last December, the European Bank for Reconstruction and Development decided to grant Yuriy Kosyuk, the main MHP shareholder, a credit of 25 million Euros to construct a biogas plant in the Vinnitsa region. The company reported to the AgriaDestinations magazine that it will be the largest biogas production plant in the world.

The World in 2050

By 2050, the world’s population will increase by one-third. Present-day schoolchildren will be middle-aged people by that time. The food consumption market will grow by 70%. China, Pakistan, Vietnam, and the countries on the African continent will remain the world’s largest food ordering customers for the coming years. In total, a quarter of the world’s population lives in these locations. But they are not all the mouths of the world. In just eight years time, developing countries, especially Asian (50%), African (16%) and those located in the Middle East (13%) will become the main consumers of dairy products. With land market development, the Ukrainian agribusinesses will accept serious investment assets. Consequently, even greater shortage of manpower is possible. So, future students should take a closer look at agrarian occupations – tomorrow is with them.


Based on the article by Alexander Paskhover for Destinations.

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