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29 Sep 2023

LFM 2023: doing agribusiness in turbulent times

On 12 September, the Ukrainian Agribusiness Club Association and UCABevent agency held the XIV International Conference “Large Farm Management” (LFM), a unique event for Ukraine and the whole of Europe. This conference has traditionally become an effective platform for communication and exchange of experience in the field of agriculture. The LFM conference was attended by 350+ leading agricultural producers, leading investors, representatives of resource and service companies, and start-ups at the Terminal Innovation Business Park.
The conference was opened by Mykola Solskyi, Minister of Agrarian Policy and Food of Ukraine, and Kateryna Rybachenko, member of the Supervisory Board of Agro-Region and Vice President of UCAB, who stressed the importance of maintaining the stability of the agricultural sector of Ukraine as much as possible in the realities of war to strengthen the country's economy. “Today, we all live in a new world, asking ourselves every day whether it is right that we continue our everyday lives while soldiers are dying. However, it is our shared responsibility to hold the economic front so that it does not fall before the Victory comes. So the best thing we can do is to continue doing what we do best — supporting the agricultural sector,” said Katerina Rybachenko.
And during the first case study, Alex Lissitsa, CEO of IMC, paid special attention to the issue of survival and business sustainability under martial law: “The agricultural sector was able to survive in the new realities due to high yields and profits in 2021, having formed large transitional balances of grains and pulses and significant financial savings. In addition, the resumption of exports via the grain corridor and duty-free trade with the EU helped to boost exports. Also, new logistics routes were created virtually from scratch, capacities were built in the Danube ports, and a high harvest was sown and harvested in 2022-2023. At the same time, the ‘grain corridor’ has become part of history in this war, with grain worth more than a hundred million dollars stuck in Odesa ports, Poland and other partners blocking exports to the EU. The enemy is destroying our agricultural infrastructure, production costs rising steadily, and purchase prices for key agricultural products falling. As a result, the Ukrainian agricultural sector has become unprofitable for the first time in 20 years. In 2022, both grain and sunflower crossed the loss line. If we talk about mass bankruptcy, it may start in late 2024 or early 2025.”
The conference continued with a speech on a related topic by Roman Slaston, CEO of UCAB. In his presentation “Interim Results of the Season: Production, Exports, Logistics”, the speaker spoke about the expected gross harvest of major grain crops, possible structural changes next year, exports and logistics performance, and the reasons why this season's high yields may play a cruel joke on the agricultural sector. “Many farmers have switched from grains to oilseeds this year, realising that the latter have a better chance of being exported in case of problems with the supply chain. As for prices, the situation is not as optimistic as last year, it is becoming harder to hold on to them, half of the cost of grain goes to logistics, while the situation with oilseeds is slightly better. At the same time, this is the third successful year in a row for the sugar industry, and we have the potential to double sugar exports if there are no obstacles to exports to the EU. As for livestock farming, we have positive trends in increasing the number of livestock at agricultural enterprises and in increasing the profitability of production. In general, for all agricultural sectors, the determining factors for the next year will be: price dynamics in other export markets, the possibility of exporting through the Black Sea and the EU, lower logistics costs, affordable loans, energy prices and the hryvnia exchange rate,” said Roman Slaston.
The issue of resource provision for agricultural producers is becoming even more urgent than usual in wartime, so the first panel discussion focused on how to make calm and balanced decisions about the need to purchase fertilisers, plant protection products, machinery and seeds in times of turbulence.Vitaliy Filatov, CEO of Vӓderstad Ukraine, explains: “This year, the global agricultural machinery market was on the rise, but companies wanted to sell their products to premium markets. At the same time, the Ukrainian market for all types of machinery has fallen by 50% and will definitely not reach the level of 2021 in the coming years. As the Ukrainian market is not a premium market, it is a risky market, and Ukraine is not the first choice for managers of leading companies when choosing where to sell.” Gennadiy Malyna, Head of Syngenta's Oilseeds Technical Support Group, PhD in Agriculture, outlined the situation on the seed market, noting that the conditions for local domestic production are in perfect condition, weather conditions are favourable for producing quality seeds, and sunflower and corn harvesting is now starting. After which the leading role will be played by post-harvest processing — bringing the seed to the required quality for delivery to the consumer.
Dmytro Gordeychuk, Head of the InfoIndustry project, shared his observations on the situation with the availability of fertilisers: “Before the war, Ukraine was one of the leaders in nitrogen fertiliser exports for a long time, but due to the hostilities, some plants were lost, and blackouts led to the fact that the plants were operating at a loss. Last season, we imported 730,000 tonnes of fertiliser, while we should have imported about 1 million tonnes. According to our estimates, Ukraine can potentially import 200,000 tonnes of fertiliser per month, while the total consumption is higher. That is, imports will not be enough, we need our own producers. We are currently in a stalemate, as farmers have hardly bought any fertiliser for the autumn, with agricultural holdings purchasing 35% of their nitrogen fertiliser needs for the spring. At the same time, fluctuations in nitrogen prices affect the entire fertiliser market. We hope that the market will calm down and fertiliser consumption will increase closer to spring.”
Vadym Skrypnyk, Director of Agricultural Production of Astarta-Kyiv, summed up the discussion: “Looking at the problem of providing enterprises with resources, we see that markets in Ukraine are reorienting, niches are being vacated and simultaneously filled by other participants. International companies are determined to work in Ukraine despite the risks. At the same time, prices for the vast majority of agricultural inputs are rising both on domestic and global markets, which may adjust consumer demand.”In addition, Anna Lebedynets, Associate Director, Senior Banker Agribusiness, EBRD, presented the results of the EBRD's work in Ukraine after the outbreak of full-scale war. She listed the types of support for investments in the development of the sector, as well as the main and grant financing instruments available to farmers. “We are proud that we have not stopped investing and continued to support Ukrainian businesses. Food security is one of the key areas of focus for the EBRD. In 2022, total investments in Ukraine reached €1.7 billion, including grants and TFP turnover, and €1 billion was invested in 2023. Given the consequences of the war and the difficult financial situation of businesses, when there is an opportunity to finance with cheaper resources, we are taking steps to encourage our clients to attract grants to develop sustainable development strategies, energy efficiency, climate change impact assessment, and business relocation,” the speaker said.
The topic of raising funds was discussed in more detail during the second panel discussion “Financing Agribusiness in Time of War: Instruments, Risks, Guarantees”. Aivaras Abromavicius, Minister of Economic Development and Trade of Ukraine in 2014-2016, is convinced that the Ukrainian agricultural sector is definitely facing difficult times, as the number of deposits in the issue accounts has increased significantly since the beginning of the war. Oleksandr Shelest, Head of Medium Corporate and SME Department of Credit Agricole Bank, assured: “Today, there are no “red lines” for lending in Ukraine, even in the frontline regions, financing is possible, but on an individual basis, in each case, projects for which money is needed are considered separately and risks are weighed. Because if we don't support a client today, we will simply not exist tomorrow.”
“Transparency in business is a key factor in the process of finding funding, especially in attracting grants and partners. Nowadays, business partnerships allow us to do more than ever before, especially in the areas of investment in processing infrastructure and export logistics," said Vyacheslav Chuk, Commercial Director of Astarta-Kyiv. Dmytro Pasichnyk, director of Dobrozem, added to the discussion by addressing the issue of investing in land: “The war has affected the dynamics of land sales and purchases. In the regions closer to the frontline, there is no great rush for investors to buy land because there are significant risks. In order to invest in land there, a farmer needs to see that the return on land will be higher than in other regions. There is already more demand in the western and central regions. However, in Ukraine as a whole, the supply-demand ratio has changed significantly: before the war, the number of people willing to buy land was 60-70% of the market, while now it is 30-40%.”
The discussion “Staffing Today and in the Future: Key Challenges and Priorities” was fascinating, where Yakov Akulov, Head of Human Capital Advisory Services of Deloitte Ukraine, stressed that the topic of care and support is becoming especially important in HR today. Deloitte's research has shown that support is becoming dominant not only through programmes and benefits, but also live support in real time, which requires a lot of attention from HR staff.
Oksana Reva, acting HR Director of Agro MHP, agreed with this thesis, adding: “Currently, agricultural companies are experiencing a shortage of seasonal and labourers. Highly qualified specialists are either bought or mobilised. In communicating with our employees, we are increasingly moving to individual approaches, researching labour market trends, seeing who responds to certain changes and how, and providing competitive salaries. However, this is not enough; we also need to create a brand of a socially responsible employer, maintain the image of the modern agricultural sector, pay attention to working hours and conditions, and simplify production processes through digitalisation.”
“If you want the perfect employee, you have to hire and train them. Therefore, work with personnel should start at school, breaking down stereotypes that agriculture is not interesting. Young people need to be “driven” by talking about innovations and modern satellite technologies. After all, at the beginning of the pandemic, we came to the conclusion that we need to improve the skills of our staff at the regional level, and the most effective way to do this is to train future employees on our own,” Iryna Romanenko, HR Director of CFG, shared her thoughts.
Dmytro Lebedev, Head of Agrohub HR360, raised the issue of employment of veterans: “Our company conducted a study on how companies cooperate with demobilised veterans. And we saw that some companies have not faced this problem. For others, it is not relevant, and only a small part of organisations has a working group that studies the situation and is responsible for developing strategies for cooperation with veterans. This demonstrates that there is a great need to train company staff to interact with veterans and to ensure that demobilised veterans are employed.”
Finally, Tatyana Volochai, Director of MHP for Communities Charitable Foundation, emphasised the importance of values in maintaining unity: "There is a war going on in Ukraine, including a war of values. This is what unites both employees and communities. First and foremost, we must understand our national identity and be proud to be Ukrainians. In addition, people in the regions and communities suffer from the effect of paternalism, when they decide that nothing depends on them. Therefore, it is necessary to develop communities to demonstrate how much depends on their actions and indifference.”
The final part of the conference was a dialogue between Alex Lissitsa, CEO of IMC and Ivan Leno, band leader of Kozak System. What the musician and the top manager of the agricultural holding have in common, what is their vision of the revival of post-war Ukraine, and what the interlocutors expect in the near future. These were the main points of their conversation. “Today we are all in the same boat, we are all rowing in the same direction and we are all interested in Victory. When we talk about the front, we must understand that the most important thing today is the military front, and the fate of our nation depends on the effectiveness of our army's supply. We cannot lose, because for Ukrainians it will mean death, and the enemy wants our souls, not our territories. Therefore, Victory is our only option,” the band leader inspired the audience with these motivational words. And as the final chord of the event, all those present enjoyed a powerful concert by Kozak System.
Throughout the conference, participants could taste Ukrainian local products from the “Incredible Craft Bag”, which was presented by the online publication AgroPortal.ua with the support of the Embassy of the Kingdom of the Netherlands in Ukraine. The “Incredible Craft Bag” is an online platform that brings together the products of the finalists of the “Incredible Villages of Ukraine” competition and the participants of the “InstaFarmers” project.
In addition, everyone could visit the conference's expo zone. This year, representatives of Agreena, New Holland Ukraine, Credit Agricole Bank, Ukrainian Corporate Governance Academy, MHP for Community, LNZ Group and DEFENDA spoke about various products and services useful for the agricultural sector. During lunch, the guests of the event had the opportunity to taste cutlets from the ScottSmeat brand.For fourteen years in a row, the International Conference “Large Farm Management” has been successfully promoting the creation of profitable business cooperation, the development of an information-aware agricultural community and provides an opportunity to present advanced developments and networking to a wide range of professionals. The team of the Ukrainian Agribusiness Club and UCABevent agency would like to express their gratitude for the support of the event: New Holland Ukraine – an exclusive technical partner, Dobrozem – an exclusive partner, land sales market and preservation of the land bank of agricultural producers, Credit Agricole Bank – an exclusive financial partner, LNZ Group and DEFENDA brand – an exclusive partner, MHP for Community Charitable Foundation – gold partner, Syngenta — silver plant protection products and seed partner, BASF — silver agrochemical partner, SANAGRO UKRAINE — silver fertiliser partner, Agro Region — organisational partner, AgroPortal — exclusive internet partner, and media partners: GrowHow, Agroexpert, AgroElita magazine, Zerno, Infoindustriya, Sapienza (Agri-Gator, Seeds), AgroTimes, Agribusiness Today, AgroPravda, ProAgro and Aggek platform.

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