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Know Your Market
Bernard N. Stephaniuk

Ukraine is recognized as a country of significant agricultural and agro-industrial potential. Ukraine’s need for a change of direction in the primary production of agricultural products and in the manufacturing and supply of agricultural equipment has made it a significant market for the North American agro-industrial sector. John Deere’s sale of 1049 combines in 1996 is a prime example.

Participating in Ukraine’s agricultural and agro-industrial potential is not just for the large international corporations. There are many small and medium sized Canadian and American manufacturers of agricultural equipment other than combines and tractors. These manufacturers have become world leaders in seeding, cultivation and haying equipment, and are looking towards Ukraine to expand beyond domestic markets. This is in part because traditional North American markets may have reached limitations as to market size, and in part because reliable and proven technology has been replaced in North America by different technology. An example of this is air seeders replacing conventional seed drills. This has also resulted in the popularity of new farming practises such as zero tillage and chemical summerfallowing.

The temptation is to market to Ukraine the same usually higher cost equipment. This temptation, however, should be resisted for at least three reasons. Firstly, does the equipment fit Ukraine’s market requirements such as agricultural practises, equipment compatibility, topography, land condition and land use, animal husbandry, supply of necessary lubricants and parts, service, transportation, roads, local standards, manufacturing and diverse agricultural production. Secondly, will the equipment and services contribute to Ukraine’s need to increase total production. Thirdly, can the higher capital cost of imported equipment and services be justified, or will it be cheaper for Ukrainian farmers to live with their production losses.

Ukraine has a large productive agricultural land base of 40.8 million hectares of which about 33 million hectares are arable. Saskatchewan’s farm land area in comparison is 26.9 million hectares of which the cultivated farm land area is 20.2 million hectares. Ukraine’s territory is approximately 90 per cent that of Saskatchewan’s.

Winter and spring varieties of wheat, barley and rapeseed are grown. Winter wheat is an important cereal crop. Crop production also includes corn, peas, sugar beets, buckwheat, oats, sunflower, flax, maize, fall rye, hemp (non-narcotic), vegetables including potatoes and melons, grapes, medicinal plants, and other crops such as rice and millet. Additional land is in pasture, orchards and hay including alfalfa and sweet clover, reserve and forestry land.

There were approximately 12,000 collective and state farms in 1994 and 35,400 private farm as of January 1, 1997. The private farms average 24 hectares in size. There are also a significant number of farms owned by institutions.

Generally the climate of Ukraine is favorable for agriculture, Southern and Eastern regions can be dry with yield loss due to drought. Western Ukraine is subject to frequent rains and over moistened soil. Fall seeded crops can suffer from winter kill as happened in the winters of 1994-1995 and 1995-1996. Harvesting losses can occur because of wet conditions and crops staying unharvested for too long.

The rural population in Ukraine has a higher percentage of elderly and of women. Migration of younger people to urban centers is causing a concern as to potential farm labour. The move to a market oriented economy is also playing a role in changing the face of agriculture in Ukraine. The purpose of a centrally controlled economy - cheap and sustained food production, maintaining full employment, production of agricultural technology that was relatively simple to manufacture and maintain, abundant and cheap fuel resources - are no longer supportable.

While Ukraine has farm equipment manufacturing of its own, the equipment design, size and kind was meant to serve the purposes of a centrally controlled economy. The move towards a decentralized economy has, in part, resulted in underlying change. Moreover, the factors affecting global agricultural production are now also present in Ukraine.

Drills manufactured in Ukraine, for example, are substandard because of: construction, grain and fertilizer box size, and because the drills are not capable of accurate seeding or proper seeding of fine seeds.

There is no strong alternative available to Ukrainian farmers. Many drills in use are old and replacements are necessary. Plowing is still used extensively. This leaves the land rough, requires high horsepower, takes longer time and consumes more fuel. Improvement in agricultural labour productivity is required to increase productivity. It has been estimated one-fifth of agricultural production, worth 7 billion USD, is lost annually in part due to equipment and farm practises.

Road and streets, are often not suited to larger equipment such as airseeders. Private farmers are also given plots of land that may only be 2 or 3 hectares in size and separated by several kilometers. Tractors are not suited to operation of hydraulic motors.

There are, however, plenty of 85 hp. tractors on both the collective, state and private farms. The average size of tractors in use in 1994 was approximately 86 horsepower. Private farmers are attempting to organize into associations for purposes of buying fuel and equipment. Equipment is being purchased and paid out of earnings earned in custom work.

Equipment initially should likely be aimed at the 85 horsepower and lower horsepower 4 wheel drive tractors. The quality and performance of the tractors is generally good. It is seeding and tillage equipment that is necessary.

The most utilitarian approach would be the 85 horsepower market. Individual unit prices are lower. The smaller size allows the larger co-operative farms to phase out equipment still in use and allows private farmers to share equipment. Then as the larger farms move toward larger equipment, a secondary market will be available in the private farms for the smaller used equipment. This size of equipment also lends itself to possible co-production in Ukraine.

The sale by John Deere of the combines falls into the category of higher cost equipment. Unquestionably good quality combines are necessary to lower harvest losses which, together with transportation and storage losses, are high and not acceptable.

Nevertheless harvest losses are a more or less fixed loss as a percentage of total production. The dramatic decrease in yield in 1996 was not due to significantly higher harvest losses (which likely should have been lower with new combines). The decrease in yield has been attributed to an unusually long, harsh winter and a dry spring. Other reasons were ageing and inadequate seeding and cultivation equipment, lack of repairs, fuel and good seed, or the seed was not planted deep enough because workers were in a hurry to meet deadlines.

However, ageing and inadequate equipment may have meant perhaps that the equipment was not capable of placing the seed to moisture, coupled with deep plowing practises that would have dried out the soil. Accordingly the significant lower yields can not be attributed to harvest losses.

Increasing Ukraine’s total crop production requires increased attention to seeding and cultivation equipment, and different farming practises. The goal is not necessarily to replace current technology and practises, but to integrate with what is adequate and domestically available. This means equipment and practises directed towards the 85 horsepower tractor market.

The growing season in Ukraine is longer than in Saskatchewan. Spring seeding of cereal crops can start as early as mid-March. Harvest begins in early July providing amble opportunity for fall seeded crops. Summerfallow is not extensively practised. There are therefore two separate and almost equally significant market periods for seeding and cultivating equipment.

Improved seed bed preparation, seed placement and weed control will contribute to an increase in total production allowing for a recovery in the higher capital cost of new equipment (this recovery is also dependent on the price received by the farmer for his products). Directing initial capital investment at lower priced and integrable technology will provide the greater benefits. The higher per unit cost of combines becomes increasingly difficult to pay for if for example the harvest yield is two tonnes rather than three tonnes per hectare. Increased capital cost also has a tendency to place farmers increasingly dependent on multinational corporations.

The purchase of the 1,049 combines may yet prove to be too expensive for Ukrainian farmers.


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