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http://www.ft.com/cms/s/0/54852a9a-1ba2-11e3-b678-00144feab7de.html#ixzz2f3Up7YOa By Roman Olearchyk and Emiko Terazono Fifty years ago, inspired by a visit to the US cornbelt, Nikita Khrushchev’s grand plan to grow corn across the Soviet Union resulted in devastating crop failures and food shortages. Today, however, in one ex-Soviet state, his vision may be realised. This year, Ukrainian farmers are harvesting their largest corn crop, and as Serhiy Didyk, who farms on the steppes of central Ukraine, said: “Khrushchev’s dream of producing vast quantities of corn on our land is finally becoming reality.” With its rich black soil, Ukraine has historically been known as the “breadbasket of Europe”. Already a large wheat supplier to the Middle East, now Ukraine’s corn acreage is expanding as well, as it offers higher profits and faces far less state regulation than wheat markets. And unlike past efforts for mass production of the grain, these days better quality seeds, fertiliser and pesticides, and favourable weather have boosted yields. Changes in the weather patterns in Ukraine in the past few years have “made corn growing more attractive and less risky compared to other agricultural crops traditionally grown in Ukraine,” says the US Department of Agriculture. This year’s expected corn harvest of 29m tonnes has set the stage for a 35 per cent jump in exports to 18m tonnes, catapulting the eastern European country to the world’s second-largest corn exporter alongside Argentina and Brazil, according to the USDA. Kiev is pinning high hopes on its corn exports. In a rallying call, Mykola Prysyazhnyuk, Ukraine’s agriculture minister, last week said: “There will be strong demand for corn on global markets, with Asia, the Middle East and Africa increasing imports. Let’s make this Ukrainian corn.” The country’s corn boom is a bright spot for Ukraine, which is grappling with its second recession in five years, a ballooning current account deficit and also hit by the recent emerging market currency turmoil that has depressed Kiev’s foreign currency reserves to dangerously low levels. Grain exports – expected to total a record $5.5bn this year, according to consultancy Ukragroconsult – have not been able to offset the sharp declines in revenue from heavy industry and other resource sectors. However, with investments in agriculture expected to rise, the sector’s growth is expected to provide diversity for an economy that is regarded as being too reliant on exports of steel and minerals. Vladimir Pantyushin, regional economist at Barclays, said: “Agriculture has partially offset the decline of metals exports and can extend these gains over the short-to-medium term.” Ukraine aims to meet growing global demand for corn as rising incomes in emerging markets lead to higher meat and dairy consumption. The country’s first ever shipment of corn to China is expected to leave ports in the coming weeks as part of a $1.5bn loan-for-corn deal brokered by both countries last year. Countries including Egypt, Israel, and Spain are among the largest buyers of Ukrainian corn, while producers are also making inroads into Asia, exporting to South Korea, Japan and Malaysia, thanks to competitive prices compared to US and South American counterparts. Asian importers, traditionally reliant on US and Latin America, are also keen to diversify their sources after the worst US drought in 50 years in 2012 devastated corn crops, leading to a price surge. Ukraine’s rising prominence in the world agriculture markets has attracted Monsanto, the US agritechnology group, which announced plans to pump $150m into building a seed production facility, and Dupont Pioneer this summer started production at a $40m seed plant. However, the corn shift is not without challenges. Bumper grain crops worldwide have depressed international prices to three-year lows. Meanwhile the country’s infrastructure is desperately in need of investment in equipment, grain storage and logistics such as ports, roads and railroads. Leading agribusiness groups – international traders such as Cargill, Archer Daniels Midland, Bunge – are already in Ukraine, but Kiev needs more, say analysts. “The government needs to improve the investment climate in the country overall, reduce its role in the sector further and instead focusing on improvements in infrastructure in order to be prepared for more grains exports,” said Aivaras Abromavicius, partner at East Capital, which manages $5bn in emerging markets But these are challenges one ex-Soviet leader could only have dreamt of. Mr Didyk, the corn farmer, said that if Khrushchev were alive today, “he would be happy to see our big corn crop,” although he probably would not be as pleased to see Ukraine becoming such a leading independent agriculture player. Continue reading →