In the Delta or the Midwest, farmers refer to it as “good dirt” for a reason. Right now, this good, black dirt is in crisis, much like the economy that houses it.
Those in the know are watching the Ukraine in the short term and in the long term. Russia’s movement into Ukraine complicates the matter.
What plays out could have an effect on grain prices in the short-term. In the long-term, given investments of scale, Ukraine will become the “world’s breadbasket,” something akin to what Saudi Arabia is to oil. That was the take last year before the current events took center stage. Find a good piece on the situation at http://www.forum-ekonomiczne.pl.
The back story is the looming population boom.
The ownership structure of Ukrainian agriculture is in the midst of recovery, transformation and change. At a forum last year, one of the presentations was titled, “Ukraine: Changing course toward a European future.” That explains a lot about the current tense situation between Russia and the West.
The key will be whether the Ukraine gets the investment it needs to ramp up production and become an important player in global food security, and whether the current crisis fades.
The value of Ukraine’s agricultural exports rose in 2012 to $17 billion, a 40% increase over the previous year.
The claims that the Ukraine will become the “world’s breadbasket” perk up ears and even elicit criticism of “propaganda enthusiasm” when the Ukraine prime minister voiced them. At the crux of the argument is the claim of a billionaire Ukrainian politician and entrepreneur named Oleg Bakhmatiuk. He believes the “breadbasket” claim will become reality when Ukrainian exports reach $40 billion. In published reports, Bakhmatiuk sees the Ukraine producing 100-120 million tons of grain and 9-10million tons of meat in the next five to seven years. To do that would require a significant increase of 20% in ag exports and require significant investments of scale from China and the U.S. to transform the Ukraine into the “food-producing Saudi Arabia.”
To realize that goal, however, the Ukraine will need steady and consistent investment from the U.S.