17.03.2014
Category: Cash Crop
By: Simon Walther, Zazie von Davier

Average agriholdings in Ukraine are less competitive than top independent farms, but the gap could close in the future


Farming in Ukraine

Agriholdings are large commercial farming businesses with multiple operations under a centralized management. This organizational form has grown since the late 1990’s and today plays a dominating role in Ukrainian agriculture.

Agriholdings compete primarily with independent commercial farms which developed from the restructuring of former kolkhozes or sovkhozes. A PhD thesis written at the Thünen Institute analysed the competitive advantages and disadvantages of agriholdings and independent farms in Ukrainian arable production using expert-based focus group discussions and comparing typical farms.

Land rents in Ukraine are still low, but the competition for land is expected to increase and access to it is expected to become a crucial success factor in the future. Agriholdings were found to have strong competitive advantages in access to and cost of capital, as well as from more favourable input and output prices. Risk diversification gives them another advantage.

On the other hand, they show a lower efficiency, with lower yield levels and higher overhead costs. At the bottom line, typical well performing independent farms were found to generate higher return to land than typical average agriholdings member farms of the same size.

If agriholdings can overcome their efficiency challenge, the economic gap may close in the future. A likely way to accomplish this was found to be de-centralization and strengthening of farm-level management.

 

 


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