Wheat production in Ukraine no easy feat

WHEN Lawrence Richmond sends a truck of grain to port from the Ukrainian farm he manages, he has a security guard ride shotgun.

Field service: Lawrence Richmond (right) with agronomist Taras Stepanovich in a wheat crop on the Ukrainian property he manages.

WHEN Lawrence Richmond sends a truck of grain to port from the Ukrainian farm he manages, he has a security guard ride shotgun. The move is not to protect the cargo from attack but to ensure the truck driver does not stop along the way to offload some of the grain on to the black market.

Corruption is the biggest issue in the Ukrainian economy, pervading at all levels. Richmond talks of a value-added tax – the equivalent of Australia’s goods and services tax – being collected by the central government but taking six months to be returned to grain growers – and only to the level of 60 per cent. In other words, with a VAT-free commodity such as grain, 40 per cent of the tax is pilfered by officials.

A third of Richmond’s 40-strong workforce are security guards, protecting machinery and other goods from being stolen. “We haven’t got a great rule of law in this country; we’ve got corruption and the goal posts are always changing,” he says. “Nothing is beer and skittles.”

Originally a Mallee boy, Richmond runs a 7000-hectare grain farming operation between Nicolaev in the south of the country and the Black Sea port of Odessa, for a Singaporean grain buyer and investor. He describes the area as the “Mallee of the Ukraine”, with an annual rainfall of 388mm and soils “reasonable” but nowhere near the quality of the humus-rich black soils of central Ukraine, about 200km further north.

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The farms grow sunflowers, wheat, barley, linseed and canola. Yields are 3-4 tonnes a hectare for wheat, about three tonnes/ha for canola and 1.8-2 tonnes/ha for sunflowers.

Richmond says the Black Sea countries are “the centre of the (grain) world”. “They are going to be the biggest grain producers in the world.

“And there is still a lot of unutilised land for grain expansion, particularly in Russia and Kazakhstan. In Ukraine, it is a little bit different, with only 40 per cent of the land underutilised.

“The average wheat yield is four tonnes a hectare in Ukraine.

“With better agronomy and better varieties, I can’t see why that is not lifted to five to six tonnes a hectare.”

While Ukraine has become a major wheat exporter in recent years, it is the massive expansion of its corn crop that has caught grain traders’ attention. For decades up to 2007, the annual Ukrainian corn harvest was 3-8 million tonnes.

The harvests began to rise from 2007 to 2010 but then it skyrocketed from nearly 12 million tonnes in 2010 to 31 million tonnes just three years later as growers switched from growing wheat and other crops to corn. The massive rise in corn production shows the huge productivity potential in the rich soils of central Ukraine, where most of the corn is grown.

Boosting farm productivity and viability is the reason Richmond landed in Ukraine in 2012. While yields have not changed much, he has managed to cut costs simply by moving to a no-till cropping system. “When I came here nearly four years ago, we were using 90 litres of fuel a hectare,” he says. “Now it is down to 31 litres a hectare, just through incorporating an Australian farming system.”

Richmond says most Ukrainian farms use a full cultivation farming system. Only about 2-4 per cent of farms practice no-till. “It’s through that sort of system that we get the costs down,” he says.

He says Ukrainian farmers have access to the same equipment and technology as their Australian counterparts – it’s just that machinery costs much less in the Ukraine.

Richmond says it costs about US$15 a tonne (of grain production) to buy land in the Ukraine.

“In Australia, it is probably costing you more like US$30-35 a tonne. If you look at leasing land, it costs us about US$60 a hectare in the Ukraine. Looking at comparable land at Horsham, you are probably going to pay US$200 a hectare.

“For labour, it probably costs an Australian farmer about US$40 an hour. We’re paying $US2 an hour in Ukraine.”

Ukraine may already be a major grain growing country but there is a sense that with further efficiencies, a juggernaut is about to emerge.