New ‘Locomotive’ Powering Ukraine as Economy Retools After Warby
Wheat, barley and sunflower oil exports are at or near records
Bumper harvest may be repeated in 2017 in boost to GDP growth
Ukraine is starting to live up to its reputation as Europe’s breadbasket.
Exports of wheat, barley and sunflower oil are at or near all-time highs, part of an agricultural revival that began to take hold in 2013. The industry’s rise coincides with declines in export mainstays such as steel and iron ore, which are produced largely in the nation’s east and have suffered amid the conflict there with Russian-backed insurgents. Trade data due Tuesday are set to underline the shift.
Agriculture has become “a locomotive of the Ukrainian economy,” central bank Deputy Governor Dmytro Sologub said in an interview. “The numbers are really stunning.”
Agriculture’s ascent may only be starting. Irrigation projects could help boost the grain harvest to 100 million metric tons from 66 million tons, according to Agriculture Minister Taras Kutovyi, who hasn’t provided a timescale for the increase. Other potential drivers include canceling a ban on selling farmland, a requirement of the nation’s $17.5 billion bailout from the International Monetary Fund.
The shift can be seen in Ukraine’s goods exports, more than 40 percent of which are now agricultural products, while the share of ferrous metals has shrunk to a quarter. Ukraine, a country of 45 million people, could one day produce enough food to feed half a billion, Kutovyi predicts.
There are downsides. There are already record stockpiles of wheat globally. Also, an over-reliance on one group of commodities can sabotage economic growth when their prices decline. But global demand for grains and food is set to advance in the long term, making demand less vulnerable than for metals, according to Olena Bilan, an economist at Kiev-based investment bank Dragon Capital.
Agriculture has been key to Ukraine’s recovery from a two-year recession, with the economy surging 4.7 percent from a year earlier in the fourth quarter, the most since 2011. While the government is lagging behind in some reform efforts, favorable rainfall in the fall and winter mean there could be another record harvest this year, according to Tetiana Adamenko, head of the National Weather Center’s agriculture department.