Farmland market will provide higher margins — opinion

The opening of the land market will allow the producer to invest more in the land and get high margins. This was stated by Vitaliy Shtempel, Director of Economics and Finance at Agrain, in the interview with Latifundist.com.

According to him, the southern region is a zone of risky agriculture because of the droughts occurring with a certain cyclicality. Today, none will invest in the irrigation system on the leased land. With the purchase of these lands, the situation will change dramatically. Investments in irrigation will come in, productivity will increase, and new crops will be produced there, he stresses.

"In Kherson region, the farms implementing irrigation systems have the highest yield on soybean in Ukraine. Soybean is not grown at all where no irrigation is possible. In the south, we can successfully grow corn if it is irrigated. By and large, the opening of the land market will allow the producer to invest more in the land and get high margins. For the villagers it is also an increase in living standards due to the high grain yield in the region," notes Vitaliy Shtempel.

He also stresses that a moratorium is an abnormal practice when the owner is forbidden to sell his property. The CFO believes that the land will be rented in Ukraine for a long time.

"We need to continue working with shareholders and enter into long-term lease agreements. There are doubts that a considerable share of farmland will be put into real turnover once the land market is open. We can speak about 3-5% of all lands that will be in circulation, bought and sold," comments Vitaliy Shtempel.

In his opinion, people for whom the land is not relevant will be the first to sell their land. These are young people from the city who inherited it from their parents or relatives living in the village. The rest of the owners will spend years watching the price formation and how it will be set at the legislative level.

"As for the common fears of the market regarding the possibility that foreign companies and agricultural holdings will buy all the land, this requires cheap loans. Today, buying farmland requires foreign loans with a lower interest rate. At the same time, the land will become a firm pledge for the bank and they will not be able to assess it cheaply," he sums up.

As a reminder, on September 20th, the Government of Ukraine released a draft law "On Amendments to Some Legislative Acts of Ukraine Regarding the Turnover of Agricultural Land", which will regulate the farmland market in Ukraine.