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Forecasts in the 2011 FAPRI-ISU Agricultural Outlook suggest Russia’s corn output may fall slightly over the next decade but wheat and barley production could increase almost 30 mmt (1.2 mbu).
The FAPRI analysis points to a 14.2-mmt increase in Ukraine’s production (150 mbu of corn, 202 mbu of barley, 219 mbu of wheat).
That doesn’t surprise Vic Miller, an Iowa grower who’s worked with Ukrainian farmers.
“When we went there initially in the 1990s, everything was very backward, almost to the horse-drawn plow,” Miller remembers. “Their Soviet equipment was unreliable, they used a lot of home-grown seed. They felt you couldn’t farm unless you worked the ground to death with intensive tillage. All these things add to the cost of production and reduced productivity.”
Now, Miller says, huge amounts of cash are going into the region’s agriculture.
“With that comes better technology and better seed. These people are not up to speed with us yet, but they are gaining,” he reports. “What I see with Ukraine is a shorter learning curve than we had. They are on the brink and with a little more tweaking, they will be even more competitive.”
Improved farming practices are just one factor in the region’s progress. Both O’Neal and Sifferath cite increased capital investment in export facilities and even upstream storage – steps that improve efficiency and expand capacity.
One Ukrainian company has built its own barges to move grain from inland production areas to its export facility at Mykolayiv, east of Odessa. And in late 2011, Ukraine’s president announced plans to reduce or eliminate export tariffs to make Ukrainian commodities more competitive.
Infrastructure problems are still significant, especially for Kazakhstan, which is completely landlocked.
Like Russia and Ukraine, Kazakhstan produced bountiful crops in 2011, including 21 mmt of wheat – its largest crop since 1956. But except for sales to neighbors like Iran, Azerbaijan, Turkey and Georgia, Kazakh exports depend on Russian and Ukrainian rail and port facilities to access major international markets.
In the competition for limited rail cars, hefty Russian and Ukrainian shipments have muscled Kazakhstan to the side. As a result, its exports are not expected to grow in step with its production.
Russia and Ukraine also have hurdles to overcome, from problems with land ownership to farming practices, grain handling and storage.
“There are still huge problems with grain quality, but that will change,” says Miller. “Their infrastructure was decimated, but they’re realizing its importance.”
He also sees continuing fallout from the region’s Communist past.
“They are behind us on technologies like GPS,” says Miller. “The governments are not crazy about it because of the old Communist need to control and spy on people. And there’s still problems with the way Communism destroyed personal initiative and entrepreneurship. But those ideas are giving way to more forward thinking.
“This thing is happening in varying degrees throughout the entire Communist bloc,” Miller concludes. “They are moving in the direction of capitalism and seeing how they can get ahead throughout that entire region – and they’ve got just beautiful, flat farmland with tremendous untapped potential.”