The UAC Chairman, Andrii Dykun, spoke about the situation in the agricultural sector and the inadmissibility of selling agricultural land from January 1, 2024, in a blog for the Economic Truth publication.
War changes everything - the land market is no exception. The situation in the Ukrainian agricultural sector in March 2020, when the law on the land market was adopted, and at the end of 2023 is significantly different.
Back then, the agricultural sector was a leader in development and innovation, with competent farmers earning steady income and investing it in further development.
Now, farmers are working at a loss because for the second year in a row, purchase prices for agricultural products are below cost, many enterprises have been physically destroyed by the Russian army, land liberated from the occupiers is mined, and farmers are forced to work under fire near the contact line. For the first time in the last 20 years, farmers are reducing their crop areas.
In such a radically opposite situation and difficult conditions, the approach to the key agricultural issue - the land market - must also be changed.
Promises and real steps
"We are opening the land market for Ukrainians"
"For its correct launch, the first stages will have limitations"
"In case of distortion of the situation, we will apply safeguards"
These were the statements made by the authorities on the eve of the adoption of the law on agricultural land turnover. But for some reason, they have now been forgotten! It seems that politicians have decided that they are not relevant now.
Almost all countries in the world imposed certain restrictions on who could buy agricultural hectares and to what extent at the first stages of land market opening.
They often include a ban on the purchase of land by citizens of other countries, the priority of purchasing shares by their tenants, and quantitative indicators of the area that can be purchased by one buyer.
Has the war become a stop-factor for the land market?
This is because the issue of land in the agricultural sector is not just a personal issue for its owners and buyers, it is a matter of social, economic and political stability of the entire state.
For example, a large concentration of land in the hands of a small group of wealthy individuals leads to the destruction of small and medium-sized farmers, leaves their families without means of subsistence and, as a result, exacerbates social tensions.
It also makes local authorities heavily dependent on the new land oligarchs, destroying local self-government. Also, the purchase of land by those who do not work in agriculture, for example, for the purpose of passive investment, leads to the alienation of farmers from their business, a drop in efficiency and production.
Moreover, the consequences of such steps, even after the realization and correction of mistakes, are felt for decades. Suffice it to recall what collectivization cost the Ukrainian village.
For example, in Poland, the land market was launched on the condition that one buyer could purchase 500 hectares. A few years later, this figure was reduced to 300 hectares, as there were fears that agricultural land could be quickly bought up by foreign companies.
Another interesting restriction in place in Poland is that you have to be a farmer to buy agricultural land. For example, in Ukraine, there are more and more signals from different regions that IT professionals are investing in hectares.
Yes, they have the money, but they don't have the agricultural skills and capabilities to engage in agriculture. Therefore, they lease the land, but it is easier to lease it to a holding company, which deprives small and medium-sized farmers of land, and the money and taxes from the rent that used to stay in the village go to the city, which destroys the life of the local community.
This is a call to think about whether we are introducing the agricultural land market in the right way.
Due to the diverse characteristics and unique history of each country, we can’t find two countries with the same agricultural land markets. All of them have a unique set of provisions that bring relations between all its participants into a civilized "channel", avoiding speculation and incorrect work.
Our law has established such restrictions:
In the first two and a half years, there will be a ban on the purchase of land by one buyer - no more than 100 hectares to one owner. Starting from 2024, the limit will be up to 10,000 hectares.
There will also be a ban on land purchases by legal entities until 2024.
There is a ban on the sale of state and communal land.
The right to purchase agricultural land by foreigners will be decided by referendum.
A preferential right to purchase is envisaged.
By 2030, the minimum price per hectare should be no less than the normative monetary value.
In October of this year, the Ukrainian Agri Council conducted a survey among more than 1,000 farmers across Ukraine to find out their opinion on the new rules that will come into effect on January 1, 2024.
73% of farmers strongly disapprove and 14% rather disapprove of raising the limit for the sale of agricultural land from 100 hectares to 10,000 hectares in 2024. Of all the farmers surveyed, only 3% are ready to increase the maximum amount of land purchased by one legal entity and 5% rather approve of the new conditions.
This situation is due to the fact that most Ukrainian farmers simply cannot afford to buy land now. In fact, the question is where to get the money to continue production activities. As I have already mentioned, as a result of the war, agricultural companies have been operating at a loss for two years now, and there are no prospects for improvement. Partially or completely blocked ports, attacks on ships, grain warehouses and logistics infrastructure, overloaded logistics to the west, occupation of territories, mined fields, shelling and destroyed production facilities - all of this works against the farmer.
Loans remain the only way out, but their volume has significantly decreased compared to the pre-war level, and the need has only increased. At the beginning of the war, many farmers were saved by the 5-7-9 loan program, but loan limits are almost exhausted, and the government has been discussing raising them to at least UAH 150 million for six months, but there is still no decision.
There is almost no state support because there is no money. Prices for products have fallen below the cost of production, but production costs have increased and continue to grow. All this is leading the agricultural sector to a systemic crisis and a series of bankruptcies.
At the same time, farmers are actively helping the army, and many of them are defending our country directly at the frontline. The Charity Fund established by the UAC has purchased and delivered more than 1,500 pickup trucks to the Armed Forces.
The question now is not how agricultural producers can buy land in such conditions, but how to survive, pay for shares and not get fired people.
Increasing the limit 100 times – it’s too much
Just imagine that in a time of war, we are planning to increase the restriction on the sale of land to one enterprise from 100 hectares to 10,000 hectares, knowing that we are leaving most farmers behind and creating ideal conditions for individual companies or wealthy people to buy up large areas at once.
Such a step is a mistake. And in times of war, such a mistake is a crime against Ukraine. Therefore, the Ukrainian Agri Council opposes raising the land limit from the current 100 to 10,000 hectares to one enterprise from 2024. It is worth noting that we do not deny the admission of legal entities to the market.
To make our voices heard, on behalf of thousands of small and medium-sized farmers, I registered a petition on the website of the President of Ukraine, calling for the 100-hectare limit for both legal entities and individuals to remain in place until the end of the war and for two more years after the victory.
In almost three weeks, during which the website was down for at least a week, the petition gained 25,000 votes. This proves that the issue is really "urgent" and the government and farmers must reach an understanding before irreparable consequences arise. We look forward to the President's consideration of the petition and hope for his support.Friday, 24 November 2023