Ukrainian American from Detroit takes up farming in Ukraine (09/05/04)

Ukrainian American from Detroit takes up farming in Ukraine

by Roman Woronowycz
Kyiv Press Bureau

TALNE, Cherkasy Oblast - By all appearances, Roman Fedorowycz does not have farming in his blood. He grew up in Livonia, Mich., a middle-class suburb located west of Detroit, nowhere near a barn or a field of corn. His parents, Oksana and Bohdan, did not work the land for a living. He completed graduate work at the University of Michigan, not exactly cow college.

Mr. Fedorowycz, 43, a member of Plast Ukrainian Scouting Organization in his youth, never particularly strove for merit badges in farming as a scout. Even today he prefers fast cars, stylized, mirrored sunglasses and Izod shirts to overalls and straw hats.

Nonetheless, he became a farmer because he saw opportunity and was willing to take a risk, which is what is needed to succeed in today's highly commercialized international agricultural market.

"It was difficult at the beginning. The government had its hands on everything: grain pricing, grain storage, transportation, the rail, the ports and the export price. But in the late '90s they finally begin liberalizing the market," explained Mr. Fedorowycz.

He added that a transformative moment came with the presidential edict of 1999 that formally ended collectivization and allowed villagers to take parcels of the land they had farmed and to lease them out, including to foreigners.

Today Mr. Fedorowycz has 20,000 acres of some of the world's richest agricultural land at his disposal in Cherkasy, and another 12,400 in Kirovohrad, farther south of here. He is using the land to cultivate several money crops, including soybeans, lupins and corn, not the typical products produced by the Ukrainian farmer.

Mr. Fedorowycz is also unusual in that he is that rare type of foreign investor in Ukraine: a Ukrainian American who has taken a financial risk and is working his craft in the country of his forefathers to help develop the "new economy" and to reap the benefits it can provide.

Few Ukrainian Americans have been willing over the years to ride the roller coaster called the Ukrainian economy. Many left quickly after the international finance crisis of 1998-1999. Fewer still have shown the persistence and determination to succeed at business in Ukraine that Mr. Fedorowycz has. Since arriving here in 1991 to test his business acumen he has dabbled in commodity trading in Lviv, held an interest in an oil and gas-wholesaling firm, had investments ripped off, then became a farm machinery leaser before moving into agricultural production.

Now, he is preparing to ride the tide of a strongly developing Ukrainian economy as a producer and seller of various agricultural commodities in the heart of Ukraine's "chornozem" (black earth) region. More importantly, today he finally looks well-placed to reap the benefit of more than a decade of learning how to run a profitable business in this former Soviet republic.

In the last five years Ukraine's economy has grown dynamically, reaching 12 percent growth in the first half of this year. Foreign investment, relatively dormant in Ukraine until last year, finally has begun to enter the country - last year to the tune of $1 billion, and this year projected to reach more than $2 billion.

While the country's growth has been strongest in light industry, wood, furniture and construction, agricultural development has played no small part in the country's economic development. In 2004 Ukraine is expected to gather some 36 million tons of grain, nearly half for export. The amount is second only to the 40 million harvested in 2002.

As any good businessperson would know, you need to know your product to profit from it. So, Mr. Fedorowycz went looking for a partner with agricultural expertise who had the same optimistic outlook about Ukraine's agricultural future and the same determination to do successful, large-scale farming in the country. He found him in Jeff Rechkemmer, a third-generation Iowa farmer who had been in Ukraine for several years and who was looking for just the sort of adventure and opportunity that Mr. Fedorowycz offered.

In 2003 Mr. Fedorowycz quickly hired Mr. Rechkemmer as his director of agricultural development. The two decided on their first planting that year - a successful venture that produced plenty of corn, soybeans and lupins for export, and resulted in a business partnership they have called Iowa Ltd.

Mr. Rechkemmer, who arrived in Ukraine in 1994, is outspokenly upbeat on Ukraine. "I think that this is the last frontier for large-scale agriculture. American farmers have looked at Argentina and Brazil, but we found that most of the lands are already developed," explained Mr. Rechkemmer.

Mr. Fedorowycz began gathering his farmland in 2000, after the presidential decree allowing individual villagers to lease their land parcels was issued. He knew the Cherkasy region because he had leased combines to farmers in the area. So the new farmer from Detroit painstakingly began stitching together the land plots owned by villagers of five villages in the western Cherkasy Oblast to eventually come up with a land quilt that today stretches over 20,000 acres of some of the most fertile black loam on the face of the Earth. At first the process was far more complicated than simply signing over pieces of paper.

"Of course there was much opposition," explained Mr. Fedorowycz. "A lot of the people looked at it as an outsider, an American, taking their land. They didn't understand why the old kolhosp system couldn't work again."

Mr. Fedorowycz convinced local officials to call town meetings to explain to the villagers that he was not out to rob them of what any farmer holds dearest. He offered them a fair price to lease their land.

Since then, he and his firm have given them many additional benefits as well, including free busing for the school children and textbooks for the elementary schools. Iowa Ltd. has initiated a doctors-on-wheels program to provide medical services to the five villages from which his company has leased land. Iowa Ltd. plows and harvests the land of the lessors and provides hay and straw for their livestock. In addition, it pays for funerals for them and their closest relatives.

Mr. Fedorowycz and Mr. Rechkemmer both retain a strong belief that farming can succeed only on a large scale. Mr. Fedorowycz holds the opinion that in the current global marketplace only economies of scale that is, large production volumes, bring an acceptable profit at the end of the annual business cycle and allows farmers to survive.

Mr. Fedorowycz also said that Ukrainians must begin to modernize not only their farming technology but their attitude toward crops historically grown on Ukrainian lands - a country that for two centuries was known as the "breadbasket of Europe."

Today the Ukrainian breadbasket can barely feed its own after years of bad farming practices, erosion and soil neglect. Mr. Fedorowycz explained that he found it ironic that one of the common sayings among Ukrainian farmers is: "Feed the soil, and it will feed you," when Ukraine's soil had in fact been deprived of proper fertilizers, herbicides and pesticides for decades.

Mr. Fedorowycz believes that now the tide has turned. He sees many new farmers, mostly large associations and companies, initiating modern agricultural practices and beginning to take the necessary steps to diversify the crops they cultivate and choose those that will provide the best yields.

"We do not want to compete with millions of other farmers struggling to grow wheat and barley," explained Mr. Fedorowycz. "Ukraine is extremely short on protein crops - corn, soybeans and lupins - for example. These are world crops."

He also noted that the Ukrainian farmer must overcome wastefulness in the harvest process and obtain the technology to gather as much harvest as quickly and efficiently as possible. Mr. Fedorowycz said old Soviet and newer Belarus tractors and combines just cannot compete with American makes such as Massey Ferguson, International Harvester and John Deere, which are slowly appearing in Ukraine. Over the years Mr. Fedorowycz has purchased many imported combines and tractors capable of harvesting and threshing an assortment of seed bearing cultures.

The broad-shouldered Detroiter said that, inasmuch as Ukraine's ecology in general and the soil in particular had been so devastated by decades of abusive policies, only farmers who are able to inject massive investment would be able to undertake the necessary steps to rejuvenate and nurture the soil to its full potential.

Mr. Fedorowycz is an optimist. He has had to be, otherwise he would have long ago left Ukraine for tamer lands: the South Pole, Kosovo and the Congo come to mind.

He has stuck it out in Ukraine because he always thought that the opportunities existed, even if latently. While he realizes that now his time has come - he is preparing to add another 15,000 to 20,000 acres by the end of the year and to begin developing an irrigation system on the Cherkasy farm - he remains cautious and reserved about his accomplishments. For example, he would not reveal any individual or corporate profit or investment figures for this story. But he remains optimistic about doing business in Ukraine and is very excited about how Iowa Ltd. is developing.

"This country and this economy have given me the ability to build a company on a scale that would have been much more difficult, if not impossible, in the United States," explained Mr. Fedorowycz.

While wildly optimistic about Ukraine's farming future, nonetheless he advises would-be entrepreneurs to enter the Ukrainian market carefully because, while the opportunities are great, there still remain large obstacles and old mindsets to overcome.

"You have to do your homework. And, no question, you have to have good local lawyers and accountants who know how to work the system. Preferably they should be from the younger generation," advised Mr. Fedorowycz. "The tide has changed in Ukraine. The investment climate is still difficult, but it is rewarding."

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