KYIV – About 44 percent of Ukraine’s territory has been freed from a moratorium that was lifted on July 1 when agricultural land went up for sale.
After two decades of the freeze, more than 42 million hectares (103 million acres) – larger than Italy or California – is now purchasable as Ukraine left the club of the few remaining countries that don’t have a farmland market. The remaining countries are North Korea, Cuba, Venezuela and Belarus.
Home to about 25 percent of the world’s well-endowed “black earth” soil, Ukraine can expect to see a boost in economic output of between 6 and 12.6 percent over 10 years, depending on the extent to which the reform is implemented, a study by the International Monetary Fund (IMF), one the nation’s largest foreign lenders, says.
Last year’s gross domestic product reached $156 billion, and agriculture constitutes about 9 percent of that amount. The industry employs more than 14 percent of the labor force, according to data provided by the U.S. Department of Commerce and the World Bank.
Ukraine for decades has carried the moniker of being the “breadbasket of Europe” and is the world’s biggest exporter of sunflower oil, the fourth-largest grower of corn and delivers grain to every corner of the planet.
However, yields are still inefficiently low compared with European Union (EU) and U.S. rates. For example, corn yields are a third lower than in the U.S. and wheat about a quarter below the EU, a Bloomberg dispatch from Ukraine states.
The new law is being implemented in stages. Currently, only agricultural land used for harvesting, orchards, pasture and other designated means can be sold between Ukrainians. Only 100 hectares or less can be sold.
In 2024, the law will allow Ukrainian legal entities to qualify to sell land, with up to 10,000 hectares able to be sold.
President Volodymyr Zelenskyy’s administration wants to hold a national referendum on whether to further open the land market to foreigners. That would mean that about 40 million Ukrainians will decide the fate of the approximately 7 million owners of arable land.
Current farmland owners have lease agreements that could range from five to up to 30 years. The status quo so far has led to inadequate investment in the land and the slow demise of rural communities because small, medium and large agro-holdings refrain from investing in land they don’t own.
Small to medium-sized farmers with little access to affordable lending or capital markets are left on their own because they can’t collateralize their land as farmers do in other countries. In other countries, farmers can pledge repayment when they buy agricultural goods they need during the sowing and harvesting seasons. Now, this dynamic could change in Ukraine.
That includes investments in quality seeds, pesticides, herbicides, machinery, manpower and the latest precision farming technologies, such as the use of drones, global positioning systems and drip irrigation.
About “17 villages disappear from Ukraine’s map each year,” said Denys Bashlyk, co-founder of Land Club, an organization that provides consultations for people who wish to buy or lease farmland as a source of residual income.
As the former head of the state service of geodesy, cartography and cadaster, he said that only about 73 percent of the nation’s agricultural land has been mapped, “with the remaining metes and bounds” being left to potential dispute between land claimers.
Big farms with more than 20,000 hectares lease the majority of available farmland, he added. A handful of farms range between 250,000 to 500,000 hectares and are known as Latinfundists, named after their counterparts in Argentina and Brazil.
Those who have land in Ukraine’s so-called “sunflower belt” in the central regions where fertile black soil earth is found can expect to fetch up to $2,300-$2,400 per hectare, Mr. Bashlyk said. The average yearly lease rate is about $150 per hectare.
An opinion column penned by Arup Banerji, World Bank regional country director for Eastern Europe, states that “land reform that truly allows owners and users to take control of their land can be transformative.”
Current land tenants could provide up to $3 billion every year to land leasers, he said.
“For rural residents and small farmers, this can create some $24 billion of collateralizable assets that allow them to invest in irrigation, horticulture or non-agricultural small enterprises. And for local communities and local governments, this can provide an income stream of up to $2 billion annually to better the lives of Ukrainians,” Mr. Benerji wrote.
There were 322 land sale transactions that took place in the first six days since the law went into force, Prime Minister Denys Shmyhal said at a Cabinet of Ministers meeting on July 7.
“The launch of the land market…[is] one of the greatest achievements since independence,” he said. “Ukrainians have become the real masters of their land, because from now on they cannot just own it, but at will freely dispose of it.”
Selling arable land to foreigners is strongly opposed by the public, however.
More than 80 percent of people aged 18 years and over oppose the sale of farmland to foreigners, a June survey by the Kyiv International Institute of Sociology says.
And more than 70 percent support holding a nationwide referendum on whether foreigners should have farmland ownership rights.
The topic has since 2001 been a tool of manipulation for politicians and it has also been a problematic subject throughout Ukraine’s history, said Alex Lissitsa, president of the Ukrainian Agribusiness Club, an advocacy group for the farming industry.
The topic has been “politicized” by “populist politicians,” Mr. Lissitsa said, in part because of Ukraine’s history with forced collectivization of farmland, grain and livestock in the early 1930s in the USSR that led to the forced starvation of up to 10 million Ukrainians, according to certain estimates.
“If the land reform had taken place 20 years ago, nobody would care by now,” he said, adding that “Ukrainians don’t really understand the issue.”
Foreigners already lease and cultivate farmland in Ukraine, including rich but food-dependent Gulf states like the government-run Saudi Agricultural & Livestock Investment Company, which owns Mriya Agro Holding. Most of their land is in Ternopil Oblast.
After Mr. Zelenskyy visited the United Arab Emirates earlier this year, $3 billion worth of cooperation deals were signed.
Still, an online farmland platform called Dobrozem has sprung up, Dmytro Dubilet, a former executive at online bank Monobank, announced earlier this month.
“The process of buying/selling land in our country is quite complicated,” Mr. Dubilet wrote on his Telegram channel. “It involves notaries, banks, appraisers [and] tenants with priority right of redemption. We have worked out this process in detail, and our support service will help sellers at all stages.”
Current lessees have land purchase priority rights and can transfer them, but that process is complicated and unclear, according to the legislative language, Mr. Lissitsa said.
“The notaries don’t understand how this could be done [to transfer ownership rights],” he said.
In an opinion piece for the Washington-based Atlantic Council, Agriculture Minister Roman Leshchenko said that “steps are currently underway to eliminate obsolete auctions that demand physical presence and are often subject to questionable outcomes.”
He said online auctions for farmland would take place on the government’s “transparent auction” platform known as Prozorro, which is used for the vast majority of public procurement tenders.