Ukraine to Increase Food Production

In the 2010 fiscal year IFC provided $75 million in long-term financing to Mriya, Ukraine’s seventh-largest agricultural producer, to help it double production of wheat and other agricultural commodities.

As one of the world’s leading grain exporters, Ukraine plays a major role in the global food supply chain. About 90 percent of Ukraine’s land base is suitable for agricultural production and the country has historically been one of the largest food producers and a major exporter. Agriculture currently contributes 10 percent of Ukraine's GDP and employs 20 percent of the population.

But Ukraine’s agribusiness sector faces several constraints.
Adverse weather conditions can curtail production and hurt farmers’ incomes and long-term financing for food production is scarce. That's why IFC is helping Ukraine become a more significant food supplier by working with agribusinesses across the supply chain to overcome these constraints. In fiscal year 2010, IFC invested about $161 million in Ukraine’s agribusiness sector.

“IFC’s funding is crucial for us to be able to grow our business, improve the efficiency of our operations, and contribute to the development of Ukraine’s agricultural sector,” said Mriya CEO Mykola Guta.

The IFC investment will help the company increase its production volumes two-to-three-fold and expand land under cultivation from 150,000 hectares in 2009 to 315,000 hectares by 2012. The expansion of farming operations and grain-storage infrastructure also will help create hundreds of new rural jobs.

IFC has also helped farmers in Ukraine gain better access to insurance products that offset the risks of crop loss from poor weather and other hazards. Our Agri-Insurance Development Project, launched in 2008 in partnership with the Canadian International Development Agency (CIDA), aims to improve the quality of products offered by insurance companies and build a regulatory environment that facilitates the offering of such products.

Natalia Gudyma, president of the League of Insurance Organizations of Ukraine, says the project contributes to the “improvement of the insurance culture, knowledge and development of Ukraine’s national agri-insurance system, and prevents unfair competition.” The growing availability of insurance products does more than mitigate risks for farmers—it also makes it easier for them to obtain bank financing, because banks are more likely to provide loans when they know farmers’ crops are insured against losses.

Recent progress in the project includes IFC’s participation in the development of a new law, expected to be passed later this year, which would pave the way for public-private partnerships in agri-insurance, thus enabling a wider rollout of agri-insurance products. The project has also played a key role establishing an association of agri-insurance companies, the first initiative of its kind in Ukraine.