20
international
November – December 2013
Ground CoveR
A new grain-loading terminal near the port of
Odessa is indicative of the increasing investment
in infrastructure in Ukraine.
Global grain growing
just a steppe away
Locals in the southern Ukraine are learning to say ‘g’day’ as
they observe first-hand the Australian way to grow grain
By Brad Collis
n On the steppes of southern Ukraine the
days are shortening as winter nears. For
farm manager Lawrence Richmond it means
leaving his wheat crops to sit dormant beneath
a blanket of snow for a few months while he
returns home to enjoy an Australian summer.
The crops will be about 30 centimetres
high (six-leaf stage) by the time the snow
buries them, but they will be safe; the
snow actually protects the plants from
the minus 28ºC to minus 30ºC ambient
temperature that would otherwise kill them.
It is an unusual agronomy for an
Australian grower to adjust to, but Lawrence
has taken it in his stride in the three
years that he has been managing 7000
hectares of crop in the Nikolaev district,
north-east of the port city, Odessa.
Lawrence previously managed up to
10,000ha in Victoria and southern New South
Wales through a farm management company
he co-owned, but the chance to apply his
expertise to the fast-developing grains industry
in Ukraine was too much of an opportunity
and challenge to pass up when it was offered.
“Apart from the four-month
dormancy period from November to
February, there’s not a lot of difference
to cropping in Australia,” he says.
“Most input costs are roughly the same
… chemicals perhaps a little bit more
expensive, but then machinery is much
cheaper. Earlier this year I needed parts to
turn the full cultivation seeder into a no-till
machine and I was able to buy them from
the Canadian manufacturer for half what
they would have cost me in Australia.”
Lawrence moved part-time to Ukraine
at the behest of two Asian investors who
are also grain traders and previously were
buyers of his Australian grain. The move has
given him a ringside seat on the emergence
of the former Soviet Republic as a major
grains producer and also provided important
insights into how the Australian industry
may need to respond to the challenge.
“Ukraine is attracting a lot of foreign
investment [Figure 1] and this is helping
it unlock a huge potential,” he says.
“We’re talking 120 million tonnes a
year – three times Australia’s current
production – and it’s high-quality grain.”
But the region also has its challenges.
Domestic food security – and that can
still also mean Russian interests – takes
precedence over export contracts, so a
healthy production surplus is needed
for export contracts to be secure.
Weather challenge
As in Australia, weather is the main variable:
either too little rain at sowing or an unseasonal
spring freeze after the protective snow has
thawed. Lawrence says that wheat – red
winter wheat – is planted in September
and harvested the following June.
“In 2011 we didn’t get enough sowing
season rain and the wheat crops were unable
to develop enough before the winter hit. We
lost most of our winter grain that season,
but when that happens we can sow a spring
barley in March, sunflowers in April or
sorghum in May. In other words, we still
have time to sneak in a rescue crop.”
As in Australia, modern practices are
helping to improve the odds for the grower.
Lawrence was contracted to introduce a more
Australian production model based around
increased water use efficiency through no-till
and reduced fertiliser and seeding rates.
“We’re in a dry area – 450 millimetres
of rainfall – and the records show the
best they’ve ever done (for wheat) is
about 14 kilograms/mm of rainfall;
allowing for 110mm of evaporation.
“This is because they were sowing 600
seeds/square metre for wheat and barley.
We’ve now halved that – though it’s still
far more than the typical Australian rate of
150 to 200 seeds/m2. So there is plenty of
scope to finesse the system even further.
“In the time I’ve been there we have gone
from full cultivation, with maybe one postemergent herbicide application, to zero-till
with knockdown herbicides, pre-emergent
herbicides, post-emergent herbicides and, if
necessary, fungicides and insecticides too.
“The outcome is we are now producing
23kg/mm of plant-available water – almost
double their previous best production level.
We averaged 3.6t/ha this year, an average
season, but comparable to yields in the
Mallee in a good year. And you only have to
go 200 kilometres further north and they’re
harvesting eight and nine-tonne wheat crops.”
The soils across the southern steppes are
metre-deep, black, self-mulching soils – similar
to the Darling Downs in southern Queensland –
and beneath this is a humus-rich cryosol layer.
“It is fantastic soil and this year one wheat
crop averaged just under 6t/ha and 14.5
per cent protein with no nitrogen applied,”
Lawrence says. “This is because the length
of the growing season gives more time for
the roots to reach this fertile cryosol layer.
“In fact we can get wheat roots
reaching 2m and sunflower roots 3m.”
Overall, Lawrence says winter rape (as
distinct from spring-sown canola) offers the
best gross margin, but is the highest risk crop
because it too has to survive the winter.
There are no grass weeds, but broadleaf
weeds can be a headache.
Leasing
The 7000ha he manages are leased by
Asian investors from clusters of local land
owners who combine their small holdings
to form larger and much more viable
cropping areas for lease to investors.
Lawrence says Ukraine is producing
about the same amount of wheat as
Australia, but in addition it will this
year, for example, also produce about 29
million tonnes of corn and it is already the
world’s largest grower of sunflowers.
“Their rapidly building grain production
is being driven by the simple fact that they
Ground CoveR
international
November – December 2013
21
Land resources
of Ukraine
Total area:
60.37 million hectares
Agricultural lands:
41.76 million hectares
loughed lands: 32.4 million
¢P
hectares or 54 per cent
¢ Pasture: 9 per cent
¢ Hay: 4 per cent
Winter wheat
About 95 per cent of Ukraine wheat is winter wheat,
planted in autumn and harvested the following
July–August.
On average, 15 per cent of autumn-planted crops fail to
survive the winter.
The amount of winterkill varies from year to year, from
two per cent in 1990 to a staggering 65 per cent in
2003, when a persistent ice crust smothered the crop.
Wheat yield declined during the 1990s following the
breakup of the Soviet Union and the loss of state
subsidies for agriculture.
FIGURE 1 Direct foreign
investment into Ukraine agriculture.
US$ billion
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
2011
2012
Corn
Corn is the third most important feed grain in Ukraine.
Corn is typically planted in late April or early May. Harvest
begins in late September and is usually completed by
early November.
Only 25 to 50 per cent of total corn area is harvested for
grain; the rest is cut for silage, usually in August.
Planted area has increased despite several impediments:
obsolete and inadequate harvesting equipment, and high
cost of production (specifically post-harvest drying
expenses).
Corn is used mainly for poultry and pig feed, and
production and consumption have risen since 2000 as
the poultry industry has grown.
Kiev
UKRAINE
Odessa
Sunflowers
Sunflowers are Ukraine’s main oilseed crop.
Sunflowers are typically planted in April and harvested
from mid-September to mid-October.
Due to a combination of high prices, low cost of
production and high demand, sunflowers have become
one of the most consistently profitable crops.
Their high profitability fuelled a significant expansion in
planted area, beginning in the late 1990s.
Many growers in Ukraine abandoned the traditional
crop rotation practices recommended by agronomists
that called for planting sunflowers once every seven
years in the same field.
Barley
Spring barley is the main feedgrain in Ukraine.
Spring barley is typically planted in April and harvested in
August, and is the crop most frequently used for spring
reseeding of damaged or destroyed winter-grain fields.
Winter barley is the least cold-tolerant of the winter
grains and production is limited to the south.
The increasing demand for barley from the brewing
industry has led to a jump in its production and the
import of high-quality planting seed from the Czech
Republic, Slovakia, Germany and France.
Two typical crop rotations used
by Ukraine growers
1 Barley + alfalfa
2 Alfalfa
3 Winter wheat
4 Sugar beet
5 Corn
or
1 Peas
2 Winter wheat
3 Sugar beet
4 Corn for silage
Lawrence
Richmond
on one of
the farms he
manages near
Odessa on the
Black Sea.
He is checking
a white
sorghum crop
sold into both
feedgrain and
human food
markets across
northern Africa.
The crop was
planted on 15
May at 60,000
seeds per
hectare – half
the normal rate
for the region.
Yield was
expected to be
about 3.5 to
4 tonnes/ha.
fact they would ideally like 16 per cent. If
Australia shows it is not interested in trying
to meet this requirement, there are plenty of
other suppliers, such as Ukraine, who will. We
are already producing 14.5 per cent protein
wheat and it goes straight to Malaysia.”
He says Asian buyers also want a large
kernel size. As a reflection of this, he says
Australian varieties tend to record a weight
of about 35 grams per 1000 seeds: “But the
Asian market wants 45g/1000 seeds and I am
growing a new variety in Ukraine this year
that achieves 50g/1000 seeds – and it is a highclass milling wheat with 14 per cent protein.”
He says grain that meets these specifications
does earn a premium: “Not exorbitantly overmarket, but enough to be taken seriously.”
For the moment, he says the main leveller
in the marketplace is climate variability
and different countries’ capacity, through
R&D, to become more climate resilient.
ever before at the same time that their capacity
to service those debts is weakening.”
Based on his own experience, and that
of other Australian growers he knows
running investment farms in former
Soviet states, he encourages Australian
growers generally to recognise they have
internationally valued skills and experience.
He believes there will be more opportunities
for Australian growers to become international
investors themselves by marrying their
skills with someone else’s capital.
“In other words, we shouldn’t limit
ourselves to exporting product. We
should also be looking for opportunities
to export our skills and knowledge.”
Lawrence suggests there is a limit to how
much more production can be extracted from
Australian farms and that even if output
doubles Australia would still be a minor
supplier in terms of volume. This, he says,
makes it all the more imperative for Australia
to be uncompromising in seeking to meet the
market’s increasing quality specifications.
“Australia on its own currently feeds about 60
million people. Even if our production systems
can eventually feed, say, 100 million that will
still only be about two per cent of the Asian
population. So we have to aim for the ‘top shelf’.
“As part of this we also need to be exploring
more sophisticated marketing models, looking,
for example, at how 50 growers from a region,
say the Mallee, can work together to not only
produce grain to particular specifications,
but to brand it and to market that brand.
“And that’s just part of the scenario.
Guarantee of supply is essential. So that
groups also needs to network with growers
in other parts of the country who can back
them up if their season doesn’t deliver.
“There are growers all over the
country producing common types; not
necessarily the same varieties, but for
marketing purposes the same grain type.
“So growers need to become business
people working together on a common
commercial goal rather than as business
competitors. That’s the challenge – and
the opportunity – that I see.” □
2013
estimated
SOURCE: UKRAINE MINISTRY OF AGRICULTURE
are in the middle of the world in terms
of markets,” he says.
“Infrastructure investment is also growing.
The port of Odessa can export 7.5 million
tonnes of grain a year and this will soon
be increased by a new four-million-tonne
export facility being built by a global grain
trader. And Odessa is just one of 13 ports.”
Lawrence also makes the point that all
of the wheat produced on the farms he
manages is exported to Asia, and in containers
to facilitate timely delivery of grains
segregated to meet buyer specifications.
“It is not just Australia that is aware of
this large and growing market – a market
that is also very clear about its quality
requirements. Meeting these, and with a
reliable supply, is the key to building longterm relationships and all of Australia’s
competitors are working to achieve this.”
He believes grain quality remains a blind
spot for Australia. “For more than 70 years
we had the Wheat Board telling us we grew
the world’s best grain, but it’s just not so
and we’ve got to stop thinking like that. I
still know plenty of growers who are happy
with 10.5 per cent protein. But the premium
noodle manufacturers need 14 per cent; in
Foreign investment
Lawrence says Ukraine’s trading weakness is
that it’s priority will always be domestic food
security: “Three years ago Ukraine halted all
wheat exports to safeguard domestic supplies
after a severe drought. This is one of the
reasons why it is encouraging investment to lift
grain production so it can guarantee supply.”
The issue of foreign investment is an
interesting subject for Lawrence, given
that in Ukraine he is part of it. Back
home he is also chairman of the Central
Highlands Agribusiness Forum in Victoria.
From the perspective of both platforms
he observes that food production needs
patient investment: investment that accepts
risk-sharing as well as profit-sharing.
“The year before last we only achieved
1.5t/ha, so the Ukraine venture made quite a
sizeable loss. But our business continued to pay
land rental, and continued to employ everyone
from funds provided by the parent companies.
By contrast, if our farms were reliant on
money borrowed from a bank, they would
have had a very difficult time financially.
“Capital invested in farming needs to be
able to be paid back as dividends, not as
interest payments on loans. Otherwise we have
the very situation that now exists in Australia
– growers running at higher debt levels than
ore information: Lawrence Richmond, 0418
M
992 920, [email protected]