Agricultural land market: fate of small farmers and demand for Ukrainian goods after the market opening.
The global crisis amid the pandemic has forced governments of all countries to take urgent anti-crisis measures. In Ukraine one of such measures was a moratorium on land reform and restrictions concerning the possible acquisition of land property up to 100 ha by individuals. Legal entities will be admitted only in 2024. Publicly held lands can not be traded at all.
In general, the reform is meant to support the economic stability and therefore prevent speculations on the market. However, the real consequences might be as follows:
- Exclusion of legal entities will lead to inability to invest in farmer businesses, that require support
Agricultural companies will not be able to become owners of the land they cultivate. They will be forced to use complicated and risky shadow schemes of concentrating land areas up to 100 ha by assigning land ownership to straw men.
- No positive changes for small farmers.
In order to be profitable, a farm needs proactive development and investment. This requires taking loans, which will be impossible, since the main collateral for the loan, the land, will be illiquid due to the reform.
- Owners of parcel lands (over 7 million of the Ukrainian population) who fail to manage their properties will be unable to sell them. The main reason is market competition and of land prices kept fixed at unfairly low levels.
- The restriction for legal entities on the purchase of land up to 10 thousand hectares is a step towards monopoly and reduction in the selection of planted crops.
The number of agricultural holdings will increase, whereas the number of smallholder farms drops significantly.
Conclusion: the price of products labeled ‘made in Ukraine’ sold by small farms that do not cooperate with large retail chains will continue to decrease. Markets are closed, and smallholders have no access to supermarkets. In future, there will probably be no one to cultivate certain crops and vegetables.
The analysis of the reform’s major aspects shows that the market opening in a new format will not have the expected significant effect on the state’s economy.