Turning Challenges Into Opportunities

Economic News

22 Jul 2010
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Ukraine has long enjoyed a reputation as potentially one of the most productive agricultural production areas of the world.

When Ukraine declared independence in 1991, the country was saddled with badly organised and poorly managed collective farms - with no farmers skilled in private farming or decision-making. Since then, it has suffered many of the vagaries common to post-Soviet states - unstable economic policies, endemic corruption and political upheaval.

Collective farms have given way to a hodgepodge of giant corporate-type farms, a collection of hardscrabble private farmers and a large number of small subsistence farms.

One problem they all face is an insufficient supply of reliable, efficient and affordable farm equipment.

In the mid-1990s, an effort was made to solve the problem, with significant programmes jointly financed by the US and the Ukrainian Export-Import bank. Through these, a large amount of American-made farm equipment was provided to Ukrainian farmers. However, because of poor management, many combines and tractors went to farms that could not pay for the equipment.

Today, debts in the millions of dollars have been written off and a large amount of expensive, imported equipment has found its way to the scrap heap because of inadequate maintenance.

Later, other large agricultural equipment companies made years-long efforts to develop the Ukrainian market with straightforward sales operations underwritten by credit on commercial terms from European banks. Ultimately, this too proved largely unsuccessful. One of the best-known farm equipment companies, UK-based Massey-Ferguson, downsized and eventually closed its operations in Ukraine, although it continues to operate through importer-dealers.

More recently, programmes underwritten by the Ukrainian government have had some success, but in a country where as many as 10,000 replacement combines for worn-out equipment should enter the market each year, probably not more than 10% of the need is fully met. In addition, much of the Ukrainian government effort has been directed towards the financing of equipment made in Ukraine that is not as efficient nor as durable as combines and tractors made in Europe or the US.

In the last few years, a small group of entrepreneurs has developed a niche business that is actively filling a small part of this market.

One of these, Jim Asher, is a 76-year old American who grew up in the wheat fields of Kansas. In 1993, he found himself in Kiev as country manager for the Citizens Network for Foreign Affairs (CNFA), an American non-governmental organisation that was for many years the largest agricultural development group working in Ukraine, with funding almost entirely supplied by the US Agency for International Development.

When he left CNFA in 1997, Asher spent some time working on agricultural assistance projects with Massey-Ferguson as it tried to develop the sales and service of its equipment line in the country.

Asher's life-long agriculture and farm banking experience and his hard-earned lessons learned in Ukraine, eventually led him to see what he thought was a real market opportunity.

More often than not, Asher does not have to find private farmers in need of farm equipment. They usually find him, thanks to his developing reputation. They are usually looking for tractors and combines, but cannot, or will not, pay the $400,000 or so asked for new equipment. With that in mind, the appeal is obvious for used and reconditioned foreign farm machinery that, properly maintained, could operate efficiently for another 10 to 20 years.

The cost difference between buying used European or American equipment rather than something new differs from deal to deal, but in almost every case, the Ukrainian farmer saves as much as 50% or more.

Once a deal is made, Asher's uses his experience and contacts, usually somewhere in America's farmland of Kansas, Colorado, Missouri or Nebraska, to locate several options. He then usually gets visas for the farm owners to visit the US to see the options and make their choices. The trip also allows the Ukrainian buyers to get a feel for Western-style farming, something most have never really understood.

Asher also takes care of the rest of the details, getting the equipment to a port city for shipment to Ukraine. Returning from these trips, he usually brings back hundreds of pounds of parts and other needs for customers who use his services on a continuing basis.

As Asher told OBG, "Ukrainian agriculture has been in a state of flux for all of the 15 years that I've been involved, and I can see the time when what I'm doing may have outlived its usefulness. However, for these last few years, it has been good business, and quite large business for someone who operates with only one or two associates. It has been a relatively profitable business that now amounts to well into seven figures."

He added, "For the person who wants to be involved in business in Ukraine, the opportunities are great, but then so are the problems. The learning curve here is long and can be very painful. However, those with good ideas and great tenacity will find Ukraine an interesting place to be."

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