Rhino's Ramblings - Big Ze And Black Sea Grains
By Robert Thomas Opinion/Commentary
Well it has been quite the Summer and after 45 days in Ukraine I am once again back in Moose Jaw after a good stint with the media there.
It was a good Summer run and I managed to dig into some areas which were of interest to me and cracked out 19 stories to other media outlets. I appreciate the support and backup from friends in Germany as well as Channel 112.
Although Ukraine is thousands of kilometers away from Moose Jaw and Saskatchewan there are some ways geo-political events there set to impact economically right here on a local scale.
It is not just cultural and religious ties which bind us, ties which I will admit are unravelling after generations for many in Canada.
But it is more so in the area of agriculture investment and development.
The major rise in importance of Black Sea grains – Russia, Bulgaria, Moldova, Romania and Ukraine - on the world market is starting not only to take hold but accelerate. New seed varieties are not only being developed but are right now being grown in major test plots. Test plots of more than a few acres.
When the new crop varieties hit the market there are hopes for rapid growth throughout the region.
Insiders in Ukraine's grain trade told me they are already scaling up internally in preparation for double digit growth. Whether it becomes true or not is yet to be seen.
I do know though for instance in the second week of August an informal delegation of Turkey's grain traders were in Odessa looking at legume and pulse crop potential. The trip to Turkey is a short hop.
Believe me I took it myself.
So what has attracted so much foreign interest – Germany, Poland, Turkey and China to name a few - beyond the new seed variety developments?
The answer is the election of President Vladimir Zelensky, or Ze as he is known locally, and his political party Servant of the People carrying a clear majority in Ukraine’s parliament or the Rada.
As part of his platform President Zelensky is set to announce land reforms which include the private sale of farmland. It is a move some economists see as having a massive upswing to Ukraine's economy.
Ukraine with its vast productive land base has in many ways been neglected by continued State land ownership 25 years after the breakup of the Soviet Union.
Lots of land may have be privately farmed but it is all done through rental and lease agreements through State authorities.
It has lead to inefficient farming practices and under production.
It is a situation where on a dollar to output scale in many instances the injection of funds is percentage as well as output wise going to lead to greater returns than if invested in already privately owned and highly efficient Canadian farms and agri-food business.
It is sort of a more bang for your bucks approach which has attracted potential investor attention especially if the political and economic situation looks stable.
It is a situation Canada should be poised to take great economic advantage of but in my opinion are on the verge of missing out on.
Some of it is we live in the past when it comes to Ukraine in general.
I remember having a fairly lively discussion with a foremost Canadian authority on Ukraine about the subject and his view was no land reform could happen until compensation was paid for lands stolen 100 years ago.
It sort of made me snicker when I asked people in Odessa whose families were repressed for being large landowners and they asked me what sort of narcotics this expert was using.
That in a nutshell is how great the divide between the past, present and future seems to be.
Additionally the culture and geo-political centre of Ukraine has shifted massively in the last decade while Canada's has politically been hemmed in failing to face the reality.
Canada from my viewpoint has now found itself in an outdated world with rapidly diminishing influence in many sectors in Ukraine.
For more than a few Ukrainians intent on immigrating Canada is no longer the Holy Grail it once was.
Poland, with its easy work permit structure for Ukrainian nationals, location as well as doorway to Europe is by far more inviting.
Although I do not have the figures it is obvious Canada and Saskatchewan will not be receiving the cream of the crop in talent from Ukraine as Poland is by far the most popular destination.
When it comes to Germany and China the new Ukrainian administration is offering some of the most intriguing agri-business opportunities since the United States opened its Great Plains to settlers.
China is looking for land and access to the agricultural wealth and potential of Ukraine and just like here in Canada they have their local strawmen out beating the bushes. Opportunity to purchase land there is possible although it is yet to be decided if there will be any restrictions on ownership – whether foreign and domestic.
Companies owned by or controlled by the Chinese government has been involved already in Ukraine’s agriculture by providing modern machinery to farms. It is a partnership some were telling me in Ukraine they were wondering would blossom into a full buyout.
On the manufacturing front both China and Germany are looking at investing and expanding with a new player Israel taking tertiary looks at being involved on food production as well as scientific development.
In Poltava I spent some time at the Ukrainian Pork Development Institute.
An institute which has been around for some time which is now looking towards foreign partnerships to develop the next great genetic jump in hog production.
It is a place literally off of the map it seems but it is now attracting outside attention and potential additional foreign investment. And yes believe it or not one group looking is Israeli.
And it is not just in the area of food production but medical as well as some are starting to tout the research there as having the potential in bio-medics.
Key bottlenecks and inefficiencies which should have been removed or worked upon in the supply and production chain are now after 25 years being looked at. Some of the reasons why they exist are money but also because those bottlenecks allowed corrupt officials and others to readily take their cut.
It is something Zelensky has realized and has actively and personally targeted.
In Odessa at a news conference Ukraine's President asked Odessa's mayor to open up the bottleneck at the Port of Odessa as the single privately owned port was strangling the Ukrainian economy.
The response was cordial but below it was a stick and a carrot approach.
The carrot was the announcement of the potential of massive tourist dollars by making gambling legal and allowing a new massive casino to take in tourist dollars.
The stick was the arrest of the local deputy chief of police on major corruption charges – a man close to the power elite in Odessa.
The other thing is with Mariupol’s port now restricted by the Crimean bridge foreign dollars are being spent to develop a second Black Sea port to eliminate Odesa's hegemony.
Now how does this impact Saskatchewan and Moose Jaw? How could events nine time zones away impact here economically?
It is simple it all has to deal with economics and to some extent politics.
If investors see better and stable opportunity elsewhere they are going to be attracted there. It is all about making the best return in both the short and long run.
When it comes to investments which masquerade as private firms but are in fact controlled by a foreign government there are many factors they look at. Some of which may be political in nature. But by in large it also about access and someone along the way turning a profit.
It is something Moose Jaw is actively courting through the new Southeast Industrial Park.
We are relying upon the region’s strengths in agriculture in an attempt to upgrade and add value to local products. From my own personal view it is an idea massively overdue and we are actually behind where we should be in that.
But with the rise of technology, investment and Black Sea grains it gives us new competitors to the Moose Jaw dream. Will it be a minor or a major impact is something yet to be seen.
While I was in Ukraine I spoke to more than a few people – both in private and public concerns - who emphasized the potential dollar returns that are just seemingly within reach.
Some of it was just as simple as changing basic farming practices.
With that said we do live in an ever hungry world one which is demanding not just more plant based diets but an ever growing demand for meat. How we market ourselves is not only key in getting sales but additionally it could lead to greater economic development with the addition of value added processing. Processing plants Moose Jaw is banking on to fund our future.
It is a process in the end may very well get potential investors to your doors but at the same time you have to complete the sale.