20 international

Global grain growing just a steppe awayLocals 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 challengeAs 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

November – December 2013 ground cover

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 post-emergent 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.

leasingThe 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

A new grain-loading terminal near the port of odessa is indicative of the increasing investment

in infrastructure in Ukraine.

21internationalground cover November – December 2013

U K R A I N E

Kiev

Two typical crop rotations used by Ukraine growers1 Barley + alfalfa2 Alfalfa3 Winter wheat4 Sugar beet5 Corn

or1 Peas2 Winter wheat3 Sugar beet4 Corn for silage

Winter wheatAbout 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.

CornCorn 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.

BarleySpring 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.

SunflowersSunflowers 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.

Odessa

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.

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 long-term 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

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 high-class milling wheat with 14 per cent protein.”

He says grain that meets these specifications does earn a premium: “Not exorbitantly over-market, 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.

Foreign investMentLawrence 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

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.” □

More information: Lawrence richmond, 0418

992 920, lawrencerichmond@bigpond.com

Land resources of UkraineToTAL AreA: 60.37 million hectares

AgriCULTUrAL LAnds: 41.76 million hectares

¢ Ploughed lands: 32.4 million hectares or 54 per cent

¢ Pasture: 9 per cent ¢ Hay: 4 per cent

SOURCE: UKRAINE MINISTRY OF AGRICULTURE

FIGURE 1 Direct foreign investment into Ukraine agriculture.

2011 2012 2013estimated

US$ billion4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0