The owner and chairman of the Supervisory Board of «PROMETEY» Group, Goroian Rafael, talks about the risks and prospects of the Ukrainian agricultural sector, the adaptation of exporters to war conditions, and the support that the industry needs from the state.
The «PROMETEY» group of companies has been working in the grain market of Ukraine for more than 20 years and is developing intensively. 2022 was a big test for export-oriented agribusiness, but the company is overcoming challenges.
How did the full-scale Russian invasion affect agricultural exports and your company?
The war almost destroyed exports. But we adapted and used road and rail while the ports were closed. Thanks to these channels, we reached an export volume of almost 50,000 tons per month. And after the opening of the grain corridor, exports through the Bosphorus were resumed, the monthly export volume increased to 80,000–100,000 tons, and we plan to reach 150,000 tons.
Before the war, we had an annual turnover of 1.5 million tons, and this year we set a goal of exporting 2 million tons. We will not reach these indicators, but we consider it possible to export 1 million tons.
Has your business suffered losses due to the war?
We have eight elevators under occupation. As of January, four of them remain in the occupied part of the Zaporizhzhia region. And those four, freed from the enemy, were significantly damaged by shelling and looting and need significant repairs. One of them will have to be rebuilt from scratch.
Do agricultural exporters feel supported by the state in such a difficult situation?
The agricultural sector has remained one of the few industries that work, and we feel a lot of attention from the state, but in different directions. On the one hand, modern patriotic representatives of the authorities are working on providing subsidies, cheap loans, etc.
On the other hand, there is the interest of corrupt people, because of which VAT reimbursement in Ukraine is very difficult. In particular, «PROMETEY» accumulated hundreds of millions of unreimbursed VAT. We are fighting and talking publicly about this fact. Because if this practice continues, the export potential of the agricultural sector will be destroyed.
Meaning the forecasts for the harvest and agricultural exports in the current conditions are disappointing?
In this agricultural season, the country harvested about 60 million tons, compared to 120 million tons last season. In the next year, we will probably collect 40 million tons, and exports will drop to 20 million tons.
This is a consequence of the fact that it is not profitable for agricultural producers to sow because traders have stopped working. The latter suffers from the inclusion of a corruption discount in the price and long-term downtime (up to a month or more) of ships in the Bosphorus since each day of downtime costs $15,000. Then the infrastructure business, which has been built for 30 years (elevators, ports, logistics facilities), will suffer huge losses and these assets will fall in value.
Let me remind you that the export-oriented agricultural sector in Ukraine was not built in one day. In the 1990s, after the collapse of the USSR, the potential of Ukrainian farm production amounted to 15–20 million tons of grain, and there was almost no export.
Through investments in new technologies, seeds, agricultural machinery, the construction of elevators, and logistics facilities, we reached 120 million tons, and the country was ready for 140-160 million tons. It is critical not to waste these 30 years of progress.
What can the state do to prevent the development of a negative scenario?
State participation is too critical. One of the areas of support should be the establishment of a quick VAT refund. In addition, the state should provide subsidies and affordable loans to farmers. Financial assistance should become available to small, medium, and large agricultural producers.
It is also necessary to remove bureaucratic obstacles as much as possible. It’s important to understand that not only the military potential is essential for the future of Ukraine, but also the agricultural sector, which has become a world brand over 30 years. If we leave the market, other countries will grab our share. It will be more difficult and more expensive to conquer the world market again than to maintain a position now.
We will experience the most significant problems in February-March 2024, when mass bankruptcy of agro traders may begin in Ukraine
What can be a positive development scenario if the state supports the agricultural sector?
For this, we need to return to the market transnational companies that exported grain from our country but were forced to leave due to corruption in VAT reimbursement. Small and medium farmers need support. If our partners see the sown fields and the participation of the state, we will not lose the international market.
But one gets the impression the government does not prioritize the support of businesses. In the country, up to 10,000 companies per month are closing, and the outflow of 10 million people is acutely felt. Due to personnel problems, in order to find and retain specialists, we already offer European salaries. Therefore, it is worth reminding that business is a necessary rear. Without a viable economy and security, the country will not be able to fight effectively.
How should this agricultural season be for your company?
This year will be a period of opportunity for us. If the state does not support small farmers, «PROMETEY» will be forced to expand the land bank. That is, to preserve the export potential, we will increase production.
War is an unfavorable period for investment. However, how can we assess the prospects for investment in the Ukrainian agricultural sector?
At the height of the coronavirus pandemic, large sums of money were poured into the world economy. As a result, in some US companies, the multiplier increased to 100, while in Ukrainian companies — no more than 3. That is, in our country with a low multiplier, there is a chance to make a high profit after victory.
For those who believe in Ukraineʼs victory, investments in Ukrainian businesses should be very attractive right now. Because $30–50 billion a year and even more will go into Ukraine for post-war reconstruction, thanks to this, after victory, Ukraine can become a leader in terms of profitability.