An exclusive interview with Minister of Agrarian Policy and Food Vitaliy Koval

Text: Dmytro Koshovy, Oksana Ruzhenkova

 

- The warm winter is adjusting future harvest forecasts. There is little snow on the fields, but frosts have finally begun. Has the ministry revised its forecasts for the 2025 harvest?

It is too early to make any conclusions. We see a positive tendency that the cold snap was moderate and not instantaneous. This is important because many crops do not have high frost resistance. The threshold of frost resistance of crops is currently -8-12 C, while previously it was -15-18 C. We observe the normal condition of crops. We hope the winter will be mild and we will not have to reseed winter crops. Usually, when 15-20% of winter crops freeze out, we have to reseed them. Now we do not see such a need. We do not expect a critical situation in the coming weeks.

- Will the structure of sown areas in the Ukrainian agricultural sector change in the 2025 season?

We don't see any major and critical changes that would lead to a dramatic shift in the crop structure.

Ukrainian agribusiness is extremely integrated into the global economy. A typical farmer in Berdychiv depends on quotes on the Chicago Stock Exchange. It is the economy that tells him to grow, for example, soybeans. By the way, I estimate the prospects for soybean cultivation very well. Even if Ukrainian farmers sow and harvest less soybeans in 2025 than in the record-breaking year of 2024, the area under soybeans in Ukraine will increase in the next 5-10 years. One of the reasons for this is the annual demand of the European market of more than 30 million tonnes, while Ukraine currently produces around 6 million tonnes. Europe needs us as a supplier of protein products, including soybeans.

Many farmers have experienced the benefits of diversifying their crop rotation with soybeans and corn. This is the American model, when farmers sow soybeans after corn. In fact, Ukraine still practices a five-crop rotation, but it is difficult given the need to maintain the technology park. Therefore, we see farmers moving towards more versatility in production.

The grain group, in particular wheat, will definitely remain a priority in the Ukrainian agricultural sector. The more livestock farming develops, the more our farmers will grow wheat. It is profitable and indispensable in crop rotations - it is very convenient as a precursor crop.

- What is the export forecast for the 2025 season? The USDA has again reduced its forecasts for Ukraine by 500,000 tonnes for wheat to 15.5 million tonnes and for corn by 1 million tonnes to 22 million tonnes.

The ministry has not yet revised its forecasts. We still estimate it at 41.9 million tonnes of grain crops, including wheat harvest within 16.2 million tonnes, barley - 2.8 million tonnes, corn - 22.1 million tonnes, and other crops - about 800,000 tonnes.

Let's talk a little more about the positive effects of expanding the area under oilseeds. For example, in 2024, we exported 6.7 million tonnes of oilseeds, and processed 4.7 million tonnes of sunflower, 400,000 tonnes of soybeans, and 300,000 tonnes of rapeseed. We are pleased that a large part of these crops is then exported. According to our forecasts, soybeans and rapeseed will show the biggest growth. The fact that we export 2.9 million tonnes of raw rapeseed is a decent indicator. I am confident that rapeseed production will continue to grow because the crop is good and the margins of its processing are excellent. The same goes for soybeans and soybean oil.

I emphasize that it is impossible to develop a strong agricultural sector without livestock. Processing of crop products always faces the emergence of by-products. For example, the alcohol industry is now transforming into bioethanol production. The main product is dehydrated alcohol, bioethanol, and the by-product is post-alcohol bard or DDGS on the international market. This is an ideal basis for the production of animal feed. In the world, bard is sold near the plant - it is light, hygroscopic and cheap - $100 per tonne. Transportation over long distances would be expensive. The whole world feeds it to animals. Ukraine does not have a developed livestock industry, so bioethanol producers are forced to sell bard cheaply, which affects the cost of bioethanol.

The situation is similar with high-grade flour, which is produced with bran left over. When corn is processed into starch or flour, there will also be residues. And so on for each type of processing. It is logical that for a balanced growth of agro-processing, it is necessary to stimulate the development of livestock.

After traveling to the Middle East and North Africa, I have to say that there is a huge market there. Egypt consumes 100,000 live cattle per month. The potential of Jordan, Lebanon, and Syria is 170,000 cattle per month. Consumption is crazy, they lack product. And we can still export only 10,000 animals. Therefore, the priority of the Ministry of Agrarian Policy and Food of Ukraine is the development of livestock. We see great prospects in this direction.

Another priority is to increase deep processing. Ukraine processes only 20% of what it grows, and exports 80% of its raw materials. Bringing domestic processing of agricultural products up to 50% is a logical and mandatory structural change that is necessary for the transformation of the Ukrainian agricultural sector. Our goal is to turn Ukraine from an agrarian country into an agro-industrial country.

- Are you generally satisfied with the minimum export price mechanism? Are you not expecting any adjustments?

I always end the month with analytics. Already in January, we could see an increase in the weighted average price of export goods. It warms my heart to think that the mechanism of minimum export prices has worked. It is wrong when a “white” business export for $300 per tonne, while someone else gets $120 per tonne. This provoked many insinuations. Yes, at first, we had a transition period, and the common digital database did not work. As of mid-February 2025, various companies and associations had several comments on technical parameters. In general, the mechanism started working.

- In addition to the minimum export prices, the market was concerned about the introduction of sugar and poultry quotas, although they were caused by objective external circumstances. How do you assess the results of this forced intervention in the market?

I have to say that we are not interfering, but rather reflecting on the conditions that have been set for us. In particular, there is a quota for sugar export to the European Union until June 5, 2025, at the level of 107,000 tonnes. Therefore, we have to divide it among all market players with a teaspoon to avoid the question “Why Vasyl gets more than Mykola.” I am pleased that the industry has taken the situation with sugar export well. When distributing the quota, the ministry clearly emphasized the coefficient of sugar production and the company's need for exports. In fact, producers and exporters agreed on this principle of quota distribution at the association level.

Understanding and approval of the government's actions by the public is important, because there are about 200 agricultural associations in Ukraine. They are already subjects of economic policy and are the voice of the industry. The more professional and powerful an association is, the easier it is for the state.

- Another painful issue for the whole country is the completion of the reservation of employees on February 28 and the introduction of a criterion for a monthly salary of UAH 20,000 or more. How does this affect the agricultural sector?

Farmers specializing in crop production often emphasize this problem and say that it is difficult for them to pay their employees UAH 20,000 per month because their business is seasonal. However, the government's task is to make systemic decisions to solve systemic problems. If you change one criterion, the market starts trying to get under it like a needle. If you make an exception for a berry producer, gardeners, for example, will want an exception. Therefore, this criterion is currently the same for everyone.

It is difficult to come up with an ideal solution, but the one that has already been proposed is positive. The Ministry of Finance is openly talking about an increase in personal income tax and unified social tax revenues. This is positive for a country at war.

- After June 5, the Ukrainian agricultural sector may be forced to change its export geography if the European Union does not extend the liberalized trade regime with Ukraine. Which agricultural products may be affected by European restrictions? Will it be limited to the list of “sensitive products” or will it be expanded?

We would also like more clarity in the forecasts. So far, we see an ambiguous vision of our future trade relations within the framework of Autonomous Trade Measures (ATMs) from the European Commission and the European Union. This encourages us to move and look for other markets.

The less our products are exposed to European countries, the easier it will be to negotiate. For example, 36% of our agricultural exports in 2021 were supplied to the EU. Then a large-scale war broke out and problems with the sea corridor arose. At some point, up to 73% of Ukrainian agricultural products began to enter the European market, simply because there was nowhere else to go. We have to thank our neighbors who accepted Ukrainian products. It was a real breath of fresh air.

In 2024, we reduced agricultural export to the EU to 52%. We are reducing the EU's share in our export geography and looking for an alternative. At the same time, we remember that the EU market is premium in terms of prices, convenient in terms of logistics and vital for our producers to keep them in good shape in terms of product quality.

So we see two main scenarios. The first basic scenario, which the ministry articulates in the negotiations, is that the war is not over, so we ask to extend the ATM regime, but with an increase in the list of sensitive products, which is now seven.

The second scenario being discussed on the sidelines is trade liberalization under Article 29, i.e. based on long-term planning to expand the number of products that can be imported into the EU. Yes, we are talking about quotas, but revised and significantly increased. For example, before the war, Ukraine could supply 20,000 tonnes of sugar to the EU. However, this is very little for Ukraine - just a few working days of our factories. We are now preparing for the final stage of negotiations.

At the same time, we cannot just wait, we have to look for new markets. We are moving to countries that need Ukrainian food. We are making progress on this path. I am pleased that in some regions we have export growth of more than 30% per year. For example, exports to Africa have already reached $2.6 billion. We are increasing supplies to the Middle East and Southeast Asia, and actively developing cooperation with Malaysia, Indonesia, and Bangladesh.

The task of the Ministry of Agrarian Policy and Food of Ukraine is to remove bureaucratic restrictions on trade with potential export countries as much as possible. Ukraine has long had no planned state orders - we have a market economy that is integrated into the global trade coordinate system, we have a proactive business that exports itself. However, businesses need the government's umbrella to support them, remove bureaucratic restrictions, and establish partnerships with countries with riskier trading conditions. By the way, Middle Eastern countries perceive the state as their main trading partner, not specific businesses. And it is logical that the state acts as a guarantor of reliability in establishing partnerships.

- Recently, the United States has made it a rainy day for steelmakers by announcing a 25% tariff. Before that, there was a black day for Canadian and Mexican exporters to the US. Are there any American risks for Ukrainian agricultural exporters?

In general, signals about the closure of any market are not very good for those countries that are open in nature. Ukraine is very open in terms of trade. And to a certain extent, it is good for us that the US is not a key trade partner for Ukraine. Our trade turnover is not high. We will not experience any harassment or cuts. Although the reduction in funding for some programs, such as USAID and others, will certainly affect our work.

- Ukraine has a free trade agreement with Turkey and Canada. During your visit to Egypt, it was mentioned for the first time that Ukraine would like to conclude such an agreement with that country. Why with Egypt?

A free trade agreement with Egypt is interesting and useful. First of all, Egypt has a signed FTA with the European Union. For example, Polish apples enter Egypt duty-free, while Ukrainian apples are subject to a 40% duty. In fact, having a better price position at the start, we are losing out due to logistics and existing duties. At the same time, for example, there are no customs restrictions on Ukrainian wheat, barley, and corn, which Egypt needs. It is logical that, as a strategic partner in wheat, we asked to expand the list of products that we can supply to Egypt without restrictions.

For Ukraine, Egypt is also a gateway for Ukrainian products to the African continent, which will help us expand our presence inland.

I am convinced that we will soon witness many positive processes in mutual trade not only with Egypt. The government has already worked on removing bureaucratic tariff restrictions in the Asian and Middle Eastern markets. I am sure our presence there will increase.

Now there is a need to improve logistics and restore container lines from Odesa ports. It is imperative to bring back absolutely all container carriers and make their trips regular. We need a ship carrying 300, 500, 1,200 containers to leave Odesa regularly and several times a week. We want our foreign partners to see that the magic of small numbers in the transportation of peas, lentils, oil, and sunflower works. This will allow us to increase trade with countries that do not consume large volumes of a particular product. I was surprised that Italy opened another container line to Egypt. So, it is profitable and promising.

- While in Egypt, you familiarized yourself with the possibility of creating a Ukrainian production hub. Do you have businesses behind you that are ready to enter Egypt? This is not the first attempt by Ukraine to create a foreign hub in that region. In 2001, there was talk of a hub in Libya, but the idea remained an idea.

The hub can be built when there is a desire of both parties, including the one where it will be built. And when we have the capacity to do so. Today, Ukraine has these opportunities as never before.

The world, which has experienced the consequences of the Covid pandemic and various wars, also understands the need to form food reserves in the regions that can be used here and now, rather than waiting for delivery in three months with various bureaucratic procurement procedures.

There are now both humanitarian and commercial food hubs. The Ukrainian government is looking more at commercial hubs, because humanitarian hubs are the responsibility of the entire civilized world to countries in need. A food business hub should and can operate regardless of humanitarian situations.

As a minister, I would like Ukrainians to increase processing and export value-added products themselves. However, our vis-a-vis clearly indicate this. Every head of state would like to have processing, for example, of grain into flour in the port area. And we have to take into account that different countries have different quality standards, in particular, in African countries, flour must be vitaminized.

I was pleasantly surprised when the Association of Agricultural Machinery expressed a desire to enter the international arena and open its enterprises outside Ukraine. We are talking about the production of irrigation equipment, tractor and combine trailers, grain carriers, tillage equipment - these products are much more technologically advanced than their foreign counterparts are.

Domestic producers of pet food for dogs and cats are likely to enter the international arena. Last year, this market overtook the market for farm animals in terms of money supply. The pet food market is more localized, while the pet food market is more mobile, and it is growing extremely dynamically - up to 10% per year. In Europe, about 160 million families have pets.

Processors, including flour millers and pasta makers, are ready to expand to new horizons.

Many of our grain producers have tried to work in foreign markets. We are grateful to them for creating a positive image of Ukraine. All potential partners who have worked with our producers appreciate their responsibility.

- At one of the winter events, you mentioned that the Ukrainian agricultural sector lacks funding, which is very low compared to developed countries. How much money did USAID allocate for the Ukrainian agriculture? Will we be able to compensate for these lost volumes?

I would not like to talk about any particular donor organization, but in general about material and technical assistance (MTA) to the agricultural sector. Quite often, the conditions of aid projects cause a harsh position, because they look like “we give you a cup and saucer for the development of the agricultural sector, but we will take away the cup of water, and this is for you to work with”, because 50% is provided for administrative costs, consulting services from third parties, and events. In international reports, a large part of them is analytical studies and recommendations. As the Ministry of Agrarian Policy, we really need them, we ask for them, but in fact, they are not available. Therefore, it is difficult to talk about the global impact and growth stimulus of the agricultural sector due to MTA.

At government meetings, I constantly emphasize that we need to transform our relations with the MFA. We are grateful, but if the goal is to really help, we want to suggest how to do it much more efficiently. Even if they select subcontractors or contractors, the action plan and structural division should be agreed upon.

Ukrainian farmers now need more applied assistance. There were some very good programs during the war, for example, storing grain in sleeves in times of crisis is a perfect solution. Mobile dryers worked. And other programs, such as export support. However, the latter needs to be more specific.

In terms of funding, the most effective program is Affordable Loans 5-7-9%, which has brought several obvious benefits to the industry, including side benefits. First of all, direct financing has become cheaper. The agricultural sector realized that cheap resources exist, can be used, and help.

Secondly, many entrepreneurs have left the “gray segment” of the economy. In order to meet the criteria of the 5-7-9% program, they had to officially register their employees and pay them higher salaries.

- You have recently had meetings with the leadership of the UN World Food Program offices, where you asked to expand purchases of processed products from Ukraine for further export to countries in need, and with the FAO, where you asked for help for small farmers and vegetable storage facilities. What are the results?

No meeting with international organizations is complete without a targeted request. We are still in the process of negotiations, and the providers of the material and technical assistance are still weighing their options, we are waiting for them to provide us with specifics, although we already see that there is a result. For example, the FAO has already assured us that it would be able to help with the situation with vegetable storage facilities. After all, a crop loss of 35% of vegetables that do not reach the citizens' tables is too much.

The UN World Food Program also heard the request to expand purchases and is already buying oil and sugar from Ukraine. The European Investment Bank, the EBRD, and the World Bank are the institutions that agreed with the proposed priorities, in particular, to increase processing in Ukraine and open new markets. This is a multifaceted work, where the state announces priorities, and international financial organizations, which are rather inertial, adjust and shape their programs.

We try to adjust even the established programs a little bit. As a minister, I always have doubts: why, for example, do we support only farmers working on areas of up to 120 hectares, why do we help a small livestock farmer who raises three, not 103 cows? International discussions are underway to justify the historical model of agricultural development. After the collapse of the Soviet Union, the average land bank per enterprise in Ukraine was 3,000 hectares, and now it is 500 hectares. For some reason, it seems too large to our partners. However, in our realities, everything is organic: a small farmer can be friends with a medium-sized farmer and sell products to an agricultural holding. He is not worried about the fact that someone has bought his products, because he interacts and has support. This is normal.

- It is known that foreign partners have insisted on revising the 5-7-9% program to support micro, small, and medium-sized producers and investment projects. What is your position? Whom will you defend to the last and whom are you willing to sacrifice?

We would like to defend everyone. The ministry works for both large and small farmers.

The positive thing is that there is still an emphasis on investment loans and processing within the amount of UAH 150 million per livestock and agro-processing entity. It is important that the loans have been extended until March 31, 2026. The working capital limit of UAH 5 million is a bit too low, in our opinion, but it is quite passable and normal. Businesses understand that they need a small loan to maintain turnover and a larger one to invest. The more business attracts these loans, the better. Farmers are also entitled to receive up to UAH 90 million for working capital.

If we imagine that the purchase of material and technical resources for the sowing season requires up to UAH 24 billion, financial institutions have provided them, and farmers have earned $10 billion from export of agricultural products, we need to understand that the money earned is a resource for modernization, investment in production, and GDP.

If we look at the situation from the perspective of an economist, the income of a Ukrainian farmer is about $1,000 per hectare, while the figure for Lithuania is $4,000 per hectare, and for Estonia - $2,200 per hectare. This means that today the Ukrainian state's revenue from agricultural export is not large and has the potential to grow. This is just the way we are going because of the war in the country, lack of financial resources, etc. We will definitely reach the high level of $4,000 per hectare when there is peace, access to financial resources and agro-processing.

Ukrainian land is unique in that the more you invest in it, the more you get out of it, and you have the opportunity to repay both loans and foreign exchange earnings. Our farmers are very conservative in their cost structure, very good. They don't save money, they invest in improving their production right away.

- The question of agricultural insurance and agro-exchange logically arises. As long as we have been working, we have been hearing that if we set up an exchange, the market will be more transparent and farmers will be able to sell at a higher price. But this has not been done. There are also mostly talks about agricultural insurance.

There should be agricultural insurance. Whatever they say, the risks should be divided between insurers and reinsurers. By the way, Spain is No. 1 in agricultural insurance. We have agreed with the Spanish Minister of Agriculture that in the spring of 2025 we will exchange experience in agricultural insurance not only for agricultural crops, but also for elevators and other things.

Regarding agricultural exchanges. Their presence or absence is not a key anchor that hinders the development of the agricultural business. The absence of an exchange in Ukraine is compensated by the access to foreign markets for any farmer. He can go to any exchange and look at the quotes. In the most remote corner of Ukraine, farmers closely monitor prices on the Chicago Mercantile Exchange for agricultural products.

The cooperative movement could have helped Ukraine more quickly, but collective and state farms have undermined public faith in cooperatives, which are now perceived as another attempt to cheat someone. In fact, a cooperative helps to share the costs of fixed assets and to earn money from the consolidation of grown resources.

- The government has recently approved a draft state program for the development of livestock. What programs are you still working on and helping to create?

Recently, President of Ukraine Volodymyr Zelenskyy has emphasized during a meeting with businesses in Rivne region that support programs for farmers should last 3-7 years. State programs to support the agricultural sector should be predictable and long-term, working for the future, not just for a short time. This is about stability for Ukrainian farmers, especially in livestock and long-term investment projects. We have already started developing relevant programs.

We need to develop programs for all subsectors of the agricultural sector as much as possible. To do this, we encourage business communities to create their own projects.

Unfortunately, society underestimates the importance of sectoral programs. But they show the main vectors and priorities of development. All international institutions teach that before meeting with government officials, they read state programs, study the priorities set, and then help build strategic sustainability. In addition, it is the sectoral state programs that ensure the transfer of knowledge in the event of any political changes.

As a minister, I have to pass on the inertia of development. It will be easier for my successor to strengthen the projects that have been developed. Even if they are transformed to meet the requirements of the times, the constructive inertia of the state machine will not depend on the individual. The time of one hero is wrong. There must be teamwork for the next generations.

In addition to the draft state livestock program, development areas in fisheries, land reclamation, vegetable growing, and seed production are being actively worked out. To some extent, they are aimed at solving the problems of import substitution. In 2024, Ukraine spent $440 million on vegetable import, $380 million on seeds, and about $1 billion on fish. This is too much. The presence of import indicates an established consumption market. If it is dependent on import, it needs to be replaced with quality products.

To elaborate on the draft state program for the development of livestock, it provides for investments in the construction of farms at the level of UAH 9 billion, and these construction projects have already begun.

- You also emphasized the need to develop regional programs. Have you seen any systematized regional sectoral programs?

Let me tell you about the result of the fourth year of the heifer compensation program in Rivne region (Koval was the head of Rivne Regional State Administration - IF-U). When it was suspended at the state level, farmers turned to Rivne Regional State Administration and asked to extend it, which was done. As a result, the growth rate of industrial livestock farming in the region is above the national average.

Another example of the positive impact of the regional livestock program in Rivne region is when a Sumy company, although not relocating to Rivne region, scaled up in its territory.

Regional authorities should always understand who the main beneficiaries of local support are. First of all, it is local authorities that receive taxes and stimulate job creation. After all, the local community will receive 60% of personal income tax, and the region will receive 15%. I am surprised when community leaders do not see the obvious benefits of creating minimum support programs.

The second level is regional support from the regional budget. A 100% support program should be in place.

The highest level of support is state support, which is the embodiment of state policy. The government is well aware that the regions receive financial benefits from the creation of enterprises, so they have to return something to the business to make it develop faster - this is the principle of the circular economy.

Regions should have a clear positioning in sectoral development. A positive example is Zakarpattia region, which supports horticulture, viticulture, localized business, and goods with a geographical name. If the region does not have a clear positioning, particularly in the agricultural sector and its support areas, neither domestic business nor foreign investors will come to it.

In 2025, the ministry will try to implement an experiment as part of the state livestock program and help livestock farmers, if local authorities also co-finance them. In this way, the regions will prove that they support the state policy and the importance of developing this type of business in the region.

- A small clarification on cotton. This is a strategic raw material for gunpowder production. Ukraine began to re-introduce this crop last year. What are the first results?

Cotton has all the chances and prerequisites for development in Ukraine. The issue is not only growing but also developing its processing. The ministry is ready to support farmers who grow Ukrainian cotton.

- How has the legalization of medical cannabis affected the development of the commodity market?

In fact, not enough time has passed to draw conclusions. After the adoption of any law, there is an adaptation period, implementation, and a regulatory framework needs to be developed for the law. The issue is moving forward. I can say with certainty that it should be a high-margin niche crop.

Niche crops, as we saw during the war, are what develop regions and shape the sustainability of their economies. Now we see a significant increase in demand for lentils, chickpeas, and peas. They are important and encourage farmers to develop, learn and gain experience. It is important that the experience of losses in the first or second years of operation be transformed into a premium price in the following years.