Agriculture

In 2009, sunflower oil output increased by 49.4% YoY or 898.6 thsd tonnes to reach 2.71 mln tonnes. In 2008, sunflower oil output stood at 1.82 mln tonnes.

On January 18, 2010, Kernel Holding S.A. [KER PW, BUY] provided minority shareholders a binding offer to acquire a 37.6% minority shareholder stake in Allseeds. Kernel is offering a sum of USD 28 mln for the stake, which is subject to adjustment depending on Allseeds’ financial results for 1Q2010. The offer is valid until January 31, 2010.

Kernel Holding S.A. [KER PW, U/R] has informed that, on January 13, 2010, it entered into an option agreement to acquire a controlling interest in the Allseeds Group, another major Ukrainian producer and exporter of crude and bottled sunflower oil. The Allseeds Group operates two crushing plants with annual capacities to crush 600 thsd tonnes of sunflower seed, grain silos with equal holding capacities, as well as a transhipment and export terminal for vegetable oil. Kernel intends on paying USD 42 mln for the controlling interest. At the moment the due diligence of Allseeds is in process, and Kernel is also waiting for the Antimonopoly Committee of Ukraine to approve the transaction.

In 2009, Ukraine’s sugar importers failed to import the total amount of the 260 thsd tonne quota of preferential raw cane sugar imports permitted under the WTO agreement. The volume imported was only 64 thsd tonnes. The importers were the Ukrros Sugar Union [UROS UZ], which imported 16 thsd tonnes, and the Ukrainian Sugar Company, which imported 48 thsd tonnes.

During the 2009/2010 sugar campaign, Astarta [AST PW, BUY] produced more than 225 thsd tonnes of high quality sugar. Thus, the Company ranked as the number one sugar producer in Ukraine in the 2009/2010 season, increasing its share of national sugar production from 15% in 2008/2009 to 16.4% in 2009/2010. Among other positive trends was the fact that more than 90% of the sugar beet processed was grown in-house, securing the Company’s inputs.

The Cabinet of Ministers intends to initiate a specialized agricultural bank in the first quarter of 2010. According to Prime Minister Yulia Tymoshenko, the creation of this structure would help build a sound public policy with repect to lending within the agroindustrial complex, and also provide credit support according to the actual technological needs of Ukraine’s agricultural industry. The Prime Minister considers that loans should be offered for a period of 5-7 years at an annual interest rate of 4-5%.

In the 2010/2011 production season, the Ukrros Sugar Union [UROS UZ, 36U1 GR], one of the largest sugar producers in Ukraine, intends to increase its production of sugar beet by 25% YoY, or by 114 thsd tonnes, to 569 thsd tonnes. This autumn, the Company gathered 455 thsd tonnes which is 70 thsd tonnes less than achieved in 2008.

The Kernel Group [KER PW], a major producer of vegetable oil in Ukraine, has completed the reconstruction of its capacities at the Poltava Oil Extraction Plant, increasing its production capacity for sunflower seeds’ crushing by 73.3%, or 550 tonnes to 1,300 tonnes per day. The modernization has enabled the Company to refine new raw material in an amount up to 600 tonnes of soybeans per day.

In the 2009/2010 production season, the Ukrros Sugar Union [UROS UZ, 36U1 GR], one of the largest sugar producers in Ukraine, reduced its production of beet sugar by 35% YoY, or 70 thsd tonnes to 130 thsd tonnes. The Company had previously planned to produce 144 thsd tonnes of sugar in the current season, and to process 1 mln tonnes of sugar beet. However, in the current season, the Holding’s sugar factories processed just 961 thsd tonnes of sugar beet and produced 130.4 thsd tonnes of refined sugar. Furthermore, its plants produced 34 thsd tonnes of molasses and 10.5 thsd tonnes of granulated pulp.

The Ukrainian Parliament has prolonged the moratorium on the sale of agricultural land until January 1, 2012. 344 deputies voted in favor of the law’s adoption, while the minimum required number to pass the law is 226. Among the reasons for the law’s adoption is the lack of a proper legislative base, which would define land relations. In particular, no law has been adopted on the land market, the land cadastre (registry), and there is no reliable information about the quality of land or monetary valuation of agricultural lands. Parliament believes that the absence of an appropriate legislative framework for the introduction of the land market will lead to market abuse and exacerbate acute social conflict.