5Y average yields, t/ha and their respective 10y cagRs

Corn		Wheat		Barley
Source: USDA		Source: USDA		Note: Barley planting in Argentina and Brazil is negligible. Source: USDA

Sunflower		Soybean		Rapeseed
Source: USDA		Source: USDA		Note: Rapeseed is not planted in Brazil and its planting in Argentina is negligible. Source: USDA

Yields at a premium in Ukraine on the company level

Unlike on the country comparison, on a listed company-level, Ukrainian farmers broadly outperform their Brazilian, Russian and Argentinian peers on all crops except soybean.

Corn, yield, t/ha, 2010-11 avg		Wheat, yield, t/ha, 2010-11 avg
Source: Concorde Capital estimates		Source: Concorde Capital estimates

Soybean, yield, t/ha, 2010-11 avg		Sunflower, yield, t/ha, 2010-11 avg
Source: Concorde Capital estimates		Source: Concorde Capital estimates

Growth Growth should come from yield improvement, crop structure reshuffle and acreage increase

We see three key long-term drivers of farming in Ukraine, ranked by importance:

• An increase in yields could be substantial, up to 2x in grains and 1.5x in oilseeds, if top performers like MHP and Astarta are taken into account. This could be achieved by the usage of modern machinery and an increase in fertilizer treatment, which both are a function of financing availability, a major problem for the average Ukrainian farmer.

• A crop structure reshuffle toward more profitable cultures. Ukraine’s historical crop mix is slanted toward low-yield grains like barley and wheat, which if gradually replaced with corn, soybean, rapeseed and sunflower could increase both revenues and profits per ha. Though crop rotation requirements are often cited by farmers as a reason why there is so much wheat and barley sown, industry standards are changing globally and in a decade we could see a much larger share of profitable oilseeds and corn in Ukraine.

• An acreage increase in Ukraine, driven by pasture conversion and the integration of non-farmed land, could increase arable land by 1/4 in the long-term. Market players estimate that non-farmed land requires about USD 300-500/ha in CapEx for most of areas (vs. USD 1,200-1,700/ha in Brazil’s Cerrado region), and USD 1,500/ha for those requiring irrigation.