Case study: Production costs in Ukraine vs. Brazil for corn and soybean

Higher-quality soil allows Ukrainian producers to implement a low-cost business model using lower amounts of fertilizers and crop protection, which results in an average cost per ha for corn production of more than 2x less in Ukraine than in Brazil. For soybeans, the cost per ha ratio is also lower for Ukraine, though if adjusted for the yield difference, Ukraine’s average production costs of soybean are larger than those in Brazil, though not by much.

Corn production costs, USD/ha, lhs, and USD/t, rhs		Soybean production costs, USD/ha, lhs, and USD/t, rhs
Note: 2010/11 costs taken for reference. In calculating cost per t, five year average yields were taken as a reference. Source: State Statistics Committee of Ukraine, SLC Agricola		Note: 2010/11 costs taken for reference. In calculating cost per t, five year average yields were taken as a reference. Source: State Statistics Committee of Ukraine, SLC Agricola

If public companies’ data is taken into account, we note that Brazilian SLC Agricola spends slightly more per ha than the country’s average in order to achieve superior yields. Astarta’s approach resembles that of SLC Agricola: higher yields at slightly more than average costs. There are a bunch of players though, like Sintal Agriculture and KSG Agro, which earn average yields at lower costs. Still, Ukrainian companies’ costs per ha are ~2x less than those of SLC Agricola, one of the most efficient LatAm producers.

Corn production costs, USD/ha, lhs, and USD/t, rhs		Soybean production costs, USD/ha, lhs, and USD/t, rhs
Note: 2010/11 costs taken for reference. In calculating cost per t, five year average yields were taken for SLC Agricola, two-three years average for Ukrainian companies. Source: State Statistics Committee of Ukraine, SLC Agricola		Note: 2010/11 costs taken for reference. In calculating cost per t, five year average yields were taken for SLC Agricola, two-three years average for Ukrainian companies. Source: State Statistics Committee of Ukraine, SLC Agricola

Farming Efficiency Ukrainian crop yields lag the eu and us, on par with Argentina and Brazil, above Russia’s

For all crops except sunflower, Ukraine`s yields are far below of those posted in the EU and US, because of three key reasons:

• Low application of fertilizers

• Poor state of agricultural machinery, 70%-80% of which is fully depreciated and yield-harming

• Poor land management practices

But compared to Argentina and Brazil, Ukraine’s yields are generally on par, with soybean, LatAm’s kep crop, being the only crop where Ukraine significantly underperforms. Russian farmers lag on yields for all key crops.