On September 3, 2013 Ukragroleasing invited experts of agricultural intelligence firms as well as media representatives on a tour in Chernigiv region to visit several agrarian firms that have cooperated with National Leasing Company in the past. Companies included:

• Private Company “Kolos”, specializing in growing grains, as well as animal farming (land bank 500 ha);

• Private Company “Levona-S”, specializing in growing and processing of grains, starch production (land bank 400 ha);

• LLC “Avangard”, specializing in grain crop production, grain processing, animal farming, meat and milk processing (land bank 3 300 ha).

Ukragroleasing is a government agency, working with Ukrainian agricultural producers to provide farming equipment leases on highly advantageous conditions. Company is required to file a list of 17 documents, including business plan and financial reports that would qualify it for obtaining the machinery needed. Annual lease rate is measured at 7%, while company is obliged to make payments either on semi-annual or annual basis. Machinery, provided by Ukragroleasing, is produced by Ukrainian manufacturers only, as National Agency is aiming to support national producers of machinery as well.

We had the opportunity to talk to owners and top-management of the three companies listed above. Three owners found the cooperation with Ukragroleasing extremely beneficial to themselves, mainly due to affordability of tractors and combines acquired through National Agency’s program. While all three mentioned that Ukrainian machinery might not be as reliable as one of popular international brands, it is significantly cheaper and much easier to maintain on their own, which matters the most for small-medium size agricultural business in Ukraine.

The demand for Ukragroleasing program still exists, as the queue for the new equipment might reach 20-40 agricultural companies per annum (based on Chernigiv region office data). However, Ukragroleasing financing was significantly lowered in 2012 to UAH 80 million from UAH 369.3 million in 2011. While we were not given any financial data on Ukragroleasing operations, it has been stated by its representatives that the Agency is working on net loss.

It is also important to note that not only small-medium size companies use services of Ukragroleasing. Large agrarian holdings also have equipment acquired through the program. Approximate number given to our analyst was that over 50% of Ukragroleasing clients at the moment are large agrarian holdings.

UkrAgroConsult comment: Ukragroleasing is another attempt of Ukrainian government to support Ukrainian agrarian sector, initially targeted at smaller entrepreneurs in the sector. At the same time, it is hard to judge the extent to which Ukragroleasing is a success or a failure, since there is no official financial data available that would reflect the agency’s operations. The fact that large holdings are also using the program, while there is demand from smaller farmers tells us that the program does not have a clear mission, which makes it less beneficial for smaller farmers, who need such support in the first place. In general, we view Ukragroleaasing as highly positive and beneficial project, since it focuses on long-term goals rather than short-term gains.

UkrAgroConsult