In preparing the material, we used: the law on the land market, statements by the Minister of Agrarian Policy Mykola Solsky and his deputy Denis Bashlyk, information from the press service of the Ministry of Agrarian Policy, a petition on the president’s website and the response of Vladimir Zelensky.
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Land reform. Three stages and what will change from January 1
The moratorium on land sales was lifted before the full-scale invasion. The land market began operating on July 1, 2021, and at the first stage, owners of agricultural land were allowed to sell and private investors were allowed to buy plots.
Moreover, even before yesterday, the following rules were in effect: only individuals could buy land with a limit of up to 100 hectares.
From January 1, 2024, the limits and the range of buyers will be increased. That is, at the second stage:
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maximum plot size for purchase – up to 10,000 hectares
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Both individuals and legal entities will be able to buy land
Please note that legal entities must be created and registered under the laws of Ukraine. And their participants are exclusively citizens of Ukraine, the state or territorial communities. Electronic auctions are an integral part of the reform. This is the main protection against possible manual manipulation or intervention.
It is noteworthy that the limit of 10,000 hectares is still less than the land banks of large agricultural holdings.
The Ministry of Agrarian Policy and Food of Ukraine expects that after the market opens for legal entities, land prices will increase.
“Those who have been waiting for a long time will enter the market – legal entities who want to own land in order to be able to develop long-term investment projects. This, of course, will entail an increase in prices,” said Deputy Minister for Digital Development Denis Bashlyk.
According to him, the highest prices are recorded in the Ivano-Frankivsk, Lviv and Ternopil regions – up to 2000, 1450 and 1400 dollars per hectare, respectively.
The third stage of land reform involves opening the market to foreign citizens and companies. But an appropriate decision still needs to be made be approved in an all-Ukrainian referendum. It is not yet known when the third stage will start, since it is impossible to hold a referendum under martial law.
How they wanted to postpone the second stage. Bills and instructions from Zelensky
Not all Ukrainian farmers support the launch of the second stage from January 1, 2024. The main argument is the low purchasing power of small farmers against the backdrop of a full-scale war. Obviously, the cost of a hectare will definitely increase, and it will be difficult for them to compete with powerful agricultural holdings.
There is a fear that holdings cultivating hundreds of thousands of hectares will buy land from individual farmers who cultivate several dozen hectares. In simple words, such farming will cease to exist.
According to the deputy head of the All-Ukrainian Agrarian Council (VAR) Denis Marchuk, a dialogue has been ongoing with the relevant committee in the Verkhovna Rada and the Ministry of Agrarian Policy since the summer, but to no avail. Back in May, a bill was introduced to postpone the second phase until two years after the end of martial law.
“As a result of the war, farmers suffered significant losses, so they will not be able to compete with large agribusiness when purchasing land,” the VAR believes.
However, the chances of a postponement were minimal as the 2023 bill never made it out of committee. And on December 21, a bill was registered in the Rada with a proposal to postpone the second stage for a year – until January 1, 2025.
At the same time, a petition on the president’s website to postpone the second stage until the end of the war with Russia received the required number of signatures. The authors note that Ukrainian farmers are going through the most difficult times, enterprises are operating at a loss for the second year, and are suffering financial losses due to blocked ports, problems with logistics and low prices.
In their opinion, increasing the limits from 100 to 10,000 hectares “in one hand” leads to the destruction of small and medium-sized businesses. Since these categories do not have the funds to purchase land and cannot attract loans for these purposes. The authors of the petition called for maintaining the limit until the end of the war and for two years after. President Vladimir Zelensky handed it over to the Cabinet of Ministers for consideration.
“I addressed the Prime Minister of Ukraine Denis Shmygal with a proposal to comprehensively study the issues raised in the electronic petition, taking into account, among other things, possible risks to food security, and take the necessary measures,” he noted.
According to the Minister of Agrarian Policy and Food Nikolai Solsky, land reform should be strengthened and not postponed.
“Any emotions, statements about postponing the reform or certain stages of it are irrelevant and should not influence the reform,” he noted.
According to him, the land market, for example, has increased opportunities for the development of horticulture and in a year and a half more gardens were planted than in five years before. In addition, the implementation of the reform is a positive signal for foreign investment.
The market was launched by analyzing the experience of neighboring countries. And two years of his work showed that there was no mass sale of land.
“Statistics showed that 0.3% of Ukrainian land is sold per year, despite the war. The proportion practically did not change when we restored the registers last year,” Solsky added.
USAID Mission Director in Ukraine James Hope emphasized that reform will be a key driver of Ukraine’s economic recovery. And the second stage will expand access to financing for small agricultural enterprises. This is especially important for farmers in de-occupied territories, as funding is needed to help them get back on their feet.
How the land market works during the war in Ukraine
If the nominal number of transactions is not growing very actively, then in monetary terms everything is different.
“During the current year, Ukraine has registered 23,460 transactions, with a total area of 65 thousand hectares. This is approximately 100 million dollars. Last year it was 23 thousand transactions – 69 thousand hectares for approximately 70 million dollars. The market has grown somewhat, as we see, volumes and prices have reached “pre-war” levels,” said Minister Solsky.
Despite the war and the economic downturn last year, there is demand for land, and the agricultural market is “live.” According to Roman Neiter, an expert on agricultural and land policy at the Kyiv School of Economics (KSE), in the third quarter of 2024, land prices were on average 10.4% higher than in the first.
According to his calculations, the average price is about 39 thousand hryvnia per hectare, but the situation differs greatly by region. Before the full-scale invasion there were 32.2 thousand hryvnia. The price increase is more than 20%, but it does not cover last year’s inflation, which reached 26.6%. In foreign currency terms, the average price fell from $1,190 to $1,070.
Nikolai Solsky believes that in 2024 the price will increase by 10-15%, and this trend will continue. Let us note that, regionally, the cheapest land is in the Kherson, Zaporozhye and Donetsk regions. In Kherson, prices are below 30,000 hryvnia, in Donetsk – about 32,000 hryvnia. The most expensive land in western Ukraine, the absolute record was set in the Ivano-Frankivsk region – more than 45,000 hryvnia.
According to the minister, access of legal entities to the land market is unlikely to significantly affect it.
“This question is not about money at all. Because the main factors are supply in a particular region and competition between the farmers themselves,” he emphasized.
The fact is that the law is formulated in such a way that legal entities-tenants have the right to priority purchase of land. Today in Ukraine, 99% of tenants are legal entities. From January 1, 2024, they will be able to fully purchase land, and before that they could assign the right of purchase to someone else.
Expert Roman Neuter also does not expect big changes. Since the 10,000 hectares level will be unattainable even for large companies. It is still difficult to buy so much land in one lot; most likely, you will still need to buy individual plots.
“I doubt that in the next three years there will be at least one or two companies that will be able to buy that much. Large companies will be able to buy more over time, but now the conditions are unfavorable for agribusiness. We analyzed the activities of agricultural holdings and came to the conclusion that they are not will be able to buy the entire land bank that they now control. Even if all landowners were ready to sell them land. Compared to other countries, our land is relatively cheap, but for a farmer now it is still a very expensive resource,” he added .
2024-01-01 04:00:00
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