NIBULON, Ukraine -- Not many people know as much about Ukraine’s agricultural industry than Oleksiy Vadatursky. Even as soaring temperatures threaten this year’s grain harvest, Ukrainian agriculture continues to offer the country’s best hope for robust future growth and badly needed foreign investment.
And few Ukrainian agriculture industry professionals know the sector as well as Oleksiy Vadatursky, a former Soviet collective farm worker who is now the owner and CEO of Ukraine’s biggest agriculture exporter, Nibulon Ltd.
Vadatursky, 62, has spent nearly his entire life extracting food from Ukraine’s famous chornozem, or black soil.
Most recently, he has also been busy trying to get the grain and seed oil he produces to hungry foreign markets – despite what he and international exporters in Ukraine describe as significant government interference.
Nibulon, based in the southern Ukrainian region of Mykolayiv, boasts 80,000 hectares of land under cultivation and $1.1 billion in assets. It is fully owned and run by Vadatursky, himself a product of Ukrainian agriculture.
“I was raised in a village, where work was hard. In the eighth grade, when I was 15 years old, I produced the annual equivalent of a full-time agriculture worker,” he told the Kyiv Post in a recent interview.
After getting an education in food processing, he began working his way up the career chain at a large Soviet bakery.
But he also managed to broaden his mind through tours abroad – a rare luxury at the time.
“I saw how people lived in different countries, and how they were treated compared to here, and decided to make something of myself,” he remembered. The foreign experience would come in handy after Ukraine gained independence in 1991, the same year that Nibulon was founded.
“When I was given the opportunity to organize my own business, when they told me that I wasn’t needed by the state system, a great desire arose to do everything that I wasn’t able to do before,” he said.
Vadatursky said that both during Soviet times and now, the biggest obstacle to realizing his potential as an agro-producer is Ukraine’s entrenched bureaucracy. In addition to competition from transnational producers and protectionist governments, one of the biggest problems faced by Ukrainian agro-producers like Nibulon is getting their goods out of the country.
“Our bureaucrats don’t interfere in production because that’s not easy work. It’s very hard work in fact. It’s easier to seize the dividends once the hard work’s been done,” he said. Instead, a company’s products are most vulnerable during transportation by rail, road and ship to port.
“They [Ukrainian authorities] once blocked ships from collecting our grain for 140 days,” Vadatursky said. International grain and seed oil exporters operating in Ukraine have experienced similar problems.
Ukrainian Deputy Prime Minister Sergiy Tigipko told a meeting of private grain exporters, industry trade associations and government officials in Kyiv on Aug. 2 that recent attempts by various Ukrainian agencies to slow down or block the export of grain from Ukraine were not acceptable and must cease immediately, according to Morgan Williams, president of the U.S.-Ukraine Business Council, who attended the meetings with Tigipko.
Private grain traders also pointed out that Ukrzaliznytsya, the state railroad monopoly, had put unofficial bans on loading grain hoppers, resulting in huge losses and slowing down or stopping the loading of export vessels. In response to such obstacles, Vadatursky has set out on a costly and ambitious plan to make his company’s logistics more secure by expanding river transport of grain to port.
The EBRD endorsed the plan by recently approving a $50 million loan for Nibulon to build elevators and terminals.
“The company has always sought administrative, financial and logistical independence. We try to be independent in all respects,” Vadatursky said. And making oneself attractive to Western lenders is one way of doing so.
“We have developed on credit and our own resources, developed a perfect credit history so that a first-class Western bank trusts us … Even those banks that were on the verge of bankruptcy gave us credit. One has to earn that,” he said.
Unlike the owners of other Ukrainian agro majors, which have sought to finance growth through placements on Western stock exchanges, Vadatursky has doubts about relinquishing equity. “Why did we develop independence if only to sell it and become more dependent? In business, one can never say ‘No’ …
We have had people trying to get us to do an IPO [initial public offering] for the last five years, but we held out and think we did right. To do an IPO is to undress in public,” he said.
Since 2002, Vadatursky has had full control of Nibulon, which used to be owned by almost a dozen shareholders.
Agro analysts familiar with the company say that the company got its start in 1991 when Vadatursky used local connections in Mykolayiv and the promise of Ukraine’s export potential to attract financing from Western investors, whom he later bought out.
His vision for his company and Ukrainian agriculture in general is centered on export. Nibulon, which produces grain and seed oil, currently boasts almost 25 percent of Ukrainian agro exports, selling 90 percent of its own products abroad. “Ukraine is destined to be an exporter, just like America,” Vadatursky said.
This means the export of raw grain and seed oil, not finished products, he said, as it makes no sense to try to sell flour to countries such as Bangladesh rather than wheat, as processing is cheaper there because of low labor costs.
Sergey Feofilov, director of Kyiv-based agribusiness consultancy UkrAgroConsult, called Ukraine’s chances of becoming a major food exporter “rather good.” Grain production – notwithstanding the drought – is on an upward curve, and could be boosted by further investment. “Grain yields could be increased by 300-400 percent with comparatively small investments in better agro-technology,” Feofilov said.