Despite the war, Ukraine's agricultural sector continues to provide the majority of foreign exchange earnings in Ukraine and is one of the key sectors for reform and attraction of public and private investment. However, the agricultural sector faces several challenges, which, if not addressed, could hinder this. In addition to the full-scale invasion and its consequences for agriculture, we are talking about the Free Trade Agreement with the EU, which will expire on June 5 this year. At this point, the scenario for the industry may depend on its extension. At the same time, Ukraine sees several possible solutions to this problem, and work is already underway in some areas, including in the EU.

At the same time, the market faces a number of other unresolved problems. These include logistics, including the unreadiness of some ports to operate, congestion on the roads, the need to demonopolize rail transportation, and mine clearance of areas that agricultural enterprises are engaged in at their own expense. Equally important are such problems as human capital, which is insufficient, domestic grain trade without VAT, the unresolved issue of electronic consignment notes, and the need for widespread use of artificial intelligence (AI), as agricultural producers lose money due to challenges, so other ways must be used to increase efficiency.

This is the opinion of the participants of the conference “Agricultural Sector 2025: Challenges and Opportunities in New Realities” organized by the analytical center “We Build Ukraine” together with the Association “Ukrainian Agribusiness Club”. The event included a presentation of a part of the Economic Growth Strategy of Ukraine in the context of the agricultural sector, developed by the think tank in cooperation with Boston Consulting Group. In addition, the participants discussed one of the key issues - how to maintain the upward trend in the sector despite the existing challenges, as well as the search for the best solutions in the industry.

According to Oleksandr Kubrakov, Chairman of the Supervisory Board of We Build Ukraine, the Economic Growth Strategy of Ukraine prioritizes the agricultural sector, along with subsoil use, construction, engineering, defense production, and energy, for reforms and public and private investment.

“According to BCG, the transformation of these sectors will have the greatest effect on increasing the country's GDP. Even during the full-scale invasion, the agricultural sector continues to account for a significant share of the country's GDP. In particular, last year, farmers accounted for more than half of all foreign exchange earnings in the country,” he said.

At the same time, Kubrakov noted that at the current stage of work on the Strategy, it is important to speak a common language with the players in the sector and to identify the problems correctly. This is necessary in order to create an economic agendas that will allow integration into the European economy.

“Each sector has 5-10 key problems, the solution of which can remove 80% of the barriers to sector development. Our task is to work together with the market, government institutions, and specialized experts to develop solutions for the industry and implement them consistently,” Kubrakov added.

According to EU Ambassador Katarina Mathernova, agriculture is a sector that is one of the drivers of the country's economy. Moreover, she is convinced that Ukraine is part of the future food security in Europe, so agriculture will continue to dominate the country.

Yana Kavushevska, head of the National Association of Sugar Producers of Ukraine, Ukrtsukor, noted that in 2023 the EU's share of sugar exports from Ukraine was about 98%, and in 2024 it was only 40%. However, this does not mean that there is no need to “fight” for the European market.

“We definitely need to, and logistics is just one of the reasons. The global sugar market is a sea route, which is currently risky and expensive (as large container lines have not yet returned to Ukrainian ports). At the same time, the EU market is close to us both logistically and politically and economically,” she explains. “Ukraine's sugar industry is a natural extension of the European sugar beet belt. Ukraine uses European sugar beet seeds, plant protection products, European sugar beet harvesting machinery, European equipment at sugar factories, and in every sense is already part of the European sugar industry. And the EU is a net importer of sugar, which annually buys from 1 to 2.5 million tons of sugar from third countries, and our task is to make Ukraine's share of these imports as significant as possible.”

Kateryna Spivakova, Director of Government Relations at KERNEL, agrees. She explained that access to the EU market is extremely important for Ukraine because of its high margins and, at the same time, limited access to the global market. Thus, the company has already undergone changes in this regard: it has largely lost the Chinese market, while exports to the EU, primarily to Spain, Germany, and the Netherlands, have increased. Kernel's production standards fully comply with European requirements. The Ukrainian product has pushed the Russian product out of European markets.

According to Taras Kachka, Deputy Minister of Economy of Ukraine, Trade Representative of Ukraine, Ukraine currently has 40 products subject to tariff quotas. And we did not export 25 of them under the tariff quotas that were in effect until 2022. For example, mushrooms.

“For these goods, there will be no major immediate impact on exports. However, there are goods that were exported in larger volumes than the quotas provided for, but they cannot be sensitive to these changes. Of course, there are some sensitive ones, such as honey, corn, bran, cereals, eggs, poultry, and sugar. For each of these groups, we have a solution on how to control the flow of these products, what the balance can be. In general, we still technically have a few weeks to calmly look for a common solution,” Kachka said.

According to Taras Vysotsky, First Deputy Minister of Agrarian Policy and Food, under the Free Trade Agreement with the EU, Ukraine has quotas for certain agricultural products. At the same time, the six-month quota for 2025 has hardly been used.

“Currently, we have almost no six-month quotas for the current year. That is, we see that for most of the sensitive groups we have not reached the 100% quota during this period. Only for eggs - by 43%. In other categories, opportunities are open for most products for which last year's quota was exceeded. These include, in particular, oats, cereals, honey, corn, poultry, etc.”, explained Vysotskyi.

Commenting on the strategy of advocacy by Ukrainian farmers for favorable conditions for agricultural trade with the EU, Nazar Bobytskyi, Head of UCAB's European office, explained that special emphasis will be placed on interaction with those European business associations that represent consumers of Ukrainian agricultural imports. These include industrial consumers of sugar among such European multinationals as Unilever, Nestlé, etc., German sweets producers, and the meat processing industry. The purpose of this interaction is to strengthen the voice and messages of European business in Brussels on the importance of maintaining open trade with Ukraine. This will help to guarantee uninterrupted and affordable food prices in Europe, as well as increase the competitiveness of European agricultural exports in the world.

According to Oleksandr Haidu, Chairman of the Verkhovna Rada Committee on Agrarian and Land Policy, there are several options for extending the EU agreement. In particular, to leave the quotas at the level of 2021, but this will mean costs for Ukrainian exporters, or to extend the agreement for a certain period - when all trade measures regarding the Association Agreement with the EU are discussed. In fact, this is what Ukraine is counting on, Gaidu explained.

UN Resident Coordinator in Ukraine and Humanitarian Coordinator Mathias Schmale noted that according to the latest damage report prepared by the World Bank, the Ukrainian agricultural sector has suffered enormous losses - warehouses and elevators have been destroyed, but the industry continues to operate despite the war, while it requires very significant efforts and the farmers' own financial resources.

“Agricultural enterprises are now even clearing their land of mines themselves, despite the fact that the costs of demining are very significant both within the country as a whole and in the agricultural sector in particular. However, both they and we understand that the development of the sector is not about profits, it is part of the global economy. Therefore, we rely on innovation in agriculture,” he said.

In his turn, BCG Managing Director for Central and Eastern Europe Laszlo Juhasz is convinced that the Ukrainian agricultural sector has a good starting point - a good start, strong demand, and Ukraine has supply factors, etc. At the same time, there are a number of challenges. In particular, we are talking about human capital, as it will play a very important role in the post-war recovery. In addition, logistics will be a crucial element: in the future, we need to have ready-made sea routes, as well as resolve issues with railways and roads.

Yuriy Vaskov, co-founder of the We Build Ukraine think tank, agreed, saying that logistics is the second key component of the total cost of Ukrainian products after production costs. At the same time, a lot has been done in this area over the past 3 years - by rail, road, and sea - which has created opportunities for Ukrainian exports. But this does not mean that the logistics issue is completely resolved.

“We need to further demonopolize the services provided by Ukrzaliznytsia. This is a long-term goal, as we will not be able to be competitive in the future without a significant change in the rules of the game in the rail transportation market. In addition, we should gradually prepare for the reopening of ports that have been shut down due to the war, particularly in Mykolaiv and Kherson regions. Sooner or later, security will allow this, so it is very important to have a plan for their launch ready,” emphasized Vaskov.

Meanwhile, Oleksiy Kosobokov, Deputy Director of ADM International, noted that one of the industry's goals is to return to the production volumes of 2021.

“This season, we managed to harvest 76 million tons of products, and next year we are aiming for at least 80 million tons of the main types of oilseeds and grains. But if we can get back to 100 mln tons, then we will be profitable as traders, and now we have problems with that. I would also add that we need to finally resolve the issue of electronic consignment notes, which should help solve the problem of overloading on the roads. This will allow everyone to be in the same competitive field,” he summarized. Vadym Miroshnychenko, Head of the Cargill Trading Department, agrees with this.

According to him, the company has changed a lot in terms of digitalization over the past 5 years - due to covid and then a full-scale invasion. Especially in Ukraine. He emphasized that we are talking about the maximum digitalization of most processes.

“The number of payments and processes that we make without even coming to the office - through electronic platforms - is huge. This is already happening automatically, this is the new digitized reality in which our company has been living for 5 years. The only thing that has not been digitized is electronic bill of lading, and this needs to be fixed, as it is still done in paper form. We would also like to complete the work on the electronic warehouse receipt,” he said.

In addition, according to the government, agricultural producers may lose billions due to all these unresolved issues. To minimize these problems, they need to find ways to increase efficiency. In particular, with the use of AI technologies. Moreover, effective cases have already been developed.

In particular, Natalia Bogacheva, Director of Transformation and Business Analytics at Astarta-Kyiv, shared one of them. According to her, this is an in-house IT company that has already become an IT business partner, R&D center, and a competence center in terms of innovation, which has already been joined by an operational efficiency office.

“And it was the right decision - we were ready for 2022. If not for this, we would not have been able to work, so to speak, in the flow. Therefore, we are now at the stage of deep AI implementation. We are already modeling production programs in agriculture, which allows us to increase the return on each hectare. It is important to go as deep as possible into research and, of course, people. We can't do anything without them, but it is important that they work with maximum efficiency,” she summarized.