Privat Agroholding lost 30% of farmland area from 2011 to 2017

08 February 2019

Privat Agroholding, a Ukraine-based agroholding that specializes in crop, milk and meat production, for years has been rather discreet, revealing no information about its operations. Anatoliy Ishchenko, a former CEO at Privat Agroholding (from 2010 to 2017), and currently field director at Kernel, has shared his experience of managing Privat Agroholding with Latifundist.com.

Privat Agroholding is a daughter company of a larger business group Privat Group. The agroholding has always been regarded by the group’s management as a non-core activity. Therefore, Privat Agroholding experienced a number of management problems. Its structure was designed inappropriately, with farmland plots located remotely from one another and mostly in Southern regions of Ukraine, known for unfavorable climate conditions. The agroholding also faced the problem of no appropriate financing. As a result, it had to use low quality seed material and plant protecting products. At the background of growing rental and logistics costs as well as more or less stable sales prices, it had been getting more and more complicated to make profits from year to year. “We were compelled to save on inputs. At the same time, we were able to succeed in finding less expensive and more accessible ones that enabled good results,” said Ishchenko.

As a CEO of a Privat Group’s subsidiary, Ishchenko had limited autonomy in decision-making, with all decisions being approved by responsible curators at the group level.  “Centralization made doing business difficult. Heavy bureaucracy along with the lack of decision-making power slowed down production process and caused delays, which are generally unacceptable in the agricultural business,” noted Ishchenko.

As a consequence of poor results, the agroholding had been losing up to 6% of its farmland area each year due to the outflow of landowners.  There had been difficulties with registration of lease agreements, which often led to hostile takeovers of farmland by competitors. In 2014, 3,500 hectares were lost in Crimea due to the annexation of the peninsula. As a result, from 2011 to 2017, the farmland area of Privat Agroholding decreased 30% to 85,000 hectares.

Adapted from Latifundist.com