Farming

Wednesday 20 August 2014

Keeping stomachs full key to settling Ukraine conflict

Agri-business

Darragh McCullough

Published 13/03/2014 | 02:30

  • Share
Russia's President Putin
Russia's President Putin

Should Ireland be cosying up to Russia more in the current stand-off with the Ukraine? While the most common narrative here is that Russia is the bad guy bullying its former bell-boy, Irish commercial interests are probably singing a different tune.

  • Share
  • Go To

Agri-consultant Brendan Dunleavy has lived and advised in both Russia and the Ukraine at various times over the last 20 years. The Meathman was not surprised to see Russia back off from a full-scale military engagement, even if it is still sabre-rattling down in the Crimea.

"President Putin knows that he can't afford to risk upsetting food supplies for the 142 million Russian population," says Mr Dunleavy.

"The Ukraine is not known as the breadbasket of Europe by accident. It is the world's third largest exporter of corn and the sixth largest of wheat, with a significant proportion of this heading for the vast Russian market."

He maintains that the memories of the early 1990s food shortage that was only alleviated by US food-aid still sting in the Russian electorate's memory.

The military posturing over Crimea has already injected uncertainty into food commodity pricing. Bloomberg reported this week that the grain markets saw their biggest increase in two years over the last two weeks.

Markets hate uncertainty, but the spike is also a function of the practicalities of trying to trade in a region on the brink of conflict. Russian warships are clogging up Black Sea ports and investors are piling into commodities such as grains to hedge against falling share prices on the Russian stock market and a devaluing Russian Rouble and Ukrainian Hryvnia.

Of course, any increase in world grain market prices is welcome news for Irish tillage farmers, who've seen grain prices fall by 20pc in the last 12 months.

But it is likely to be only a temporary boost, according to Mr Dunleavy.

"The Russians have turned off the tap of money to bail the Ukraine out of its immediate cash crisis," he said.

"When this is combined with the falling value of local currency, inputs suddenly become expensive to buy. In turn, this forces Ukrainian grain producers to sell at lower prices in an effort to get their hands on cash. ."

Beyond grain, there is a bigger picture for Irish business interests to consider throughout this stand-off.

Local agri-businesses have carved out valuable markets in Russia over the last decade.

Mr Dunleavy has seen first-hand the huge opportunities for Irish expertise through his work as a former World Bank adviser.

"The likes of Kilkenny-based Hermitage Pedigree Pigs established some very valuable contracts for their pig genetics in Russia. Kerry milking equipment manufacturer Dairymaster has also got a good foothold in what is an expanding market with almost limitless potential. Carlow's machinery manufacturer, Hi-Spec, has also started trading there. There are huge farming operations being established in both Russia and the Ukraine. I'm working with one that aims to farm up to one million acres in the near future," he said.

While there are obviously huge opportunities for Irish agri-business in both the Ukraine and Russia, it is only the latter that will have the money to fund the development of the sector.

It is for this reason that Mr Dunleavy feels Ireland should be aligning itself much closer to the stance of Germany, Holland and Denmark, rather than the US and Britain, during this conflict.

"The Irish Government is playing this very badly. The statements that our Tanaiste Eamonn Gilmore is coming out with are commercial lunacy if you ask me. We can still support Ukraine but we don't have to insult Russia while we're at it."

Indo Business

Read More

Editors Choice

Also in Business