# **2.2 Why study of crop rotations is of relevance for Ukraine**

Studying determinants of adoption and economic impact of different crop rotations in Ukraine is of relevance as the country experienced a significant shift in cropping patterns towards maize and sunflower that has raised concerns about soil mining and associated loss of soil fertility. Owing to its fertile and rich soils, the country was historically the former Soviet Union’s breadbasket. With some 41.5 million hectares of agricultural land, more than Argentina (34 mn. ha) or the country’s three western neighbors, Poland (11 mn. ha), Germany (12 mn. ha) and France (18 mn ha.) combined, Ukraine has the potential to be a key player in global agriculture.<sup>4</sup> Indeed, following drops in output in the early 1990s that can be attributed to the transition from collectivized farming, the agricultural sector more than doubled value added and now accounts for 10% of GDP and 42% of total exports.

In the late 1990s and early 2000s, close to 30 million hectares of land was privatized to some 7 mn. owners who each received an area of about 4 ha each. Of this, some 20 mn. ha is currently cultivated by legal entities: 6 mn. ha by large farms or agri-holdings and some 9 mn. ha by middle-size farms, both of which emerged mainly from collective farms and more than 4 mn ha is cultivated by so-called individual farmers ( _fermerski gospodarstva_ ). A moratorium on sales of agricultural land introduced in 2001 implies they can only lease but not own their farmland.<sup>5</sup> Several factors, including the lack of a unified lease registry, a mix of digital and paper documents, corruptible registrars, courts and police forces, and legislation prohibiting registration of leases shorter than 7 years that tends to drive landowners into informality, further reduce users’ ability to enforce leases, diverting resources from investment or reducing incentives for it.<sup>6</sup> While the resulting tenure insecurity is widely alleged to incentivize unsustainable land management, ‘inspections’ by government agencies to identify and prosecute violations of environmental rules are perceived as discretionary and ineffective.

Tenure insecurity also reduces Ukraine’s potential for irrigation and agricultural value added. The amount of land irrigated, which stood at 2.2 mn. ha in Soviet times, still stands at its low of 0.3 mn. hectares due to insecure land rights, threatening to jeopardize climate resilience and labor-intensive investment to generate jobs. While commercial agriculture is technologically advanced and capital intensive, focus is on mobile capital and production of bulk commodities such as maize, wheat, and

> 4 Brazil’s total agricultural area is 64 mn. ha, though much of it is of significantly lower fertility than Ukraine’s famous black soil. By comparison, total farmland in the United States in 2017 was 364 mn. ha (900 mn ac) with an average farm size of 178 ha (USDA 2019).

> 5 While the median farm size is close to 2,000 ha (imposing considerable transaction cost by requiring management of about 500 lease contracts), some large farms are organized in agri-holdings of 100,000 ha or more that access foreign technology, capital and equity. About 12 mn. ha are cultivated by small and household farms that produce half of output value but have remained largely informal and some 9.2 mn. ha remain under state or communal ownership.

> 6 The ability to register fraudulent contracts or to obtain connivance from local enforcement agencies triggered a wave of so-called ‘raider attacks’, often by individuals showing up to harvest crops they have not sown or through strategic cancellation of contracts to cause maximum disruption. Large enterprises hire their own militias to deal with this but medium sized operations who cannot afford this are thought to be particularly vulnerable.

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