Financing a season

Seed, fertiliser, fuel and crop protection are bought between March and May. Grain is sold from August onward. A farm therefore needs six months of money it does not have, every single year, and the terms on which it gets that money determine its profitability more than its agronomy does.

The instruments that exist

Bank credit, which is the cheapest and the hardest to obtain, because leased land is not collateral and a growing crop is difficult to pledge.

Supplier credit from input distributors, which is available, quick and expensive: the interest is embedded in the input price and is often not stated at all.

Agrarian receipts, a Ukrainian instrument in which the farm pledges a defined quantity of future crop, registered publicly, enforceable through a simplified procedure. That registration and enforceability are what make it lendable.

Warehouse certificates, which turn stored grain into a pledgeable asset after harvest and allow a farm to borrow instead of selling into the harvest-price trough.

What each costs

Roughly in the order listed. The interesting point is that many farms use the most expensive option not because credit is unavailable but because the cheaper options require documentation they have never assembled.

What improves it

Accounts that a lender can read. A farm with three years of audited figures and a registered land position borrows at a different price from one without, and the difference is larger than any input discount available anywhere.

The general point

Agricultural finance in Ukraine is not short of capital. It is short of the paperwork that lets capital price the risk.

Selling a machine to a customer who spends everything in spring and earns everything in autumn makes their financing my problem too: a supplier who demands cash up front does not sell in this sector. Half of an equipment sale is therefore the design of a payment schedule. What would improve agriculture is not cheaper credit but credit shaped to the season.