In March 2010, the USAID LINC project organized two events for Crimean agrarians wishing to learn new ideas for increasing the efficiency of farmers’ work

Establishing Marketing Groups

On March 12, 2010, the USAID LINC project in cooperation with experts from the EU Implementation of Ukraine’s Commitments under WTO and ENP Frameworks in the Rural Sector project held a seminar in Simferopol on the Creation and Operation of Marketing Organizations of Agricultural Producers in Crimea. The experts shared their experiences with those interested in creating and developing marketing groups in Crimea.

Crimean farmers as well as representatives from the UNDP Crimea Integration and Development Program, who have created 20 agricultural cooperatives in the autonomous republic, and representatives from the Extension Service within the Agriculture Ministry of Crimea attended the seminar. The participants were familiarized with marketing group creation principles and operation experiences abroad and legal aspects of organizing marketing groups in Ukraine.

“I want you to start thinking about the kind of cooperative or a group you would like to create after today’s meeting,” said USAID LINC Crimea Field Director Daniel Themen addressing the audience. “I hope you will think about your next steps today.”

Market Infrastructure Development Expert John Millnz pointed out that farmers’ organizations are created not for the government, not for investors, but for the farmers themselves. The membership in these groups should be voluntary and based on the ideas of team members. For instance, a marketing group in Serbia originated in a meeting to which all farmers from neighboring villages were invited to discuss options of their future work – whether they would jointly sell milk and wool, create their own market, etc.

“If you give farmers an opportunity, they can come up with many ideas. The real problem is to identify which of these ideas are going to work,” said Mr. Milnz.

In order to ensure that the new group will be functional, its members should answer the following questions: Do they have a clear objective? Is there a leader who is ready to lead and develop this group? Is there a real market opportunity for this idea? Are all the farmers, not just one, really interested in the idea? And finally, is the idea viable financially?

John Milnz gave several examples of already functioning groups in other countries. Five farmers in Italy realized that there was a market in Western European supermarkets for kohlrabi, and formed a group to grow this vegetable. In England, ten strawberry growers decided to create a group to supply the strawberries all the year round. The group itself could provide their own produce for six months only, and for the remaining half-year concluded an agreement with a strawberry growing group in Spain.

Another example was from Italian highlands, where the farmers came up with an idea of “sheep adoption.” A tourist can pick a sheep he or she likes out from the herd, and for €200 per year the farmer will take care of the animal, send the sheep’s photos to the tourist. The tourist can also visit or take the animal any time during this year. “This is not agriculture,” said Mr. Milnz. “But this is a rural business group.”

Market Infrastructure Expert Mykola Hrytsenko remarked that Ukrainian legislation does not have a definition for marketing group. “Even in the Soviet Union times there were informal marketing groups which brought potatoes or grapes from Ukraine to Russia,” he said. “An entrepreneur who goes round in his truck and buys calves and pigs is a marketing structure represented by one private entrepreneur. No one can prohibit him from doing so,” said Mr. Hrytsenko.

Mr. Hrytsenko defined a marketing organization in the agricultural sector as an organization that unites farmers to promote their produce. According to him, a classic village may have two forms of such an organization: a limited liability company and an agricultural servicing cooperative. Within the Ukrainian legal framework, one can employ two laws associated with marketing group organization, namely the Law of Ukraine ”On Cooperation” and the Law of Ukraine “On Agricultural Cooperation.”

Preparing Investment Proposals

On March 23, 2010, the USAID LINC Crimean office hosted a seminar on Legal Issues of Agricultural Sector Functioning and Investment Proposal Preparation in Agriculture for farmers wishing to attract investments to their businesses.

USAID LINC specialists helped participants to identify opportunities for attracting investments in agriculture, find out latest changes in land law, and explore possibilities of working with supermarket chains.

USAID LINC Competitiveness and Investment Promotion Specialist Olha Kuts told the farmers about the strategy for attracting investments in agriculture, the situation in Ukraine with foreign direct investment, and gave a description of investment project stages.

USAID LINC Land Market Reform Task Leader Pavel Kulinich made a presentation on recent changes in Ukrainian land legislation. He commented on changes to Article 120 of the Land Code, which defines the legal regime of buildings, constructions and land plots, and to article 1861, which envisages establishment of a committee for adjustment of land management documentation. “Some of the changes concern only farmers, some, general public including you. Therefore, I think they are worth attention,” said Pavel Kulinych.

USAID LINC Specialist on Business Processes Borys Shadrin presented findings of a research conducted by USAID LINC into a possibility for Crimean supermarkets to purchase produce from local farmers. The findings show that one of conditions for supermarkets to buy from local farmers is farmers having the status of value-added tax (VAT) payer. The supermarkets also require that the produce and packaging meet Ukrainian standards and be certified. Mr. Shadrin suggested that the issue of VAT can be solved by creating a marketing group.