WASHINGTON, D.C., - The global market environment is excellent for Ukrainian agricultural development according to John Shmorhun, President, Agriholding Hormelia, a SigmaBleyzer company, Kyiv and Kharkiv, Ukraine. In a presentation recently to members of the U.S.-Ukraine Business Council in Washington, D.C. held at the offices of Cargill in Washington, D.C., John said grain and oilseed consumption in the world is expected to grow 3% annually over the next ten years and only one-third of the growing demand can be met by developed markets, while emerging markets are expected to supply the remaining two-thirds (up to 45 million tons).

Shmorhun stated the key demand drivers are (1) growing global population, (2) rising per capital consumption and (3) increasing bio-fuel consumption. Global food demand is rising faster than supply, reducing world grain stocks. Global crop prices are expected to keep rising. In an environment of rising global demand, the Ukrainian agro sector is well positioned for future growth.

UKRAINE - A STRONGER GLOBAL PLAYER

According to Shmorhun Ukraine can and should be a much stronger global player in the future. He pointed out:

• Ukraine has more agricultural territory than any country in Europe, 11.7% (32.4M ha or 80.1 M acres) of Europe's arable land.
• The country offers unique climate and geographical benefits:
  1. accounts for 1/3 of the world's black soil
  2. the average depth of the humas layer in Ukraine is 40-60 cm, Europe is 5-30 cm.
  3. a stable continental climate accommodates a wide variety of grain, oilseed and vegetable production.
  4. strategically located in the middle of a large and growing global trade zone with access to Black Sea shipping links.
• Ukraine is one of the leading grain and oils exporters.
• Ukraine is a leading producer of grain and oilseeds with significant room for expansion and improvement:
  1. Grain and oilseeds account for 80.5% of Ukraine's arable farmland.
  2. Future production will benefit from increased yields and additional farmland bought back under grain production.
  3. With the appropriate policies and investment, the grain harvest in Ukraine could increase significantly - to over 100M tons a year (more than 2.5 times the production in 2010).

OPPORTUNITIES FOR GROWTH

The President of Agriholding Hormelia told the members of the U.S.-Ukraine Business Council (USUBC) he believes there are great opportunities for growth. Average crop yields in Ukraine are still lower than in Western Europe. Decades of poor management and under-investment have resulted in crop yields far below potential.

Ukraine still has lots of room to improve yields and increase margins. Crop yields could rise by 50% on average just through the use of new technologies. Exemplary farmers adopting Western agronomic techniques are already achieving US and EU yields consistently in some place.

Ukraine offers numerous cost advantages such as comparatively low labor cost, land pricing, and cost optimization resulting from economies of scale that exist in farming.

Shmorhun said the key to agricultural growth in Ukraine is effective government policies and reforms that create a pro-business and investment environment, private and competitive markets, and facilitate a major inflow of investments into the sector.

SIGMABLEYZER'S INVESTMENT IN AGRICULTURE

SigmaBleyzer is a leading private equity firm with an investment and operating track record of more than 15 years in Ukraine. They currently manage assets valued at approximately $1B across six investment vehicles. Founded in 1994, their focus continues to be on buyout investments in turnaround and distressed situations. The company takes an active, hands-on role in the management of investments.

John Shmorhun said SigmaBleyzer has invested €82.5M from its Southeast European Fund IV (SBF IV) into agriculture. This investment was prompted by attractive post-crisis valuations of large corporate farms, and the value enhancement that consolidation, restructuring, and improved management can bring to the farms acquired.

SigmaBleyzer intends to consolidate numerous small businesses that will benefit from corporate integration, and focus on crop growing, particularly grains and oilseeds, to form a commodity business with the potential to expand rapidly in the current low-cost land environment.

The agricultural sector offers an opportunity to merge numerous agricultural companies into one operational holding. SigmaBleyzer plans to create a leading agricultural company over the next five years that is a top producer and exporter of agricultural commodities.

SBF IV’s first acquisitions in agriculture were made in January and March of 2010, and up to date SBF IV has accumulated over 72,700 ha of operating farm land within the Kharkiv and Poltava regions. These corporate farms, located within prime agricultural areas, came with management, operating personnel, and machinery, and form an operational platform ready for further expansion.

Harmelia is today on of the top 25 largest Ukrainian agricultural companies in terms of land controlled, according to Shmorhun.

NOTE: John Shmorhun was appointed to head up SigmaBleyzer's new agricultural investment division, Harmelia Holdings, in September of 2009. A former DuPont executive, John managed DuPont’s agro businesses in Ukraine and Russia for more than 17 years. He in charge of DuPont's operations in the CIS countries for eight years. Between 2003-2008, was in charge of DuPont’s agrochemical business. Prior to that served as a naval pilot for 10 years. He holds an MBA from the International Management Institute in Geneva and a BS in Mechanical Engineering from the US Naval Academy. John is originally from Maryland, USA.

NOTE: SigmaBleyzer, www.SigmaBleyzer.com, and The Bleyzer Foundation, http://www.BleyzerFoundation.org/ are members of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.