Ukraine unrest affects equipment exports
FARGO — The political upset in Ukraine is creating some uncertainty for agricultural equipment exporters from the northern Great Plains.
Dean Gorder, director of the North Dakota Trade Office, says the overarching concern is stability for the people of Ukraine. He has told U.S. Sen. John Hoeven, R-N.D., that trade is hard to accomplish without a stable government.
“Whatever the U.S. can do to stabilize the situation is to our business advantage,” Gorder says. “In the short-term, it’s just a tough situation.”
North Dakota companies exported about $22.1 million of ag-related products to Ukraine in 2013. That’s up from $18 million in 2011, $17 million in 2012. North Dakota had exported up to $67 million to the country in 2008, before economic calamities. Annual sales declined to $8 million in 2010, and have since started coming back.
“Since then, we’ve been working to gain that market back,” Gorder said, noting that the state office has a representative in Kiev. “It’s pretty much all agriculture-related — tractors, harvesters. I know there was some success in 2013 in grain bins, things like that. For the first time since I’ve been around the trade office, they’ve actually purchased food from us. Ukraine is typically a competitor with things like sunflower and wheat, but they imported some legumes, so they could be pinto beans, navy beans or lentils.”
The region’s entrepreneur traders are scrambling to assess the situation.
Howard Dahl, president of Amity Technology in Fargo, which sells farm equipment in Russia and Ukraine, confirmed to Agweek that he has been traveling in Moscow and went to Kiev on March 4.
“Maidan Square is hard to describe,” Dahl said. “It feels like sacred ground where 100 people lost their lives.”
Casey Bryl, Amity’s export sales manager, says the company exports Amity sugar beet harvesters and defoliators and crop management tools including soil samplers.
Amity sells equipment through dealer networks throughout the country, from near Russia in the east nearly to Poland in the west. It also deals with some large individual customers in Ukraine.
Business deals are not political, even though some individuals in the east have a natural affinity and strong feelings toward Russia.
“At the end of the day, they still want to provide their customers with good agricultural solutions — good parts and service,” Bryl says. Much of the equipment is shipped into Ukraine through the Black Sea ports at Odessa, or into Latvia, and logistics so far haven’t been interrupted.
The bigger problem is the valuation of the Ukrainian currency, the hryvnia. In June 2013, $1 was worth about 8.1 hrvynia, and today it’s worth 9.7 hryvnia — a roughly 20 percent decrease in purchasing power for the Ukrainians. But the currency is also devaluating against the euro. It’s much more livable at a 1:8 ratio, Bryl said.
Bryl said the company is in the process of delivering equipment for spring 2014 that was ordered last October to December and is paid for. The larger concern is for equipment orders that would be delivered for the fall of 2014 and spring of 2015.
The devaluation means Ukrainian companies will face challenges getting financing from their Ukrainian banks. The situation is analogous to Russia, which has seen a decrease in the ruble’s value, although the financial sector there is larger and has specialized institutions that focus on agriculture and are more willing to adjust to adversity.
It is not clear how any economic sanctions the U.S. or Europe might impose that would further complicate the situation, Bryl said. He said those could cause difficulty, but customers tend not to blame agricultural equipment suppliers for the problems.
“The ag community, even though it is a global community, it’s a very tight community,” he said.
Similarly, Ryan Offutt, executive vice president of RDO Equipment of Fargo, has worked to develop business in that part of the world. He said the recent events will “clearly have a real impact on both our Ukrainian and Russian business this year,” but he says events have been “unfolding so quickly these past few weeks that it is hard to predict what things could look like a month from now.”
He said the company has always managed its business in the region with “focus on the long-term success of our stakeholders, and this year will be no different.”
RDO operates the world’s largest string of John Deere dealerships. It operates 12 stores in Russia and has built another four in western Ukraine in the past two years.