WAR
Kischenzi Farms’ battle to maintain Ukraine’s agricultural production
WHEAT
Russia’s invasion of Ukraine in early 2022 threw the country into turmoil, causing tens of thousands of casualties as well as extensive damage to Ukraine’s infrastructure. It also had a major destabilizing impact on global food security, with rising grain prices and shortages of basic commodities like sunflower oil. The farming industry is not just essential to Ukraine – it plays a key role globally. Kischenzi Farms, an agricultural business in central Ukraine, is working hard to keep production up and running during challenging wartime conditions. Farmer and owner Kees Huizinga discusses the challenges they’ve faced so far – and what’s needed to face those to come.
FMO investments
CLIENT SINCE 2009
2018 USD 8 mln 2022 EUR 0.08 mln
FINANCIAL PRODUCTS USED EMERGENCY GRANT/ LOAN
TENOR 10 YEARS FUNDING SOURCE FMO
Photo: Kees Huizinga, farmer and owner of Kischenzi farms
KISCHENZI OVER TWO DECADES
Kischenzi Farms has been in operation since 2001, with its first harvest in 2002 from just 800 hectares of land. Over the past two decades, the farm has grown considerably: it now covers 15,000 hectares of land, engaging in arable, dairy, pig and vegetable farming. Part of that expansion is thanks to funding from partners like FMO, which came on board in 2009 through the Dutch government fund, the Fund Emerging Markets, and subsequently started supporting Kischenzi through FMO’s own balance sheet.
“When FMO came on board in 2009, we had fewer than 100 employees,” Kees recalls. “We now have around 450 direct employees. But the farm also provides jobs indirectly – truck drivers, electricians, construction workers and many other people in the region also have work because of Kischenzi. The farm is very important to the local community.”
Land covered by Kischenzi Farms:
With its huge grain exports, it’s no surprise that Ukraine is known as “the breadbasket of Europe”
FROM THE BREADBASKET OF EUROPE TO LOGISTICAL NIGHTMARE
While Kees is originally Dutch, he came to Ukraine because the country is famed for its farming: “The fertile black soils, huge fields, suitable climate – plus Ukraine is close to Europe and well connected to the world market, including China and Africa. All these things make Ukraine extremely attractive for farmers like me.” With its huge grain exports, it’s no surprise that Ukraine is known as “the breadbasket of Europe”.
But when Russia invaded in 2022, everything ground to a halt. “The Black Sea ports were blocked,” explains Kees. “The logistics were a nightmare because we could no longer export goods via ship. The first two years of the war cost us around $10 million – Ukrainian farmers were the ones who paid the highest price for the blockade. Transporting goods via truck or train was possible for a few products, but it wasn’t financially feasible for many others.”
Of course, immediate concerns were about more than just commodity prices. “Around 40 men who were working at the farm have left to serve in the Ukrainian army,” says Kees. “Already, six of them have died. Our staff and their families have been our main concern through all of this.”
2001 start Kischenzi Farms
2002 First harvest 800 HA of land
2009 FMO on board
2022 Russian invasion
2024 450 employees15,000 HA of land
SUPPORTING UKRAINE IN EVERY WAY POSSIBLE
Because of the heavy toll that the war has taken on Kischenzi Farms and the country as a whole, Kees mobilized other Dutch entrepreneurs in Ukraine to raise money and organize humanitarian aid. Their first truck left from the Netherlands just seven days into the war, and since then they’ve provided over $15 million in goods and cash to support the Ukraine people and army through their foundation, Stichting de Leeuw Kyiv (The Lion Foundation).
While aid is important, there’s lots to be done on the farm, too. “Many refugees from occupied areas or regions close to the front line spent a few nights at Kischenzi when fleeing, and some have joined to work on the farm,” Kees says. “Farming is critical to Ukraine’s infrastructure, so it’s crucial that we keep going and don’t give up. We have no choice. We have 450 people working here, and a country depending on farmers for food. We simply cannot let Putin win. But Ukraine is very resilient: there are farms producing food all over the country. The Russians cannot destroy it all. The best way that Kischenzi can help the war effort is to keep doing what we’re doing: increasing turnover, employing people, paying taxes. Doing good business is our way of supporting the army financially and creating more stability.”
“Farming is critical to Ukraine’s infrastructure, so it’s crucial that we keep going and don’t give up. We have 450 people working here, and a country depending on farmers for food.”
And stability is exactly what’s needed in uncertain times. The war is just one element in a very fragile system. Political uncertainty in the US and Europe exacerbates the problem, while extreme climate events leave global food supplies in an even more vulnerable state. “The war showed us all how reliant we were globally on Russian oil and gas, and how important Russian fertilizers were for Ukraine’s agriculture industry,” explains Kees. “We need to produce our own energy on the farm using solar panels, biogas digesters and so on. We need to use fewer chemical fertilizers and improve soil health through manure and other farming techniques. But making these changes takes time and technology – all of which costs money.”
Photo: Harvesting crops on 800 HA of land
LONG-TERM, LOW-INTEREST FINANCE
This is perhaps where FMO comes in. Since the war started, FMO has restructured Kischenzi’s outstanding loans to provide a longer tenor and lower interest rates. “Our partners at FMO have been very supportive,” says Kees. After the start of the war, FMO also contributed an emergency grant for humanitarian aid, which Kischenzi used to house refugees and support families whose fathers had died in the war.
But the most important thing FMO can do, according to Kees, is to provide long-term financing to small- and medium-sized enterprises (SMEs). “Because of the war, Ukrainian farming has become high risk for regular banks. We’re therefore looking for partners like FMO to take on the risk that other financiers won’t. Big banks might invest in the large agricultural holdings, but SMEs are often left out of the picture. Ukrainian farmers also need low interest rates, so that we can make improvements to our infrastructure, energy, fertilizers and sustainable practices over a long period of time. Farming is extremely capital-intensive in general, and it takes 10 or 20 years to make changes to an entire system. That’s why long-term, low-interest finance is so important in agribusiness.”
Photo: FMO's loan proceeds are being used for the construction of a new barn.
DIVERSIFICATION VERSUS DISRUPTION
Because Kischenzi is diversified in terms of what the farm produces, it has weathered the storm relatively well so far. “At some point we were making a loss on the arable farming, but we were able to compensate with dairy and vegetables. Spreading the risk not only meant we survived, but we’re even growing in our vegetable and dairy divisions,” says Kees. The Black Sea port has reopened, thanks to Ukraine's ability to push back on Russia, and the country (at least, the parts of the country that remain unoccupied) is able to export agricultural produce once again. “But there’s no room for complacency,” warns Kees; “it doesn’t take much to disrupt everything. If the Black Sea ports are blocked again, then we’re back to the same situation.”
As the war – and the uncertainty surrounding it – continues, what’s next for Kischenzi? “Looking ahead, all we can do is continue to move forward – full throttle. That’s the only way we can support the Ukrainian army while also safeguarding the future development of the country. People are always going to need to eat – that’s what we’re here for.”
People are always going to need to eat – that’s what we’re here for.
FMO remains committed to Ukraine's economic recovery
When Russia invaded Ukraine, on 24 February 2022, FMO had a committed portfolio of around EUR 170 million in the country (including mobilized funds), primarily in agribusiness investments. In the first months following the invasion, we prioritized emergency assistance. Through our Technical Assistance budget, we provided emergency grants to 7 clients, to help sustain their operations and support their employees and families. For one client we provided financial support to relocate its business to ensure continuation.
As the war continues, we remained committed to Ukraine's long-term stability and economic recovery. We are restructuring loans, offering continued support to our clients, allowing them to navigate these challenging times. Where possible, we continue to invest. For example, in September 2022 we joined the first fund raised for Ukraine since the start of the war. We committed USD 20 million to the Horizon Capital Growth Fund IV, managed by Horizon Capital, a leading private-equity firm investing in fast-growing tech and export-oriented companies in Ukraine and the near region. We also continue to invest in the Trans-Oil Group from Moldova, which plays an important role in grain export from Ukraine.
Looking ahead, FMO as a registered bank is actively exploring ways to increase its support to Ukraine's private sector, notably supporting small and medium-sized enterprises. FMO is working closely with the Dutch government and the European Commission to secure the required concessional finance, which is intended to open up new investment opportunities, contributing to Ukraine's resilience. FMO's current portfolio in the Ukraine stands at EUR 179 million.
A FUTURE WE CAN FORESEE IS A FUTURE THAT WE CAN CREATE TOGETHER
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