AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT
Quarterly Report
April - June 2018 (FY18 Q3)
July 30, 2018
QUARTERLY REPORT April – June 2018 (FY18 Q3)
July 30, 2018
Submitted to: US Agency for International Development Regional Mission to Ukraine, Moldova, and Belarus (USAID/Ukraine) 4 Igor Sikorsky Street Kyiv, Ukraine 04112 Tel: (380 44) 521-5000 Fax: (380 44) 521-5245
Submitted by:
Chemonics International Inc. 1717 H Street NW Washington, DC 20006
DISCLAIMER
This publication was produced by Chemonics International for review by the United States Agency for International Development. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.
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Contents Acronyms...... 4 Executive Summary ...... 5 Improving Rules and Regulations ...... 7 Land Market Reformed ...... 7 Institutional Capacity to Design and Implement Reforms Built ...... 11 State Agri-Food Controls Reformed and Improved ...... 14 Enhancing Value Chains and Supporting Functions ...... 17 Fruit and Vegetables Value Chains ...... 17 Dairy Value Chain ...... 24 Meat Value Chain ...... 26 Supporting Functions ...... 29 Communicating and Learning ...... 34 Annexes ...... 37 Annex I: MEL Indicators ...... 37 Annex II. Milestone Progress Table ...... 40 Annex III. Policy Matrix ...... 43
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 3 of 46 Acronyms
AMP Association of Milk Producers ATO Anti-Terrorist Operation AUPB Association of Ukrainian Pig Breeders AUAC All-Ukrainian Agrarian Council AVVC All-Ukrainian Association of Villages and Village Councils BRDO Better Regulation Delivery Office B2B Business to Business CLA Collaborating, Learning and Adapting CPCC Control Points and Compliance Criteria CTC Consolidated Territorial Community DCFTA Deep and Comprehensive Free Trade Area EBRD European Bank for Reconstruction and Development ECHR European Court of Human Rights FY Fiscal Year GGN GLOBAL G.A.P. Number HACCP Hazard Analysis and Critical Control Point HoReCa Hotels, Restaurants, and Cafés IDP Internally Displaced Person IFC International Finance Corporation IFS International Featured Standards IPL International Procurement and Logistics MAPF Ministry of Agrarian Policy and Food MEDT Ministry of Economic Development and Trade MEP Ministry of Environmental Protection MoH Ministry of Health MP Member of Parliament NGO Non-Governmental Organization NGCA Non-Government Controlled Area (of Donetsk and Luhansk oblasts) PLT Prime Lab Tech PR Public relations RST Reform Support Team SIF Strategic Investment Fund SME Small and Medium Enterprise SRO Self-Regulatory Organization SSFSCP State Service for Food Safety and Consumer Protection UAC Ukrainian Agrarian Council UAL Ukrainian Agrarian Lyceum VC Value Chain VR Verkhovna Rada (Parliament of Ukraine)
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Executive Summary
Overview The Agriculture and Rural Development Support Project, hereafter ARDS or the ARDS project, is implemented through a four-year, cost-plus-fixed-fee completion type task order funded by the United States Agency for International Development (USAID). ARDS builds on USAID’s previous projects in Ukraine and lessons learned by USAID/Ukraine, Ukrainian partners, and other donors. ARDS is implemented by Chemonics International Inc. and began on September 7, 2016 and is scheduled to end on July 31, 2020. ARDS has a contract ceiling of $21,797,270.
The ARDS project supports broad-based, resilient economic growth through a more inclusive, competitive, and better-governed agriculture sector that provides attractive livelihoods in rural areas. ARDS works with stakeholders to implement a broad array of solutions to market system failures that span the enabling environment, including land markets, policies, governance and rights, as well as direct engagement and synchronization of both the core and support functions of agricultural value chains, namely, meat, dairy, fruit, and vegetable value chains. The project works at the national and local levels, with a special focus on rural development in southern and eastern Ukraine.
ARDS embraces approaches defined in the U.S. Global Food Security Act of 2016 that emphasize market-led development for agricultural transformation to generate sustainable growth opportunities for small farmers, small and medium-sized enterprises, and poor rural households. Within the unique context of Ukraine’s agriculture sector, ARDS applies the strategy’s guidance in policy, market systems, and value chain facilitation, introduced by USAID in 2017, to sustain Ukraine’s gains and capitalize on sector opportunities. ARDS integrates the Collaborating, Learning, and Adapting (CLA) Framework promoted by USAID. Across all efforts, ARDS works with a range of government, private sector, civil society, and donor partners to plan, implement, map outcomes, and scale what works, adapting as needed by redesigning or abandoning strategies and tactics. ARDS applies a gender integration and mainstreaming strategy throughout implementation. The majority of rural land owners are women and they are a significant asset to family farms, and, therefore, to sector growth. However, women’s voices remain underrepresented in national and local decision-making and their entrepreneurial and economic potential has yet to be fully realized.
The FY18 Q3 report describes actions undertaken against the FY18 work plan and milestones achieved. Progress against indicators required for quarterly reporting is in Annex I. A detailed timeline of actions taken against the workplan are presented in Annex II. and legislative milestones are portrayed in Annex III.
Highlights of Results
Improving Rules and Regulations In consultation with key stakeholders, ARDS is planning to launch a comprehensive local systems development program to build the capacity of rural consolidated territorial communities (CTCs) to manage their resources and thrive. The program uses as its focal point the innovative CTC land management pilot project in Kipti CTC (Chernihiv oblast). The local systems development program will focus on six oblasts, mainly in eastern Ukraine. Competitive selection of a grantee to implement the program is underway and it is expected to commence during the next reporting period.
ARDS launched a pilot project in Mykolaivka CTC (Donetsk oblast) to enhance the Kipti CTC pilot’s steps and develop solutions to simplify land management procedures, e.g. community land plan allocation and allowance for investment projects.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 5 of 46 ARDS contributed to the development of two draft laws on land reform issues, both of which were passed for adoption to the Verkhovna Rada (VR) during the quarter. The draft laws improve the ability of the land cadastre and property registry systems to prevent illegal takeovers of land and farming companies by introducing systematic monitoring of land relations at the national, regional, and local (rayon) levels; the laws also improve procedures for land management, especially on passing into communal ownership formerly collectively-owned wind breaks, field roads and unclaimed land shares so that they can be properly used to benefit local communities
Enhancing Value Chains and Supporting Functions ARDS completed the implementation stage for all Strategic Investment Fund (SIF) investment projects in the fruit, vegetable, dairy, and meat value chains and conducted a summary meeting with all the grantees to ensure that next steps and expectations for 2018 are aligned. ARDS continues to communicate experiences through these investment partners to reach secondary beneficiaries (input suppliers, collectors). ARDS continues to offer training sessions for secondary beneficiaries on adopting new solutions developed with its investment partners. The training builds motivation for secondary beneficiaries to change their behavior and adopt new practices. Working with SIF investment partners, ARDS began a series of pilots/solutions in the fruit, vegetable, meat, and dairy value chains and focused on disseminating best practices through peer learning.
Communicating and Learning The ARDS Facebook page is engaging more followers each quarter, with more than 5,000 followers currently. ARDS understands the utility of further expanding external communications through this channel.
In FY18 Q3, ARDS developed behavior change solutions for agri-SMEs that will lead to improved business practices and better market linkages in all four value chains. For each of the nine solutions, ARDS defined indicators for measuring behavior change impact over the period.
Consistent with best practices, ARDS continued to use Microsoft (MS) Project and Teams to plan, implement, and monitor the project's activities and tasks on a rolling, three-month basis. The work plan’s activities are disaggregated by value chains and the core systemic issues ARDS identified in each value chain that have the greatest impact on the Ukrainian agribusiness economy and the quality of rural livelihoods. Each task in MS Project and Teams is aligned with the work plan, which, in turn, aligns with contractual commitments.
ARDS uses an adaptive management approach, which is defined in ADS 201.6 as “an intentional approach to making decisions and adjustments in response to new information and changes in context.” Through continuous learning ARDS has modified the MEL plan in the past and is in discussions with USAID to modify the current MEL plan indicators. In FY2018 Q4 ARDS will propose changes to the MEL plan indicators to reflect changes in focus and resource allocation since the last MEL plan revision. Rationale for programmatic or tactical shifts that affect MEL indicators are noted in relevant sections below.
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Improving Rules and Regulations
Land Market Reformed
Land rights understood by citizens
At USAID’s request, ARDS conducted a series of eight regional roundtables in partnership with the World Bank. The roundtables were attended by more 780 participants: leaders of rural Consolidated Territorial Communities (CTCs), small- and medium-size enterprises/farmers, local NGO activists, oblast administrations officials, StateGeoCadastre regional departments, and local media.
The roundtables, entitled “Improving the Efficiency of Management of Land Resources in the Agricultural Sector: Opportunities and Instruments for Rural Communities and Agricultural Producers,” were split into two sessions, with ARDS and the World Bank taking responsibility for their individual sessions. ARDS shared the experience of community-led land management planning based on the Kipti CTC pilot in Chernihiv oblast, presented recent legislative initiatives in the Verkhovna Rada (VR), answered numerous questions, and engaged participants in a dialogue on various aspects of land reform. The World Bank focused on opportunities and risks of opening the agricultural land market.
For ARDS, it was an opportunity to highlight the Kipti CTC pilot, its expansion through the Palanka and other CTCs in Cherkasy oblast, and the upcoming local systems development initiative that uses the land management system implemented in the Kipti CTC pilot as a focal point for the new ARDS rural development strategy.
Much of any future work undertaken to help citizens understand their rights will be implemented through or in conjunction with the local systems initiative, given that the draft Law “On Agricultural Land Turnover” developed by the Ministry of Agrarian Policy and Food (MAPF) has lost momentum as
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 7 of 46 it was never released for public discussion. As part of its rural development strategy, ARDS is focusing most of its resources for supporting the lifting the moratorium on land sales on the regions of Ukraine.
Agricultural land policies and governance system improved
Land administration procedures improved
ARDS continued collaborating with the VR Committee on Agrarian Policy and Land Relations, leading agriculture sector associations, and MPs to further promote ARDS initiatives on improving the legal environment for land administration.
On April 4, the Committee on Agrarian Policy and Land Relations approved the ‘anti-raiding’ draft law1 for VR reading and adoption. In May and June, the law was included in the VR’s agenda several times, but each time its review was postponed. ARDS helped draft the law at the request of and in close collaboration with leading agriculture industry associations through a working group established by the VR Committee on Agrarian Policy and Land Relations. The draft law will stop illegal takeovers of land experienced by farming enterprises around Ukraine and strengthen the protection of land owners’ and users’ property rights by improving the maintenance of the land cadastre and property rights registration systems and ensuring the completeness and accuracy of records in these systems. It removes existing data inconsistencies between the land cadastre and property rights registry and provides official status to the Public Cadastre Map. The law is scheduled for VR voting in its first reading in July.
On April 19, another ARDS-supported draft law2 on the allocation of land plots to ATO veterans failed to secure enough votes to be adopted by the VR and was sent for revision. On May 15, the revised draft law was registered in the VR and presented for review by the Committee on Agrarian Policy and Land Relations. Meanwhile, to advance the approval of the most important initiatives of this draft law, agricultural associations, the ATO Veterans Council, and the All-Ukrainian Association of Combatants and ARDS will advocate for including the key provisions of this draft law into another draft law on establishing family farms that was also developed by ARDS experts and is at a more advanced stage of review and adoption (see section ‘Legal environment for efficient land market established’ below).
On May 22, the VR approved in principle a draft law prepared in FY18 Q2 with ARDS support to ensure efficient use of agricultural land tracts3. Provisions of the law (i) allow farmers to maintain field unity by introducing a simplified voluntary mechanism for optimizing agricultural land use to avoid the unnecessary division of fields, (ii) pass into communal ownership formerly collectively-owned wind breaks, field roads and unclaimed land shares so they can be properly used to benefit local communities; and (iii) better protect rights of land owners and users on irrigated lands. The law creates legal mechanisms for the more efficient use of up to 1.5 million hectares of agricultural land that was unclaimed during the land privatization process or has an unclear legal status, as well as mechanisms for the consolidation of small land plots and increased investment in irrigation systems. Many Ukrainian policy-makers consider addressing these issues as a pre-requisite for opening the agricultural land market. The law is scheduled for parliament voting in its second reading in July.
ARDS began preparing two laws on deregulation and the improvement of land management procedures. The draft laws are expected to be prepared, discussed, and submitted to the VR in September 2018. Going forward, ARDS will allocate its resources for deregulation and improvement of land management procedures also on establishing CTCs land management capacity, as part of the local systems development program. The FY19 work plan will be revised accordingly, dropping another small pilot
1 Draft Law “On Amendments to the Land Code of Ukraine and Some Other Legislative Acts on Counteraction to Illegal Takeovers” (#8121) 2 Draft law “Introducing amendments to the Land Code of Ukraine and some other pieces of Ukrainian legislation to guarantee the right to get a title for land plots to war veterans and individuals of the same status, including participants of the anti-terrorist operation, the Revolution of Dignity and their families, and stop the corrupt practices in managing the state and communally owned lands” (#7511) 3 Draft Law “On introducing amendments to some pieces of Ukrainian legislation to address the issue of collective ownership of land, improve the regulations on using the lands being a part of agricultural land tracts, prevent asset grabbing and induce irrigation in Ukraine” (#6049-D as of December 26, 2017)
Page 8 of 46 AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT initiative on improving legislation on land inheritance rights. Based on an analysis of outstanding pieces of legislation and policies pending review and possible through two election cycles (Presidential and VR) through the life of the project, ARDS will recommend revising the target downward for indicator #6 of the MEL plan in FY2018 Q4.
Land management capacity established
ARDS prepared a draft law to allow CTCs to establish their formal boundaries and manage land resources within them4. Its purpose is to determine the land-related authorities of CTCs on their territory outside the settlements. Experience shows that territorial communities increase their support for lifting the moratorium and introducing the agricultural land market if land is transferred to CTC ownership and there is a precise definition of CTC councils’ land-related authorities.
In April, the draft law was presented for discussion with experts and shared with partner sector associations for registration in the VR. ARDS also shared the draft law with 354 representatives of CTCs and collected their comments and feedback during the roundtables conducted with the World Bank from April - June 2018. The draft law is expected to be submitted to the VR in the next reporting period. Presenting land system management tools to CTCs and farmers Poltava, June 2018 ARDS continued disseminating its Practical Toolkit for CTC Land Management, based on the Kipti CTC pilot in Chernihiv oblast, with CTCs and local communities.
On June 21, ARDS presented its initiative on land management to G7 Ambassadors and Vice Prime Minister Hennadiy Zubko at the Kipti CTC. Kipti CTC head Volodymyr Kuchma presented the pilot land management results in his community and its impact on Kipti community investment plans.
G7 Ambassadors visit Kipti CTC The G7 Ambassadors and Vice Prime Minister were impressed with Chernihiv oblast, June 2018 the initiative’s results and recognized the necessity of establishing land management capacity at the CTC level in a holistic way by both adopting the law and developing practical steps for implementation for CTCs. Vice Prime Minister expressed his impressions on his official Facebook page while visiting Kipti highlighting the importance to move forward the law on transferring state land to CTCs.
“At Kipti CTC, we were presented today a fantastic and necessary project ‘Land Management and Implementation of Local Economic Development Strategy in Decentralization,’ implemented by the USAID ARDS project. … Now it is very important to pass the law on transferring land resources to CTCs and land territorial planning." H. Zubko, Vice Prime Minister
ARDS will initiate another pilot on land management with Mykolaivka CTC in Donetsk oblast. The pilot’s target is to enhance the previous pilot’s steps and develop of solutions on simplification of land management allocation procedures, meaning community land plan allocation and allowance for investment projects. ARDS plans to finalize this second pilot on land management by December 2018.
4 Draft Law “On Amendments and Additions to the Land Code of Ukraine and Other Legislative Acts of Ukraine on Forming and Using Lands of Village, Settlement, and Urban Territorial Communities”
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 9 of 46 Agricultural land market established
Agricultural land market introduced There was no meaningful change in the Ukrainian government’s position on abolishing the land moratorium. Although officially the government continues to work on the draft law “On Agricultural Land Turnover”, the draft law has not yet been released for public discussion. ARDS has focused its efforts on drafting laws that would gradually abolish the land moratorium and enhance land rights even under the moratorium. The main ARDS legal initiatives on establishing the agricultural land market (farmer-centric model for the agricultural land market, draft law “On Land Ombudsman of Ukraine” and draft law “On Amendments and Additions to Certain Legislative Acts Concerning the Transfer of the Rights of Lease of Agricultural Land”) are on hold. Since these laws are related to the draft law “On Agricultural Land Turnover, ARDS will be advocating for them only when that draft law is published.
In May, ARDS joined the Working Group on Developing Proposals for Land Reform, which is affiliated with the VR Committee on Agrarian Policy and Land Relations. The working group expects to develop the concept of Turnover of Agricultural Land. ARDS will promote its main legal initiatives (above) within this collaborative working group.
ARDS analyzed the May 2018 decision of the European Court of Human Rights (ECHR) regarding the case “Zelenchuk and Tsytsiura vs. Ukraine.” The court recognized that the land moratorium contradicts the Constitution of Ukraine and is subject to cancellation. According to the ECHR court decision, after August 22 any Ukrainian land owner can sue the Ukrainian government in a local court to be compensated for the violation of his/her land owner rights. This would have an enormous negative impact on the Ukrainian state budget. This precedent will hopefully reinforce the need for lifting the land moratorium and impact farmers’ attitudes towards land reform.
At the request of USAID, ARDS commissioned a Political Economy Assessment (PEA) of land reform in Ukraine. The results were presented ECHR press release, May 2018 to and discussed with USAID and the World Bank in June 2018. The final document will be published in the next reporting period.
Legal environment for efficient land market established
As lifting the moratorium is still pending, ARDS has focused its efforts on developing two laws that would enhance citizen land rights even under the moratorium. One law aims for a partial lifting of the moratorium on agricultural land sales on January 1, 2019, for fruit, grape, and berry producers. At the request of the Ukrainian Chamber of Commerce’s Committee of Agricultural Entrepreneurs, the Association of Fruit Growers, and the Association of Winegrowers, ARDS drafted a law on agricultural land rights for farmer-gardeners5. The draft law establishes legal safeguards to protect farmer-gardeners’ investments in leased land, allowing fruit, grape, and berry farmers to purchase up to 200 hectares of agricultural land used for commercial production of perennial crops under lease terms. The total area of such land is estimated at around 200,000 hectares. If approved, the legislation will create more favorable conditions for long-term investments in fruit, grape, and berry production by small- and medium-size farmers and pave the way for lifting the moratorium
5 Draft Law “On Amendments to the Land Code of Ukraine regarding the Acquisition of Agricultural Land for Gardening, Viticulture, and Hop Growing Needs”
Page 10 of 46 AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT on all agricultural land in Ukraine. The draft law is currently going through expert discussion and is expected to be submitted to the VR in the next reporting period.
Another ARDS initiative is on establishing family farms. During May and June, ARDS worked on a law6 that would introduce transparent farm auctions for establishing and running family farms as legal entities. The draft law provides for lifting the moratorium on land plots owned by family farms and limits free privatization of land by citizens, which would stimulate the acquisition of land on the market. The draft law was adopted in the first reading on May 22 and the second reading is expected in September 2018. Together with partner sector associations, ARDS experts are working with VR Committee on Agrarian Policy and Land Relations to include into this DL the key provisions from draft law on the allocation of land plots to ATO veterans to secure ATO veterans’ rights with higher probability to pass this law in autumn 2018. ARDS will continue its initiatives on improving the legal environment for a more transparent land market as it helps to create better conditions to enable lifting the moratorium. However, ARDS will recommend revising the MEL plan indicator #6 for downward revision in FY2018 Q4.
Institutional Capacity to Design and Implement Reforms Built
Institutional capacity of Ukrainian Government agencies increased
ARDS continued assisting the MAPF and its Reform Support Team (RST) in strategic areas of organic production, niche crops, and irrigation system rehabilitation and development. ARDS completed or contributed to the working group’s activities in the following ways:
1) Developed proposals to amend the draft law on organic products7 for review by the VR. The draft law to bring transparency and structure to the organic market was approved in the first reading on April 19.
2) Organized a media brunch with MPs and MAPF officials for national media on May 23, 2018, to facilitate further discussion of organic legislation and final approval of the draft law on organic products.
3) Assisted the VR Committee on Agrarian Policy and Land Relations to finalize the text of the draft law on organic products. The Committee endorsed the draft law on June 21 and recommended it for final approval by the VR. Approval and implementation will catalyze further development of the organic sector by improving its regulation and raising consumer confidence in domestic and export markets.
4) Conducted a survey of national and international organic certification agencies to compile a comprehensive database of Ukrainian producers and processors of organic products for 2017. The database will serve as the main source of statistical information on Ukraine’s organic sector and a basis for MAPF’s national registry of organic producers.
5) Drafted the law “On Water Users Associations” and presented it for review by MAPF officials. The draft law will establish a proper legislative framework for water user cooperatives and associations and improve management of irrigation systems at the local level.
6 Draft Law “On Amendments to the Land Code of Ukraine and Certain Legislative Acts of Ukraine on Fostering Establishment and Development of Family Farms” (#7060) 7 Draft law “On Basic Principles and Requirements for Organic Production, Circulation, and Marking of Organic Products,” (#5448)
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 11 of 46 ARDS had planned to phase out this form of assistance (seconding ARDS staff to the RST) and therefore did not budget funds past May 2018. Instead, ARDS planned and budgeted for short-term targeted STTA hired as private entrepreneurs through the end of the project. However, the MAPF made a request to USAID to continue funding for experts and coordinators indefinitely.
In early May, USAID reached a compromise with the MAPF whereby ARDS will continue to provide support in the three priority areas of rural development, organic, and irrigation by hiring private entrepreneurs. ARDS was asked to hire one full-time expert per area for six months, through December 2018, assuming a July start date. ARDS may hire one more full-time expert for another area which is TBD and subject to USAID concurrence. Alternatively, if justified, two experts may be engaged for one of the three areas listed above. The total “labor bank” of LOE for the assistance is 480 days. SOWs for experts will be based on specific deliverables to be achieved through December 2018. Also, SOWs will be drafted by the MAPF and will include monthly reviews of progress toward achieving deliverables. The reviews will inform any SOW adjustments or even decisions to terminate assistance before December 2018, if there is a lack of progress towards achieving results.
The MAPF had finalized one SOW for an organic expert by the end of the reporting period and ARDS will submit the approval request to USAID in the first week of July. ARDS is encouraging the MAPF to accelerate the SOW drafting process to fulfill their agreement with USAID.
MAPF’s restructuring has been in process since ARDS began. ARDS was optimistic that progress could be made so therefore set targets for MEL plan indicator #5 “Number of officials applying new skills to develop agricultural policies or partnerships” and began training MAPF staff. Unfortunately, very little progress has been made in the official MAPF restructuring. Staff hired for the two new MAPF Directorates in April 2018 will be trained through Cabinet of Minister-sponsored training and by other donor-financed projects. Adapting to the current situation, ARDS has canceled the next round of planned training and professional development for MAPF and will recommend eliminating MEL plan targets for this indicator in FY2018 Q4.
Capacity of business associations and civil society enhanced
ARDS continued supporting partner agricultural industry associations to build their capacity for agricultural policy analysis and advocacy of market-oriented reforms. Highlights of supported activities include:
Ukrainian Agrarian Confederation Developed a concept for the National Strategy for Agrarian Sector Development based on the principles of mixed economy. Updated and published an analytical report on the economic efficiency of land use by agrarian enterprises of different size. Prepared a concept for rural development in the context of decentralization and land reform. Prepared a report on the breakdown of state agrarian enterprises according to their production area and profitability, including a comparison with similar enterprises in the private sector. Association of Ukrainian Pig Breeders Finalized and presented to the MAPF for approval draft national pig industry standards for an environmental impact assessment. Finalized and presented for approval draft guidelines for compliance with legislative requirements on food product safety at facilities for breeding, keeping, and slaughtering swine and primary processing of carcasses. Organized three trainings for members on the application of national pig industry guidelines. Held a press conference to disseminate results of the project at the national level. Analytical Centre of Agrarian Union of Ukraine Updated and published “Concept of Industry Associations Development based on Self-Regulation Principles.” Developed proposals for state authorities on the regulatory and legal framework of industry self-governance and its financial, economic, and organizational support. Ukrainian Society of Soil Scientists and Agrochemists Developed and published models of system management for fertile soil potential in Kharkiv and Volyn oblasts. Drafted a regional program on soil protection and reproduction of fertility, using Kharkiv oblast as an example, and presented it for public discussion and approval by Kharkiv oblast council.
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Developed proposals on improving the regulatory and legal framework for managing fertile soil potential. All-Ukrainian Association of Village and Township Councils Created a working group to analyze current legislation regulating the development of rural areas. Conducted analysis of current policy and regulatory framework governing the development of rural areas and compared its components and mechanisms with mechanisms that ensure conditions for the sustainable development of rural areas in developed countries, primarily in the EU. Held four regional events with experts, local self-governance leaders, and rural entrepreneurs to discuss results of the analysis and proposals for improving the regulatory framework.
The Strategic Investment Fund grants closed in May 2018, except for the All-Ukrainian Association of Village and Township Councils, which ends in August. One grant will be awarded to the All-Ukrainian Agrarian Council next quarter to build the association's capacity for agricultural policy analysis and reform advocacy. No other SIF grants to associations for capacity building are planned, other than one grant designed to prepare an association for receiving direct funding from USAID, as required by the ARDS task order. In the future, the capacity of business associations and civil society will instead be enhanced by engaging with them directly through legislative drafting or working in partnership on other ARDS initiatives. This change in plans reflects the current political climate with two upcoming elections and the ARDS reallocation of funds to capture stakeholder momentum in rural areas through the soon to launched local systems development program. ARDS therefore will recommend eliminating future targets for indicator #12 of the MEL plan “Number of NGOs receiving U.S. government assistance engaged in advocacy interventions” in FY2018 Q4.
Capacity of local communities and CTCs
ARDS developed a local systems development program to expand the successful land management system developed in Kipti to other CTCs. The land component of the program will be the entry point to work with communities on mapping out their resources, who will be supported in building their economic profiles and preparing investment projects - all ensuring steady development of the CTCs. Establishing land management systems is the initial step to building CTC capacity, and helps to identify CTC boundaries and land property.
The focus of the first stage of the local systems development program is building CTC capacity to manage their land resources. ARDS is supporting Palanka CTC (Cherkasy oblast) to establish its land management system, with data collection completed in FY18 Q3.
As part of this variation of the Kipti pilot project, ARDS is encouraging local private businesses to cooperate with their communities. The Association of Milk Producers (AMP), an ARDS investment partner in the dairy value Palanka CTC citizens participate in CTC plan development; Gorodotske village, Cherkasy oblast chain, will be a role model for engaging local business in May 2018 developing the new Palanka CTC in Cherkasy. A local business’ close cooperation with its community will be beneficial for rural development and is the essence of the ARDS local systems development program that will be launched next quarter.
ARDS will implement the local systems development program in six eastern Ukraine oblasts (Kharkiv, Donetsk, Luhansk, Zaporizhzhya, Dnipropetrovsk, and Kherson). The comprehensive program will focus on developing skills in land-use management systems, using the Practical Toolkit for CTC Land Management, building GIS-based land-use management systems for CTCs, pre-feasibility studies for select investment projects, business plan development, and access to funding.
ARDS also announced a grant program to support CTCs to implement their investment projects. Three projects out of 45 submitted investment concepts were selected for co-investment in two local communities: Vesele CTC (Zaporizhzhya oblast) and Kipti CTC (Chernihiv oblast). The implementation phase begins in next quarter for these projects.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 13 of 46 ARDS will respectively revise the plan on indicator #23 related to this ARDS activity to reflect the phasing of projects implementation by years in FY2018 Q4.
State Agri-Food Controls Reformed and Improved
From May 26 to June 2, ARDS conducted a study tour to EU countries to learn how governments engage business associations and the private sector in agri-food control and compliance monitoring of phytosanitary and veterinary regulations, requirements, and standards.
A Ukrainian delegation of industry associations, phytosanitary and veterinary laboratories, the VR Committee for Agrarian Policy and Land Relations, and the MAPF visited the Netherlands and Germany to learn about EU principles of agri-food control systems, with an emphasis on the private sector’s role in veterinary and phytosanitary control.
Twelve Ukrainian participants met with representatives of Dutch and Ukrainian industry association German ministries and inspection bodies, industry associations, and EU lab specialists learn from Dutch laboratories and farms. The study tour helped Ukrainian experts to see and German experience of private sector involvement in how private laboratories, industry associations, and the business agri-food control community can be engaged into veterinary and phytosanitary control in Ukraine.
“Given that one of the top priorities for the state phytosanitary labs in Ukraine is to obtain accreditation under the Ukrainian state standards DSTU, ISO / IEC 17025, It was really interesting for us to find out more about the lab accreditation procedure and the Dutch Accreditation Council. We also learned the operating principles of the accredited labs we visited during the study tour. I believe private phytosanitary labs have the right to exist in Ukraine, because this will trigger positive competition and encourage state labs to ongoing improvement.” Olha Kharachko, State Phytosanitary Laboratory, Lviv oblast
“The study tour proved to have significant practical meaning. When you read the European Directives, it is hard to understand all the provisions and details, whereas when you see it on a practical level, you can ask some questions and even the most complex concepts become clear, evident, and easier to implement. My recommendation will be to introduce certain amendments to the legislation to delegate a number of functions to private laboratories.” Vladyslav Sedyk, Phytosanitary Association of Ukraine
“Official visits to both state and private institutions of Germany and the Netherlands enabled extending our professional horizons and finding answers to some critical questions, such as trends and prospects of laboratory testing, focal areas of laboratory studies, and European best practices (legislation, methodology, quality standards).” Olha Dyhun, Laboratory ‘Prime Lab Tech’
By sharing international best practices, ARDS is driving private sector engagement and the introduction of self-regulation elements in agri-food control by providing expert support and building awareness.
After summarizing the learning from the study tour and research findings from previous reporting periods, ARDS organized the conference “International Practices in Private Sector Engagement into Phytosanitary and Veterinary Control” on June 27, 2018. The conference was co-conducted with the Better Regulation Delivery Office (BRDO) to facilitate discussion on regulatory and administrative
Page 14 of 46 AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT barriers, draft laws on phytosanitary measures, and identify the next steps for enabling the regulatory environment in the meat, dairy, fruit, and vegetables supply chains.
ARDS will prepare an action plan with recommendations for the Ukrainian government and civil society by the end of July. In the next quarter, ARDS will provide support to the MAPF and industry associations to elaborate drafts of legislative acts in accordance with the action plan.
ARDS will promote the best international practices in agri-food control and will promote them while working on the framework law on self-regulating organizations with the Ministry of Economic Development and Trade. The framework law is envisaged by the Concept on Introducing Self-Regulation adopted by the Ukrainian government on May 10, 2018.
Regulatory environment streamlined for dairy and meat value chains
In May, ARDS conducted an analysis of existing and potential regulations in the agricultural sector regarding veterinary laboratory tests and international experience operating and regulating private veterinary laboratories. ARDS identified recommendations on how to improve veterinary control procedures; how to address the gaps, outstanding issues, and conflicts in regulations regarding veterinary control; and best practices in operating and regulating private veterinary laboratories. These issues and the next steps for streamlining veterinary control were discussed with officials and experts during the conference on June 27, 2018.
ARDS facilitated discussions between the Ukrainian government and industry associations Association of Ukrainian Pig Breeders (AUPB) and AMP to set-up the main principles on farm animal welfare initiatives and establish the National Council on Animal Welfare.
In March 2018, stakeholders (ARDS partner associations and the MAPF) agreed to draft rules on animal welfare. The rules will serve as Codes of Practice that describe minimal standards and requirements for the protection of farm animals to ensure their welfare (infrastructure, holdings, feed, access to animals, hygiene, etc.). The stakeholder discussions resulted in defining core approaches for implementing Animal Welfare initiatives: 1) Rules would adopt minimal requirements to align with EU Directives8; 2) Rule implementation would require renovation of pig and calf farm infrastructure, with farmers being responsible for corresponding costs; 3) Rules will come into force starting from 2021; Barriers to establishing efficient veterinary control in Ukraine 4) MAPF would perform the functions of the National Council on Animal Welfare.
In April, AUPB and AMP became members of the MAPF Working Group (created in 2015) on adopting Ukrainian legislation to EU requirements on farm animal welfare. In May and June, ARDS partner associations developed draft Codes of Practice in their dedicated areas: AUPB for pig welfare and AMP for calf welfare.
ARDS provided recommendations to AUPB on the draft rules on pig welfare. In the next quarter, the MAPF Working Group will conduct internal discussions to fine tune the rules for further public discussion. ARDS will facilitate public discussions, engaging experts and industry associations to advocate for the need to establish animal welfare standards.
8 European Union Directive #2008/119 and Directive # 2008/120 from 18 December 2008
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 15 of 46 Since the MAPF postponed rule implementation until 2021, the implementation phase on animal welfare is beyond the ARDS project timeframe. ARDS has revised its work plan accordingly to reflect the changes on animal welfare initiatives for 2019-2020. In light of these developments, ARDS will recommend revising MEL plan indicator #11 downwards in FY2018 Q4.
ARDS must accept the MAPF’s current limited capacity to move forward with deregulation in agri-food control. Full-scale animal welfare standards require significant private sector investment and the MAPF will have to make unpopular decisions. The Ukrainian government lobbies for partial implementation of animal welfare, which needs to be reflected in the implementation phase from 2021.
Regulatory environment streamlined for fruit and vegetables value chains
In April 2018, ARDS conducted an analysis of the regulatory environment in the field of phytosanitary procedures and measures, including a search for best practices in private phytosanitary laboratories operations. The analysis helped to define the barriers in existing regulations and urged finding solutions to improve phytosanitary control procedures and overall legislation to empower private phytosanitary laboratories. The barriers in establishing efficient phytosanitary control were discussed with officials and experts during the June 27 conference (above).
In parallel, ARDS, the Phytosanitary Association of Ukraine, BRDO, and the VR Committee on Agrarian Policy and Land Relations advocated together for the adoption of the draft law9 on streamlining phytosanitary procedures10.
This law embraces the EU approach of delegating specific functions for official phytosanitary control to private laboratories as one of the steps to harmonizing Ukrainian legislation with EU principles according to DFCTA and the EU-Ukraine Association Agreement. The law will empower private laboratories to conduct official phytosanitary tests for produced plants. This will be the first crucial step in the state agri- food decentralization process and should reduce corruption in the agricultural sector. With this law, farmers will have the option to choose between state and private laboratories to conduct agri-food safety tests for their produce. This will also encourage market Leaflet with key provisions competition between private and state laboratories, which should lead on draft law #6673 to improved quality of services for farmers.
ARDS facilitated discussions on enhancing this draft law with industry experts and associations. ARDS presented its findings on gaps between the draft law and international regulations in plant protection. The draft law was enhanced in June 2018 with simplified procedure steps and delegation of broader functions to the private sector. Representatives of the VR Committee on Agrarian Policy and Land Relations initiated this proposal based on their learning during the study tour to EU conducted by ARDS in May - June 2018. While visiting Dutch regulators and private laboratories, study tour participants were impressed with the efficient agri-food control system, established partnership relations, and trust between all actors.
On June 21, 2018, the VR Committee on Agrarian and Land Relations considered updated draft law and decided to put it on the VR agenda for adoption in July 2018. After the law is adopted, ARDS will support the Ukrainian government in preparing by-laws and regulations on practical implementation of the new law, such as laboratory selection criteria, and the step-by-step process of delegating phytosanitary testing duties to private laboratories.
9 Draft law “On Making Amendments and Supplements to Some Legislative Acts on regulations to some phytosanitary procedures” (#6673)
10 International Plant Protection Convention (IPP C); EU Directive 2000/29/EU (dated May 8, 2000); EU Regulation 2017/625 (dated May 15, 2017); EU Regulation 2016/2031 (dated October 26, 2016).
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Enhancing Value Chains and Supporting Functions
ARDS targets four key value chains to improve the agricultural market system and opportunities for rural households. ARDS works to integrate Ukraine’s rural farm households, small and medium farm enterprises, and rural non-farm enterprises into these value chains for improved rural livelihoods and economic development. Embracing the U.S. Government Global Food Security Strategy’s Guidance on Market Systems and Value Chain Programming, ARDS adopts an inclusive market systems approach that uses value chain principles in the meat, dairy, fruit, and vegetable value chains, while aligning value chain support functions and the enabling environment.
This approach relies on the facilitation of value chain actors, including the private sector, individual households, national and local government, civil society, and academia. ARDS only undertakes “light touch” efforts that facilitate sustainable market development and leverage market actor relationships without directly intervening in value or individual supply chains. Inherent in this approach is an emphasis on developing Ukrainian capacity to act on opportunities, respond effectively to shocks and stresses, and solve problems independently. ARDS also addresses systemic and support function constraints that, if removed, can bring growth in multiple value chains, including input supply systems for dairy and beef cattle production and for fruit and vegetables, market information services for fruit and vegetables, and financial services and logistics for all value chains. Finally, challenges, successes, and learning under this area focus ARDS initiatives towards improving rules and regulations.
Using the inclusive market systems approach, ARDS, with its investment partners, will facilitate building cases for how to bring growth in multiple value chains by adopting and implementing various aspects of behavior change into agri-business daily activities.
Fruit and Vegetables Value Chains
Decreasing harvest losses
Building post-harvest process ARDS continued to work with its investment partners on establishing improved post-harvest process in their supply chains.
ARDS, together with Agrico, will run a seminar series for partners and market actors down the value chain on applying Global G.A.P standards to potato production and processing. The first seminar will be organized jointly with the company Syngenta in July. During seminars, ARDS will also disseminate the published booklet on Methodological Guidelines for the implementation of GLOBAL G.A.P Standard Requirements in Potatoes.
ARDS and Agrico established a 100-hectare demonstration field at Potato plants of Madlein variety on CJSC Elvico-Giant in Kostyantynopilske (Marinsky rayon, Donetsk the demonstration field in the oblast) to showcase growing technologies for nine potato varieties Donetsk region, June 2018 (Riviera, Arizona, Evolution, Volare, Esmi, Constance, Madlein, Rudolf, and Picasso). ARDS supports local farmers with consultants on technologies for protecting potato plants against weeds, pests, and diseases. In August, a demonstration field day is planned for 15- 20 potato growers in Donetsk oblast to spread information on growing technologies for the industrial cultivation of potatoes and the best varieties for the local climate and soil.
Another ARDS investment partner, Sady Donbasu, continues to grow its export sales. After shipping a pilot batch of 122 tons of apples to Belarus in FY18 Q2, the company exported an additional 208 tons to Belarus during FY18 Q3.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 17 of 46 In another effort to “tighten” relationships among value chain actors to expand markets and increase incomes throughout the entire fruit value chain, ARDS signed grant agreements with two previously selected SMEs: Si Milk (Malyn, Zhytomyr oblast) and Fruktona (Vinnytsya). ARDS expects these grantees will purchase, install, and commission equipment in the next quarter.
Fruktona Cluster Partnership
The majority of agri-SMEs working in the fruits and vegetables supply chains are used to working individually and rely mainly on their own efforts. ARDS research on behavior change (Dec. 2017) found that more than 56% of respondents said it was a challenge to find potential partners and build trusted business relationships. Fruktona has taken a leading role in creating a fruits and berries cluster, uniting specialized agri-SMEs (that have one or two agricultural cycle processes) and building trusting and long-term relationships. Fruktona’s cluster success will serve as an example for other SMEs of the benefits of changing the cooperation model from one-off contracts to long-term reliable business relationships. This behavior change will bring higher incomes in the long term and stimulate sustainable business development for all cluster participants.
Fruktona facilities and example of frozen cranberry. Maksym Bortnyk – farmer
Fruktona Farmer and Partner LandBort
Maksym Bortnyk is a young farmer who organized his small agri-enterprise, LandBort, in 2016. Maksym decided to start his agri-business by growing strawberries and renting two hectares of land in the village of Shyroka Greblya. In 2017, LandBort became a berry supplier for Fruktona and was the first input supplier to harvest and collect strawberries according to Fruktona’s standards (berries without calyx - green leaves). In 2018, Maksym agreed to use Fruktona’s facility for freezing and storing his harvested berries. He rented another 13 hectares and planted strawberries on all his rented land. Now Maksym is planning to access export markets himself through Polish traders. This change in behavior exemplifies adaptation to market needs and the of building sustainable market linkages. with partners.
Increasing harvest control / productivity After the first stage of cooperation between ARDS and its investment partners was completed, and all the purchased equipment was successfully set up and functional, ARDS launched the next stage, focused on strengthening investment partners’ suppliers and scaling up best practices to the eastern part of the country.
In Kherson oblast, ARDS supports its investment partner Rozdolne in launching a demonstration field of 1.5 hectares for growing eight domestic bell pepper varieties, hosted by Nasko farm enterprise. Rozdolne will hold a field demonstration day for 30-50 farmers engaged in the industrial cultivation of peppers in late August. The partners planted different pepper varieties, so demonstration visitors would be able to compare local and foreign varieties and select which of them they would prefer to grow. Unlike field days traditionally organized by big international suppliers, visitors will be able to collect peppers, weigh them, and evaluate the productivity of each bell-pepper variety.
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Facing frequent disruptions in its horseradish supply, Vinnytsya Food and Gustatory Factory also launched a demonstration field to convince its supplying producers that horseradish is worth industrial cultivation. In April, the factory hired an international expert from Hungary to advise on modern technologies for horseradish cultivation. The factory had planned to purchase planting materials from Hungary, as well, but the supplier withdrew from the deal, fearing competition from the factory.
In 2018, only one producer, Zgar-GD, agreed to apply new Planting the first industrial horseradish field in horseradish growing technology on its field (see the text Ukraine, Vinnytsya April 2018 box on this input supplier).
Vinnytsya Food and Gustatory Factory Partner – Farmer Zgar-GD
Zgar-GD is a typical family farm enterprise run by the oldest, most experienced family member, Galyna Sidak. Galyna is a talented agronomist with more than 40 years’ experience working in Soviet-type collective enterprises (kolkhoz). In 2001, Galyna organized her own family farm. She grows a variety of vegetables and cereals, including beetroot, potato, wheat, and corn, on her 60-hectare farm. Zgar-GD is a long-term producer for the Vinnytsya Food and Gustatory Factory and has been supplying beetroot for more than five years. In April/May 2018, the factory persuaded Zgar-GD to set-up a demonstration site for industrial horseradish cultivation. After completing training on technology for growing horseradish, Galyna allocated 0.7 hectares of her land to plant horseradish and set-up a demonstration plot. However, she did not use the new technologies as she preferred her family’s traditional ways. Thus, Zgar-GD is applying a mixture of new and traditional approaches due to concerns regarding certain aspects of the new technology promoted by Vinnytsya Factory.
Zgar’s behavior change provides an interesting example of gradual execution. Initially, the farm agreed to plant horseradish as a demonstration plot, but applied its own technology (fertilizer dosing, land preparation, etc.). In November 2018, after the harvest, Zgar will compare its plot’s productivity and quality with the output from the field planted by Vinnytsya Food and Gustatory Factory using new technologies. Based on the results, it will decide whether to accept the new horseradish cultivation technology next season.
The results will be analyzed to (1) compare yields and economic efficiency of horseradish production using different technologies; (2) compare the profitability of horseradish cultivation and other crops such as potatoes; and (3) collect data and experience to motivate farmers to change their behavior, diversify their production of niche products, and introduce new technologies. Demonstration results will be shared with other farmers to convince them to embrace the change.
On June 26, Poltava-Sad, with ARDS support, held a seminar for eleven veterans in Poltava oblast who received land plots from the Ukrainian government for their participation in the Anti-Terrorist Operation (ATO). Poltava-Sad proposed that ATO veterans start growing fruits and vegetables for processing. The company demonstrated its processing facilities, the nuances of cultivating cherries and raspberries in fields and the enterprise’s nurseries and presented business perspectives for potential suppliers. The ATO veterans at the presentation of enterprise, for instance, is ready to provide new suppliers with cherry growing technologies during a seedlings and guarantee purchase of future crops. seminar at Poltava-Sad
ARDS investment partner VSESTO, a vegetable processor, faced the problem of low quality raw materials (cabbage and carrots) from local small- and medium-sized producers. Instead of looking for new suppliers in other regions, the company decided to improve the quality of local vegetables.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 19 of 46 VSESTO engaged agronomists and practitioners from Latvia to conduct a detailed webinar on varieties and technologies for growing cabbage. VSESTO purchased high-yield cabbage seeds “KRAUTMAN F 1,” which it provided to a local supplier with guaranteed purchase of all future yield at local market prices for the day of purchase. Another farm purchased seeds of the proposed variety on its own and concluded a similar contract for guaranteed purchase.
ARDS supports VSESTO in introducing the HACCP safety system, so establishing product quality traceability system with its suppliers is at the top of the company’s agenda. On June 22, VSESTO conducted another training for small producers, sharing their experience in contracting products and applying new production technologies in accordance with food safety standards.
‘Of course, we could change the geography for purchasing vegetables, re-orient to Zaporizhzhya or Dnipropetrovsk oblasts. But we want to support our neighbors in Lyman, who live alongside us and have a desire to grow. We are eager to see our suppliers not just as one-time salesmen, but permanent reliable partners. Therefore, in the first place, we ourselves must become "agents of local change", changing the usual attitude towards the development of a supplier network. If you wish, it’s like changing the common mindset.’ Tetyana Martynyuk, Executive Director of VSESTO
Implementing SMART agriculture ARDS collaborates with its partner Agrico Ukraine on establishing a fertilizing dose system for potatoes. During the reporting period, Agrico started to develop technological schemes on fertilizer doses for potatoes for its supply chain producers. The schemes will be finalized in the next quarter for dissemination among a broad number of Agrico partners, as well as the Association of Potato Producers.
Agrico is eager to establish the fertilizing dose system based on its own results in optimizing fertilizer costs. In 2016, Agrico conducted soil testing of its land in Semypolky (Brovary rayon, Kyiv oblast), and gained an understanding of the soil’s chemical structures. In autumn 2017, Agrico applied only the required dose of fertilizers as per soil tests results, which helped Agrico save 25 percent on fertilizer costs.
Agrico plans to strengthen its competitive advantage in negotiations with national Modern Trade chains and introduce tests for pesticide residue on potatoes that will be supplied to chains in Autumn 2018. This initiative is in line with another ARDS intervention: establishing a pesticide control system. ARDS co-invested with PLT laboratory to purchase modern laboratory equipment for detecting pesticide residues in the environment, including in soil, groundwater and other water sources, plants, feeds, fruits, vegetables, and other food products. In FY18 Q3, PLT laboratory purchased its first batch of modern equipment for conducting pesticide residues tests. PLT laboratory will be fully equipped by October 2018.
Additionally, in the next quarter ARDS will develop methodological guidance for Ukrainian farmers on the safe use of existing pesticides for further dissemination among farmers based on the Programmatic Pesticide Evaluation Report and Safer Use Action Plan (PERSUAP) that it prepared on behalf of USAID/Ukraine.
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Safety system standards implementing Guidelines to implement international food safety standards for the fruit value chain, which were developed and tested in partnership with sector associations UkrSadProm and UkrSadVynProm, were published in FY18 Q3 and will be distributed to fruit and berries producers through the associations and the Agrarian Club by Syngenta. Unfortunately, due to the protracted process of re-distributing functions between the MAPF and MoH, neither ministry has taken responsibility yet to officially approve the Guidelines.
To improve safety standards in producing vegetables, ARDS developed methodological guidelines for implementing the Global G.A.P. requirements for vegetable growing. The guidelines provide a detailed description of the Global G.A.P. norms and list the tasks, documents, forms, and records to be implemented and maintained by certification type. The text will be finalized in the next reporting period after discussion with producers and then published and disseminated. Using the methodological guidelines will enable vegetable producers and export-oriented purchasers and traders to meet basic food safety requirements.
ARDS continues providing technical support to its investment partners to assist SMEs with the implementation of guidelines and standards. In FY18 ARDS-developed Guidelines for implementing Global Q3, ARDS conducted preliminary audits and provided recommendations G.A.P. in potato growing on compliance with the Global G.A.P. requirements to Sady Donbasu, Halych Eco-Fruit (Galfrost’s supplying partner), and Uniq Garden (U-Berry’s partner). In the next reporting period, the partners will train key personnel on applying the Global G.A.P. standards at their enterprises, critical points analysis, and safety monitoring systems. ARDS also supported the implementation of the HACCP safety system by various types of actors in fruit and vegetables supply chains: two processors (Sady Donbasu and VSESTO – ARDS investment partners) and one trader (APK Torg - trader on Odesa Pochatok market supported by ARDS).
Steps in HACCP implementation Sady Donbasu VSESTO APK TORG (processor) (processor) (trader)
Diagnostic audit conducted Complete Complete Complete
Audit report prepared In progress Complete Complete
Corrective action plan developed In progress Complete Complete
Provided recommendations on premise plan In progress Complete Complete
Premise plan prepared In progress Complete Complete
HACCP instructions preparation In progress Complete Complete
HACCP implementation plan Sept-Dec 2018 Sept-Dec 2018 Sept-Dec 2018
Over the next six months all three SMEs will develop their HACCP implementation plans for a roll-out in the next marketing year.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 21 of 46 Strengthening SMEs business / marketing / management skills Enhancing sales performance ARDS continues its work on strengthening the business, marketing, and management skills of small and medium fruit farming enterprises.
ARDS supported a private sector initiative by Syngenta company to launch a Fruit and Vegetable Market Partners Club. The club will promote behavior change in value chain actors and is consistent with a market systems approach. The club’s inaugural meeting was held on May 22. The club unites all value chain actors (producers, processors, retail chains, and restaurateurs) to improve product quality, support the introduction of standardization and certification systems at agri-SMEs, help establish communication and interaction between players throughout the value chain, and stabilize the domestic fruits and vegetables market. The club will engage leading Ukrainian and international trainers and experts to assist with the implementation of international quality and safety standards, particularly GLOBAL G.A.P. and HACCP; support capacity development to create additional value for fruit and vegetable products and to expand the markets; and provide training on modern business approaches, production planning (areas, terms, storage, and delivery schedules), legal and financial aspects, marketing strategies, and agro-technologies. Farmers at the Fruit and Vegetable Market Partners Club Syngenta also plans to organize study tours and launch event internships, create and maintain demonstration locations, and disseminate best practices through the club. To continue assisting Ukrainian agri-SMEs to enter global markets, ARDS announced an open competition to participate in the Asia Fruit Logistica 2018 exhibition (Hong Kong, September 5-7). Asia Fruit Logistica is the only annual international trade fair in Asia for fruit and vegetables producers that focuses on fresh and processed fruits and vegetables. Ukrsadprom, with support from MAPF and ARDS, will organize the Ukrainian stand at Asia Fruit Logistica 2018. ARDS will pay for a standard exhibition stand, the design of the stand, and the development and publication of marketing materials for five SMEs. Participating SMEs will cover all their own travel and accommodation costs. Ukrsadprom and ARDS selected five companies operating in the fruit, berries, and vegetable supply chains to participate in Asia Fruit Logistica 2018. Considering the learning from previous exhibitions, ARDS identified ‘must have’ requirements for SMEs that will be supported by the project at the 2018 exhibition: Proven experience in exporting fresh fruits, berries, and vegetables; Available Global G.A.P. certificates; English-speaking sales personnel and English-language website; Prepared display samples of their fresh produce at the stand; Produce/prepare a minimum batch of products (100 tons for berries, 500 tons for stone fruits, and 1,000 tons for stable fruits and vegetables of stable quality); Have capacity for pre-sale preparation of products (automatic sorting, packing, quality control). Additionally, all short-listed applicants were requested to make a 15-minute presentation about the company in English to the selection committee via Skype. ARDS is currently working with five selected SMEs to design the stand, develop marketing materials, and prepare for successful presentation of their products in Hong Kong. ARDS will suggest revising the targets for MEL plan indicator #17 to reflect the new phasing of implementation by years in FY2018 Q4.
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ARDS also continues working to establish local market linkages. On June 22, ARDS organized the roundtable “Improving access of SMEs operating in fruit and vegetable sector to retail chains.” The event was attended by five large retailers (Auchan, BILLA, Metro Cash&Carry, and Stolychnyi market), and trading company Ukrainian Berry Guild. ARDS presented the results of the pilot river logistics (watermelon) project implemented in 2017 and initiated discussion with market players on the possibilities for further development of this project. Participating retailers demonstrated low interest in deploying river logistics. The following key obstacles were mentioned: Long transport time (five days); Failure to meet transportation conditions for fresh fruit and vegetables (no refrigeration) and associated product quality and safety risks; Risks caused by monopoly of Nibulon (non-market pricing for services); Need for substantial investment in infrastructure (packaging, packing materials, loading and unloading); Risks related to farmers’ ability to form large batches of quality products on an on-going basis (retailers believe that farmers can form large batches only occasionally). After compiling feedback from big national retailers and ARDS’ own calculations, the project concludes that the economic benefit of the river logistics pilot project is doubtful under existing circumstances. However, the pilot proves to be of interest to certain market players, considering their intention to move this pilot forward themselves by launching a second shipment in August. It is important to note that incentives other than commercial interest and short-term gains drive this pilot: the desire for political influence and publicity compensate short-term economic risks of the project and potential long- term commercial gains drive these market actors. Over time this effort may lead to the elimination of concomitant systemic problems and river transport will become more attractive to all participants in the chain. ARDS continues to monitor the initiative and is ready to provide guidance on request.
Strengthening marketing skills ARDS continued supporting the development of SME partners by creating attractive marketing products for consumers. ARDS signed agreements with Agrico, Vinnytsya Food and Gustatory Factory, and Sady Donbasu to start building their marketing portfolios.
Agrico, which is developing a marketing strategy for its new potato package (2- to 5-kilograms), developed and approved a trademark name, visual identity, and communication platform. A patent search revealed that a similar name already exists in the trademark registry. Registration of the chosen name is still possible, but must be filed along with the logo to visually distinguish it from the registered one. This slightly shifts the date of applying for registration.
ARDS is applying the lessons learned from Agrico's branding process as it assists Sady Donbasu and Vinnytsya Food and Gustatory Factory with development of new trademarks and products. In FY18 Q3, Vinnytsya Food and Gustatory Factory, in consultation with Agrico, prepared a scope of work and launched a competition to choose a brand development agency. Sady Donbasu has already completed a tender and selected a company to develop brands. Both branding plans will be finalized by the end of FY18.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 23 of 46 Dairy Value Chain Establishing a quality system for raw milk
Improving cow milk quality Comprehensive new regulatory legislation on milk quality impacting the agricultural industry, which was supposed to come into force on April 4, 201811, was again postponed to July 1. ARDS still expects official approval from the MoH and MAPF on the guidelines developed on Compliance with Food Safety Legislation at Facilities for Raw Milk Processing and its Pasteurization. The delay is caused by the process of re-distributing functions between the MoH and MAPF.
In the meantime, to introduce the guidelines developed by ARDS into the daily routine of milk farms, ARDS and AMP conducted a series of practical trainings on “Good Practices in Milk Production and Preparation of Dairy Farms for New Legislative Requirements.” The trainings included a simulated dairy farm inspection to better explain new legislative requirements and the methodology government inspectors will use to control quality at farms.
The trainings were conducted for 81 AMP farm members in: Training on "Good Practices in Milk Production and Preparation of Dairy Bilyn village, Volyn oblast (May 11) Farms for New Legislative Requirements” May 14, Uman (Cherkasy oblast) Uman, Cherkasy oblast (May 14) Paraphiivka, Chernihiv oblast (June 8) Maksimivka village, Poltava oblast (June 11) The dairy specialists were trained on how to take milk for quality analysis, effectively use veterinary drugs to guarantee successful treatment, how to precisely diagnose mastitis using express-detection methods, and how to effectively prevent disease. These skills will help AMP member farms increase the quality of milk they produce and maintain healthy herds. Launching Laboratory in operations
AMP Laboratory provided services on microbiological, physical, and chemical quality of milk to 49 farms from Chernihiv, Zaporizhzhya, Kirovohrad, Khmelnytskyy, Kyiv, Rivne, Cherkasy, Odesa, Volyn, Sumy, Zhytomyr, Ternopil, and Vinnytsia oblasts.
“Thanks to AMP Laboratory, we managed to detect and eliminate from our herds cows that carried the Staphylococcus Aureus bacteria - an agent of mastitis variety that is almost untreatable, but has a very high rate of contamination in the herd. Additionally, we found out that a disinfectant that we used for washing milking equipment was ineffective and a malfunctioning milk pasteurizer which we used caused the disease in calves. Now mastitis is under two percent in our herds.” Yaroslav Bilous, Director, Kyivska (Makariv rayon, Kyiv oblast)
11 The Law of Ukraine adopted on May 18, 2017, № 2042-VIII “On state control over observance of legislation on food products, feed, by-products of animal origin, health and welfare of animals”
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“We are glad to cooperate with the AMP Laboratory: just during one quarter, we moved from second grade milk to extra. We had a terrible situation with mastitis, because before collaborating with the laboratory, 100 out of our 825 cows had a clinical form of the disease, and the antibiotics we had been using had no results. Today, the number of mastitis cows is less than one percent and we stably produce extra quality milk.”
Anatoly Vitru, Progress (Volodymyr-Volynskyi rayon, Volyn oblast)
The AMP Laboratory was branded as LLC Uman Laboratories that will provide various types of laboratory services to AMP members as well as non-AMP member farms. Uman Laboratories plans to expand lab services (e.g., creation of a feed analysis unit) soon.
In 2018 Uman Laboratories developed an innovative kit Mastitis Kit (or M-Kit), a set of tests for rapid identification of mastitis and sensitivity to antibiotics for farmers use. Uman Laboratories also applied to patent this innovative product. The laboratory will present M-Kit at the international exhibition of stockbreeding EuroTier-2018 (November 13-16, Hanover, Germany) and participate in the DLG Innovation Contest at the exhibition. Meanwhile, the laboratory works on improving this kit and employs a group of IT specialists to develop a portable scanner to read M- Kit results at farms. This IT solution should operate on iOS or Android- based devices and be integrated with popular platforms for farm management. Uman Laboratories is financing this work.
In May 2018, USAID Assistant Administrator for Europe and Eurasia Brock Bierman visited Uman Laboratories to see how new technology helps dairy E&E Assistant Administrator Brock Bierman visited Uman farms attain success by producing a better product that meets international Laboratories standards. May 2018
During the reporting period, Uman Laboratories prepared a complete set of documents for certification in accordance with DSTU ISO 10012:2005 (availability of measuring capabilities and competence in carrying out measurements) and submitted the application for laboratory certification to Cherkassy StandartMetrologiya. The next step is an independent audit, which should be conducted in FY18 Q4.
Milk collector/processor market actors established
Milk pilot I: milk collector role for 50-100 tons per day batch and Milk pilot 2: Milk processor
The First Milk Cooperative was selected for the implementation of two pilots - introducing the milk collector role and creating a milk processing center. ARDS is analyzing the planning of industrial and residential premises at the Milk Collecting Center during the reconstruction of the site so the premises will correspond with HACCP requirements from their opening. By August 1, after reconstruction, the cooperative will install equipment for receiving and cooling milk and washing devices. Staff recruitment is also underway. In accordance with law12 on food safety, the HACCP quality control system will be implemented. The pilot will help farmers with a daily milk batch of up to three tons be more competitive with the price of raw milk and will stimulate their further development.
The milk collection center will be expanded to include a training center on milk processing, as the need for a training center became clear during trainings for future farmers and dairy industry specialists. The
12 “On basic principles and requirements to the safety and quality of food products” (#771)
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 25 of 46 training center will enable young people to practically apply their knowledge in crafting cheeses to become industry specialists and/or create cheeses on their family farms. Milk pilot 3: Luhansk new model on milk processing
ARDS continues to work with Bilovodskyi Butter Factory to address the systemic issue of low quality raw milk. The VR recently adopted state standards that restrict Ukrainian dairy factories from processing second grade raw milk, effective July 1, 2018. At the beginning of 2018, ARDS co-invested with the factory to acquire a bactofuge unit to enable the purification of raw milk at the cellular level. With this equipment, the factory can run additional treatments on low quality raw milk that is purchased from private households. This modernization will also enable compliance with dairy product standards, including maintaining export standards and promoting dairy product sales in retail networks and trade companies. The factory will receive the purchased equipment by the end of FY18.
On June 1, the factory received official permission from the State Service of Ukraine on Food Safety and Consumer Protection to export butter. Extra grade butter produced by Bilovodskyi Butter Factory is meeting the requirements for Algeria, Morocco, Turkey, Georgia, India, Nepal, Bangladesh, Kuwait, Lebanon, Syria, Saudi Arabia, Yemen, Pakistan, Egypt, Oman, UAE, and South Africa. This is a very important step for an enterprise in Luhansk oblast, which has faced a significant decline in consumption since 2014. The factory now has a significant stimulus to increase production volume, and, accordingly, increase the chain of milk producers from which it buys.
Meat Value Chain Beef production for local and export markets
Calf-raising center
After developing a model for calf-raising centers using the potential of dairy bull-calves from individual households, family farms, and small farms, ARDS prepared to test and demonstrate the model with two different approaches to cooperation with private households. Implementers were competitively selected to set up two demonstration sites: Cooperative Cherkasy Bulls (Cherkasy oblast) and Lebid Agro (Rivne oblast).
Cherkasy Bulls is a cooperative located in Tsybulkove village, Monastyryshchynskiy district, Cherkasy oblast. The cooperative is a newly created enterprise with more than 20 members that will unite private households to sell beef. The cooperative will provide a variety of services: cow insemination, veterinary services, cattle identification and breeding. Cherkassy Bulls will pilot the ARDS-developed business model at its site by providing breeding services for its cooperative members.
Lebid Agro is a medium enterprise located in Velbivno village, Ostrozhskiy district, Riven oblast. The enterprise has 2,000 ha and grows cereals. Recently it began renovation of an old Soviet facility farm located on its land to organize the calf-raising center. Lebid Agro will pilot a business model with calves initially purchased from private households and calves fostered in a separate building as per US standards.
Up to 4,000 households and 30 farms in Rivne, Khmelnytskyi, and Cherkasy oblasts will be involved in these pilot projects. The pilots will help develop organizational, logistical, veterinary, and financial tools for working with households to organize entry into markets. The pilots address the issue of illegal sales of calves aged 7 to 10 days, which takes place in unsanitary conditions and without any documentation or veterinary control. The creation of community-based calf-raising centers and the breeding of these
Page 26 of 46 AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT calves for further profitable sale will be a good solution to this market failure. Establishing this new business across Ukraine will revive the beef industry and increase rural household incomes.
“Today, a farmer is trying to sell a calf as soon as possible after its birth. So, the calves are being slaughtered at the age of 7-10 days. A calf requires six liters of milk per day at a cost of 20-30 UAH per liter, while all they gain is 200-300 grams of meat a day, at the price of 35 UAH per kilogram. Keeping these calves is loss-making for households. This is precisely why almost one million calves are slaughtered annually in Ukraine at the forbidden age of 7-10 days, while fattening them to the weight of 500 kilograms could add at least 500,000 tons of beef to the market and additional income to rural households.
Kostyantyn Paskevich, business consultant, Cooperative Cherkasy Bulls (Cherkasy oblast)
During the next quarter, both partners for the pilots will finalize all required documentation with the target to start implementation in Oct/Nov 2018.
Safety standards in meat production and processing
Safety standards on meat processing
ARDS continues to build practical solutions for improving the local meat value chain to address the systemic issue of under-developed infrastructure for beef and pork pre-sale preparation. In FY18 Q2 ARDS co-invested with agri-company Pryvillya to purchase equipment that will improve production efficiency and grow sales. Agrofirm Pryvillya (Luhansk oblast), located 130 kilometers from the NGCA and 15 kilometers from the Russian border, is a mature meat processor with more than 10 years of experience producing meat products.
In FY18 Q3 ARDS started conducting an analysis of the planning for reconstruction of industrial and residential premises at Agrofirm Pryvillya in accordance with HACCP standards. As soon as the reconstruction is completed in October 2018, ARDS will assist Agrofirm Pryvillya in purchasing modern equipment for meat processing and will continue advising the enterprise on the implementation of HACCP standards in meat processing. Agrofirm Pryvillya plans to increase production volume, improve product quality, expand the range of sausage products up to 30 types, and, accordingly, increase the company’s own livestock breeding and procurement from the local community and small enterprises. This will stimulate agricultural enterprises and private farmers to increase animal production to gain additional revenue. Agrofirm Pryvillya will incorporate at least 10 SMEs and more than 40 private households into its supply chain as meat suppliers. These suppliers will benefit from having guaranteed sales for their livestock and introducing modern technologies for animal husbandry safety. The firm will also assist its suppliers with international standards implementation on animal husbandry safety. The introduction of a traceability system for safe animal breeding will improve the region's epizootics and reduce the spread of African Swine Flu.
In FY18 Q3 ARDS ARDS co-invested with Miasne Remeslo to improve another local meat value chain in Donetsk oblast. The company, established in 2004, specializes in producing high quality sausages and meat delicacies using Ukrainian meat and applying German technologies. The company produces 80 types of sausage under the trademarks ProdRezerv and Miasne Remeslo, which are distributed by regional and national retail chains, including Silpo, Shchyryi Kum, Absolut, and Obzhora. It also supplies meat and sausage products to kindergartens, children's food production facilities, and recreational and medical facilities in Mariupol and Manhush rayon (Donetsk oblast).
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 27 of 46 ARDS will co-invest with Miasne Remeslo in upgrading meat processing and sausage producing equipment at its facility in Mariupol. This investment will allow Miasne Remeslo to implement HACCP safety standards at its facility and improve meat processing and the quality of its products.
Miasne Remeslo plans to increase by more than 30 percent the purchase of meat from meat input suppliers. This investment will improve the local value chain and will stimulate input suppliers to increase animal production and implement safety Miasne Remeslo production facility standards, resulting in additional income. Seven SMEs, farms, Mariupil, May 2018 and households supplying raw meat directly and indirectly (via five slaughter houses in Donetsk oblast) to Miasne Remeslo, will benefit from the project.
ARDS is also supporting the enterprise with the introduction of the HACCP food safety system in cattle and pig production. Through implementing the HACCP system, the company will meet the more stringent food safety requirements to comply with EU requirements and expand its sales markets. The enterprise also plans to improve the system of supplying products from small farmers to municipal facilities such as schools and kindergartens. In the next quarter, Miasne Remeslo will receive new equipment and begin its installation.
Safety standards for pig breeding
During the reporting period, ARDS completed the pilot on the practical implementation of the Guidelines on Compliance with Food Safety Legislation at Facilities for Growing, Keeping, and Slaughtering Pigs, and Butchering Meat conducted on five meat SMEs. These guidelines were developed in partnership with the Association of Ukrainian Pig Breeders (AUPB) in FY17. The guidelines were practically tested and are now being adopted by leading industry associations. The MoH is still expected to support the initiative and approve the guidelines for use by all pig-breeding enterprises in Ukraine in FY18 Q1. ARDS and AUPB began disseminating guidelines in FY18 Q3. In April three seminars for pig producers were conducted on the practical implementation of the guidelines. The seminars were held in Kyiv (April 18), Lviv (April 23), and Dnipro (April 24). Seventy-eight pig producers participated, learning about hygiene requirements such as measures and conditions necessary to manage hazardous factors and ensure suitability of food products for human consumption, and discussed possibilities for their implementation. The requirements can be applied in full or in part without violating the law.
AUPB and ARDS conducted a press-conference on “The New Rules of the Game for Pig Business in Ukraine”, discussing with the media:
Requirements for pork producers when the moratorium on business verification is lifted (effective in 2019); Implementation of European norms for pig welfare; Rules and requirements for storage and disposal of by- products (manure); AUPB and ARDS press conference Procedures for obtaining permits for the construction / on “The New Rules of the Game for reconstruction of production facilities in accordance with Pig Business in Ukraine” the Law “On Environmental Impact Assessment.”
ARDS also continued its cooperation with AUPB on the implementation of national standards and guidelines for an environmental impact assessment and hygienic requirements at pig-breeding enterprises. After consulting with businesses and experts, technological instructions on the storage,
Page 28 of 46 AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT disinfection, and disposal of pig manure were finalized (a manual on treatment and decontamination of manure with a reagent method was added) and submitted for approval to the State Service of Ukraine for Food Safety and Consumer Protection and the MAPF.
Additionally, ARDS supported the Working Group on the Development of National Standards for Environmental Impact Assessment for the Pig Industry under the National Technical Committee for Standardization to finalize national standards “DSTU Standard. Environmental Impact Assessment. Pig Complexes. Evaluation Criteria and Documents” and “DSTU-N Standard. Environmental Impact Assessment. Guidelines for Preparing a Report on Environmental Impact Assessment.” Both documents were sent for approval to the Ukrainian scientific-research and training center.
Supporting Functions
Supporting meat, dairy, vegetable, and fruit value chains as an engine for rural economic growth goes beyond the support provided to core value chain actors. Using a sophisticated market system approach, ARDS also supports functions that sustain core value chains, including information, infrastructure, skills, technology, and a range of services for value chain actors, e.g., finances, inputs, and post-harvest processing.
Market infrastructure
Access to new local markets Production cooperative Ivankovetsky Svitanok, supported by ARDS to introduce new dairy processing technology, brought several new products to the market. Ivankovetsky Svitanok sells its products to four schools, seven kindergartens, three local hospitals, and other institutions. However, big local retailers demonstrated less interest in the products than expected, as shelf-life of the new cheeses is shorter than those made with preservatives. To compensate low retailer interest, the cooperative pursued direct sales to customers who appreciate the high quality of the products.
Following ARDS recommendations, Ivankovetsky Svitanok will further improve product quality by introducing thermostatic processing of kefir. The cooperative applied for a grant from the Kirovohrad oblast investment fund to purchase the necessary equipment.
Producer groups’ institutional capacity developed ARDS continued to provide training and consultations to agricultural cooperatives. Twenty-one cooperative representatives from Cherkasy, Donetsk, and Luhansk oblasts were trained on institutional development, marketing of their products and services, access to new local markets, new technologies, and increasing productivity. ARDS training will help cooperative members improve their collaboration, improve service quality, increase the 21 cooperative representatives from number of services, introduce international safety monitoring Cherkasy, Donetsk, and Luhansk systems, and, consequently, expand sales markets. oblasts were trained by ARDS
Technology and infrastructure Food safety standards implemented in local wholesale and retail markets ARDS continues to work on finalizing methodological guidelines for introducing HACCP safety measures at wholesale and retail markets based on the experience of the Pochatok wholesale market in Odesa. ARDS shared the guidelines with interested markets and market associations, received approval of the recommendations from the UkrCoopSpilka, and will submit the guidelines to MAPF for approval in the next quarter.
Simultaneously, ARDS worked on the practical implementation of the methodological guidelines, assisting Novyi Rynok enterprise (Kherson oblast) with HACCP implementation. ARDS conducted a
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 29 of 46 diagnostic audit for compliance with the Voluntary Standard for Food Safety Systems DSTU ISO 22000 and prepared Novyi Rynok for certification.
ARDS continued developing an information bulletin with recommendations for CTCs on legal requirements for food. The bulletin will inform tender committees about food purchasing requirements for sensitive consumers, such as hospitals, kindergartens, and schools. In the next quarter, ARDS will collect feedback on the recommendations from the All-Ukrainian Association of CTCs and will publish the bulletin.
Irrigation systems improved ARDS selected 15 irrigation systems to pilot new approaches to their management. Unfortunately, the enterprises demonstrated less interest in ARDS support than had been expected. ARDS received no applications from Luhansk and Mykolaiv oblasts. The latter has the Ingulets and Yavkinsk irrigation systems, which are almost as large as the Kakhovka and North Crimean irrigation systems, and many smaller systems throughout the oblast. The most active were Kherson oblast CTCs, which initiated 60 percent of the applications, demonstrating their readiness to represent the interests of their citizens and businesses, as they are interested in the economic result of their activities. ARDS conducted assessments of the 15 selected irrigation systems to identify development baselines. Users were surveyed to identify the main challenges and prospects for irrigation system management and organizational development. Availability of water supply system: More than one-third (34 percent) of respondents are missing irrigation systems and have a desire to build them; 20 percent have old, worn-out utility water pipes with constant accidents and significant water losses. The rest have functioning irrigation systems which require expansion (modernization): 33 percent work but could increase the irrigation area; 13 percent are newly-built irrigation systems that will go into operation during the current irrigation season. Lack of operational costs: All respondents indicated a lack of working capital when answering the question “What do you think impedes an increase in the area of irrigation (specify and characterize the problems in your case)?” Considering the $50,000 minimum price for a sprinkling machine, estimated pipeline and fittings costs of $1,500/hectare, operational turnovers up to one million UAH, and no long- term bank lending for the design and construction of irrigation systems, it is indeed challenging for small businesses to improve the functionality of irrigation systems. Tariffs and standards: Private enterprises consider the standards of water use, tariffs for water supply, and payment methods acceptable. Communal water mains operated by utility companies are constantly facing accidents and repairs. Utility companies complain that tariffs only partly cover their expenditures and that, as a rule, their activities are loss-making. Tariffs are established by local communities and cannot exceed the national level. Land: Most respondents own their land, so only two irrigation systems (13 percent) listed the fragmentation of land as an obstacle to expand the irrigation system. Readiness for implementation: There are three main steps for improving irrigation systems. (1) Formation of the idea, production of design, and technical documentation. Three out of 15 entities have the design and technical documentation prepared and fully approved. If there is financing, it is possible to carry out construction work this year. (2) Construction. Four entities have ordered construction projects and, according to an optimistic assessment, they will be ready for implementation by the end of August 2018. (3) Testing and putting into operation. For eight out of 15 entities, expansion of the irrigation system is still at the idea formation stage. That is, they must go through the entire process of ordering documentation, drafting, approval, and equipment procurement. No radical changes should be expected by the end of CY18. ARDS will use this baseline analysis to develop recommendations and provide technical assistance for improving irrigation system management and the institutional development of water user groups.
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Specialized services SMEs financial awareness increased ARDS continued cooperation with the MAPF's State Farmers Support Fund of Ukraine to help agricultural SMEs access low-cost credit. The Fund is a government institution that provides interest- free loans and compensation for interest paid on bank loans to farmers incorporated as Farming Enterprises. The poor quality of applications and unpersuasive financing applications the Fund receives every year are, in part, the result of many farmers’ poor business planning skills. ARDS aims to increase farmers’ financial awareness and improve their financial modeling skills to give them a competitive edge for financing. It will certainly be advantageous and significantly improve the quality of applications for funding if they are centered around detailed and realistic business plans.
In March/April, ARDS and the State Farmers Fund conducted six regional trainings (in Rivne, Ivano-Frankivsk, Vinnytsya, Mykolaiv, Poltava, and Kyiv) for small and medium farmers who grow vegetables and berries. The fund is expected to provide 43 million UAH in interest-free loans in the first round of financing (by the end of June
2018), and the trainings targeted this As of June 2018, agri-receipts covered potato (1 receipt for 3,000 tons), and subsequent rounds. garlic (2 receipts, 19 tons), apples (2 receipts, 150 tons), raspberry (1 receipt, 1 ton), blueberry (1 receipt, 0.1 ton), hops (2 receipts, 30,000 tons), and milk (1 receipt, 25 tons), beyond the traditional crops. ARDS provided highly-skilled consultation on financial awareness and financial modeling, using business plan-generating software and ARDS templates. Trainings on creating business plans were delivered to 171 farmers from 17 oblasts. Participants received advice on creating their business plans and enjoyed free access to the software tool to prepare highly-customized business plans tailored to their needs and in the specific format required by the Fund. Thirty SMEs prepared full document packages required to receive the State Farmers Fund loan. Thirteen of them submitted their applications for consideration, requesting a total loan amount of 5.6 million UAH to purchase machinery and equipment for processing agricultural products, and to replenish working capital. ARDS will continue training farmers in the development of qualitative business plans, aiming to train 250 farmers who will develop 100 business plans, at least 50 of which will be submitted for financing.
“I am grateful to ARDS for the free development of a business plan for the Ukrainian State Fund… Agrianalityca is a unique program that allows you to plan the activities of different farms (plant growing and animal husbandry). We were able to develop a production map and automatically get all the background for a weighted solution, see the profitability, and accumulate funds in the right period for further production. I hope that we will receive financial support for the development of our enterprise through the developed business plan.” Valentina Polyanska, Chief accountant, Polyanski Farm
Feedback from the training participants shows a high demand for this kind of training to help prepare business plans for funding competitions. Moreover, training participants requested additional post- training consultations to help them prepare better business plans, applications, and other supporting documents. Considering that law on credit unions failed to be adopted, ARDS will recommend revising the targets for indicators #18 and #19 related to finance in FY2018 Q4.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 31 of 46 Support services to SMEs improved Improving market information services ARDS continued collaborating with UniqueTechnology, PROD mobile application developer, on upgrading the application. Prod was developed for farmers as a marketplace to negotiate pricing and batches and to collect various market information. PROD experienced significant difficulties in attracting new users and placing sales announcements. By the end of June, PROD attracted 572 farmer-users, who placed 57 announcements for fruit and vegetables product purchases and sales. The developer conducted a telephone survey of users to identify problems and possible solutions. Users suggested supplementing the app with new functional capabilities, such as information on current prices, size of commodity batches, and forecasts and trends in the fruit and vegetable crops market.
ARDS is also seeking ways to expand PROD usage. During a June roundtable with the largest Ukrainian retail chains (Auchan, BILLA, Metro Cash&Carry, Stolychnyi market), ARDS presented the mobile app to participants and initiated discussion on PROD’s further development. Participants had a wide range of suggestions, including: 1. Introduction of a buy/sell option in the application; 2. Client verification; 3. Client reliability check; 4. Electronic bidding; 5. Analytics on product prices and volumes, market trends.
In the next quarter, PROD developers will work with Syngenta and Shuvar market on ways to integrate these features into the mobile app.
Supporting Laboratory for the determination of residues of pesticides in vegetables and fruit
ARDS is co-investing with Prime Lab Tech (PLT) laboratory in Boryspil (Kyiv oblast) in modern laboratory equipment to detect pesticide residues in the environment: soil, groundwater and other water sources, plants, feeds, fruit, vegetables, and other food products. Starting in August 2018, when the new equipment will be fully set up and calibrated, PLT will introduce a new service of analyzing pesticide residues.
PLT representatives participated in the May-June study tour to Germany and the Netherlands (see “Regulatory environment streamlined for fruit and vegetables value chains”). They learned about the role and place of private phytosanitary laboratories in the fruit and vegetable safety control system, as well as the principles and procedures for interacting with governmental inspection bodies.
The knowledge gained during the visit will help PLT, as USAID Mission Director Suzan K. Fritz visited PLT a private laboratory, to become an efficient part of the Velyka Oleksandrivka, June 2018 state control system.
On June 12, 2018, USAID Mission Director, Susan Fritz, visited PLT to get acquainted with the laboratory’s latest modern technologies and the ways the laboratory helps farmers to develop their business.
In the next quarter, PLT will receive and assemble all the equipment in the laboratory. Extending the scope of services requires additional training for laboratory personnel on new services, which will follow the equipment’s arrival to the laboratory.
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Later in CY18, PLT plans to apply for its laboratory accreditation ISO 17025. This will authorize the laboratory to provide tests that are currently carried out by state laboratories only.
PLT will use up-to-date equipment to provide a full set of services to farmers (see scheme on PLT complex approach) that will be promoted to SMEs and individual farmers beginning in FY 2019.
Introducing Centers of Veterinary Services for industrial and private dairy farms
Successful livestock farms are usually a key employer in rural areas and a guarantee of social well-being in villages. The development of dairy and meat farms through the creation of the Center of Veterinary Services in Eastern Ukraine is crucial for increasing employment, improving the welfare of rural communities, and improving the investment climate. ARDS competitively selected implementers to start establishing two Centers of Veterinary Services for industrial and private dairy farms in Donetsk and Luhansk oblasts. One center will be in Svatove, Luhansk oblast, at Slobozhanske farm site, while the other will be at Svitanok farm site in the Novoselydivka village, Donetsk oblast. Partnering with AMP, ARDS supports these centers’ preparation for operations, including purchasing equipment, recruiting personnel, training for personnel and establishing the Centers of Veterinary Services. These centers will focus on providing quality consulting services to dairy farms and improving veterinary medicine supply. News services will significantly increase the productivity of local dairy herds and keep up the confidence of livestock owners. With increased profitability, dairy farms will be able to increase their savings, attract investments for the modernization and expansion of farms, increase herds, and improve hygienic standards in milk production to meet international quality and safety requirements. The Centers of Veterinary Services will stimulate a 30 percent increase in employment on dairy farms due to increased farm productivity and better investment attractiveness. Initially, the Veterinary Centers will provide services to at least 40 dairy farms with 50 or more cows. The centers’ veterinarians will provide veterinary care and artificial insemination services to about 400 family dairy farms and households located in the same communities as the centers’ industrial farm clients. The centers will be launched in full at the beginning of FY 2019.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 33 of 46 Communicating and Learning
ARDS conducted several notable communications activities during the quarter.
Events The Communications and Learning (C&L) team worked with ARDS component teams to organize the following events: o Visit to Kipti CTC by G7 delegations (Kyiv oblast, June 21) o Roundtables on populating the CTC land management toolkit o Organic brunch o Agri Invest Forum o Launch of the Fruit and Vegetable Market Partners Club (Kyiv, May 22) o Study tour to the Netherlands and Germany (May 26 - June 2) o Training for ATO veterans by Poltava-Sad (Poltava oblast, June 26) o Trainings for AMP farm members: - Bilyn village, Volyn oblast (May 11) - Uman, Cherkasy oblast (May 14) - Paraphiivka, Chernihiv oblast (June 8) - Maksimivka village, Poltava oblast (June 11) o Regional trainings on finance and applying to MAPF's State Farmers Support Fund of Ukraine (Rivne, Ivano-Frankivsk, Vinnytsya, Mykolaiv, Poltava, and Kyiv; March-April) o Trainings for cooperatives (Kramatorsk, June 12-13, and Severodonetsk, June 14-15) o Call for applications for ARDS support to participate in Asia Fruit Logistica
Media Please see the full media report here.
Social media and webinars The ARDS Facebook page has 5,442 followers, as June 30. FY18 Q2 FY18 Q3 Growth Jan-Mar Apr-Jun rate 2018 2018 Number of followers 4,920 5,442 ↑ 11%
The number of people reached with ARDS posts 170,000 137,000 ↓19% (The number of people who had any post from ARDS page on their feed.) The top seven publications on ARDS’ Facebook during the reporting period:
Facebook publication Date Views Likes Shares
Grant program for CTCs 26.04.2018 18.42K 771 220
Infographics on MAPF support to farming 11.04.2018 17.5K 418 167
Grant competition for creation of calf raising center 24.04.2018 11.3K 379 150
Business case on growing greens at 0.1 ha 23.04.2018 10.4K 260 70
Manual on Land issues for Judges 22.06.2018 7K 159 67
Signed grant agreement with Fruktona 21.05.2018 5.6K 216 31
Business case on family business in processing dried 13.04.2018 5.1K 112 33 tomatoes Social media posts and direct messages informed ARDS that the most interesting topics for followers, besides traditional interest in the grants program, are governmental support, business cases and success stories, and practical manuals.
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ARDS continued publishing videos on the ARDS YouTube channel: o Organic media branch o Video record of Skype-seminar on how to prepare applications to ARDS grants program for Luhansk and Donetsk oblasts o Video recording of seminar on application preparation for CTC grant program o Video on training on horseradish growing technology o Short video about ARDS pilot on land management in Kipti village o Video story about ARDS grantee Galfrost o Video story about ARDS grantee Sady Donbasu
Publications ARDS developed a number of publications, including: o Guidelines to implement international food safety standards for the fruit value chain o Guidelines for Global G.A.P. Implementation in Potatoes o Models of Systematic Land Management (Example of Kharkiv and Volyn oblasts) o Manual on Land Issues for Judges o Handouts for trainings conducted by the Association of Milk Producers (AMP)
ARDS continued the tradition of creating online stories about investment partners. In FY18 Q3, stories were published online for co-investment grantees in January-June 2018. The profiles contain brief information, photos, videos, maps, and more.
1. Si Milk 2. Bilovodskyi Butter Factory 3. Pryvillya 4. Miasne Remeslo 5. VSESTO 6. Fruktona 7. PLT Lab
Monitoring and Evaluation
ARDS started a survey to measure the progress on four project indicators (land administration procedures timing and cost, level of corruption, and a social poll of land plot owners). Survey results will be included in the FY18 annual report. ARDS prepared a Behavior Change Baseline Report on the survey about changing behavior among agrarian SMEs. The study was conducted in December 2017 - January 2018 by GfK Ukraine on behalf of ARDS. ARDS defined the indicators for measuring behavior change impact in fruit & vegetables, dairy and meat value chains. ARDS collected all the statistical information on four supply chains: fruit & vegetables, dairy and meat to set up a baseline comparison for measuring behavior change impact. ARDS reviewed the MEL indicators for 2017-2018 aligning to adjusted work plans for FY2019 and FY2020. Collaborating, Learning, and Adapting System
ARDS keeps implementing the CLA system in the project’s everyday work and throughout FY18 Q3, the following steps were taken:
o Two After-Action Reviews were completed by following the Critical Reflection Methodology and collecting lessons learned from all the events. o ARDS conducted a full quarterly CLA review based on FY18 Q3 results, addressing the needed changes for FY18 Q4.
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 35 of 46 As a result of the CLA sessions, it was decided to hold off on any new activities and grants, and, for the rest of the project’s duration, focus on finalizing current activities, analyzing pilot results, and learning and disseminating best practices. Thus, there will be no new pilots for business models in FY2019 and FY2020. ARDS will pay more attention to the behavior change campaign and sharing good practices.
The CLA implementation status overview is displayed in the table below, based on maturity levels for each CLA element.
CLA block Element / Maturity Not yet present Emergent Expanding Advanced Institutionalized Collaborating ExternalInternal CollaborationCollaboration Technical Evidence Base Theories of Change Learning Scenario Planning M&E for Learning Pause & Reflect Adapting Adaptive Management
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Annexes Annex I: MEL Indicators
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AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 39 of 46 Annex II. Milestone Progress Table
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Annex III. Policy Matrix Sub-Stages defined by ARDS for informational purposes only. Stage 1: Analysis …underwent analysis (review of existing policy and/or proposal of new policy) Sub-Stage 1(i) Informal/undocumented analysis Sub-Stage 1(ii) Official/formal/documented analysis Sub-Stage 1(iii) Decision and planning to commence consultation/identification of resources Stage 2: Stakeholder …underwent public debate and/or consultation with stakeholders on the proposed new or revised policy. This could also include proposed repeal of an existing consultation / public debate policy. Sub-Stage 2(i) Consultations (public or closed) Sub-Stage 2(ii) Decision and planning to commence drafting/identification of resources Stage 3: Drafting or revision …were newly drafted or revised Sub-Stage 3(i) Initial drafting Sub-Stage 3(ii) Validation by stakeholders Sub-Stage 3(iii) Revisions Sub-Stage 3(iv) Draft finalization Stage 4: Presenting for legislation Sub-Stage 4(i) Presented for registration in Verkhovna Rada or other state body Sub-Stage 4(ii) Registration Stage 5: Approval (legislative or …received official approval (legislation/decree) of the new, revised, or repealed policy by the relevant authority (legislative or executive body) regulatory) Sub-Stage 5(i) Approval by Parliamentary Committee Sub-Stage 5(ii) Parliamentary approval in the first reading Sub-Stage 5(iii) Preparation for the second reading Sub-Stage 5(iv) Parliamentary final approval Sub-Stage 5(v) Presidential Assent Stage 6: Full and effective …were fully and effectively implemented by the relevant authority (this includes USG support to implementing the effective repeal of a policy) implementation Sub-Stage 6(i) Launch and dissemination Sub-Stage 6(ii) Start-up/implementation beginning/training and capacity building
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 43 of 46 ARDS Policy Action Agenda
Policy Policy Document STAGES (Sub-Stages) Comments Q3’18 area Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6
i ii iii i ii i ii iii iv i ii i ii iii iv i ii
Enabling Draft Law of Ukraine “On Agricultural Q1’17 Q2’17 environme Land Turnover” (prepared by the nt for Cabinet of Ministers in the version private dated April 12, 2017) Q3’17 sector investment Draft Law of Ukraine “On Making Q2'17 Q3'17 Q4'17 Amendments to Some Sub-Laws of Ukraine on Simplifying the Procedure for Registering Inheritance to Real Estate, State Registration of Titles to Inherited Land Plots and Other Real Estate on the Territory of Rural Territorial Communities” (#6764)
Draft Law of Ukraine “On Making Q2'17 Q3’17 Q4'17 Amendments and Supplements to Some Legislative Acts on Identifying Legal Regime of Land Collectively Owned ….”
Enabling Draft Law of Ukraine “On Making Q2'17 Q3'17 Provisions of this draft law environme Changes to Some Legislative Acts of were included into draft law nt for Ukraine on Formation and #6527-D, which was private Development of Agricultural approved by Agricultural sector Cooperation and State Support to It” Committee on June 21, investment (#6527-1) 2018.
Draft Law of Ukraine “On Making Q3'18 Approved and Changes to Some Legislative Acts of recommended by Ukraine on Formation and Parliamentary Committee Development of Agricultural for the first reading.
Cooperation and State Support to It” (#6527-D)
Draft Law of Ukraine “On partial lifting Q3'18 Q3'18 Draft law requested by of land moratorium for fruit and partner industry berries growers” associations.
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Draft Law of Ukraine “On Making Q2'17 Q3'17 Q4'17 Q3'18 Approved in the first reading Amendments to the Land Code of on May 22, 2018. Ukraine ……… on Stimulating Recommended by Creation and Development of Family Agricultural Committee for Enabling Farm Households” (#7060) the second reading on June environme 21, 2018. nt for private Draft Law of Ukraine “On Making Q2'17 Q3'17 Was included in draft law sector Amendments to Some Legislative Acts #8121. investment on Price Registration for land and other Real Estate”
Draft Law of Ukraine “On Protection Q4'17 Q4'17 Was included in draft law of Property Rights of the Land Plots #8121. Owners and Users”
Draft Law of Ukraine “On Q2'18 Q2'18 Q3'18 Recommended for the first Amendments to the Land Code of reading by Parliamentary Ukraine and Some Other Legislative Committee on April 3, 2018. Acts on Counteraction to illegal takeovers” (#8121)
Draft Law “On Amendments to the Q1'18 Q1'18 Was included in draft law Tax Code of Ukraine and certain #8121. legislative acts of Ukraine on encouraging the creation and operation of small-scale farms and the deconcentration of powers in the field of land relations” (#7363)
Draft Law of Ukraine “On Basic Q1’17 Q2'17 Q3'18 Approved in the first reading Principles and Requirements for on April 19, 2018. Organic Production, Circulation and Recommended for the Marking of Organic Products” (#5448) second reading by Parliamentary Committee.
Draft Law of Ukraine “On Making Q1'17 Q1'17 Q2’17 Amendments to the Law of Ukraine ‘On Personal Farm Household’ on Rural Green Tourism Development” (#2232-A)
Land and Draft Law of Introducing an Institute of Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 natural Land Ombudsman in Ukraine resources tenure, Draft Law of Ukraine “On Making Q1'17 Q2'17 Q4'17 Q3'18 Approved in the first reading rights, and Amendments to Some Legislative Acts on May 22, 2018. policy of Ukraine on Optimizing Use of Recommended for the
AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT Page 45 of 46 Arrays of Agricultural Land” (#6049- second reading by D) Parliamentary Committee.
Draft Law of Ukraine “On Making Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Being reviewed by Changes to Some Legislative Acts of Parliamentary Committee. Ukraine on Monitoring Land Relations” (#7502, #7503, #7504) "On Amendments to the Land Code of Q2’18 Q2’18 Q3'18 Sent for revisions on April 3, Ukraine and Certain Legislative Acts of 2018. Updated and Ukraine on Provision of Guarantees reregistered on May 17, for Combatants and Persons Equated 2018. Recommended for the to Them, Including Participants of the first reading by Anti-Terrorist Operation….” (#7511) Parliamentary Committee.
Page 46 of 46 AGRICULTURE AND RURAL DEVELOPMENT SUPPORT PROJECT – FY2018 Q3 REPORT