Challenges of the agribusiness sector in 2025 and opportunities for adaptation to new realities2.24 MB

Introduction

Despite direct losses and losses of more than $80 billion due to a full-scale invasion, Ukraine’s agribusiness sector remains a key driver of the economy. In 2024, it accounted for 59.3% ($24.7 billion) of foreign exchange earnings from commodity exports, while in 2021 this figure amounted to 40.7% ($27.7 billion).

Today, the agricultural sector is one of the key and priority sectors for reform and attracting public and private investment. At the same time, the sector is dealing with a number of challenges that may hinder its development.

In addition to the damage from the war, there is the Free Trade Agreement with the EU, which expires on June 5 this year. The industry scenario may depend on its continuation. The market is also facing a number of unresolved issues, including logistical challenges, the need to de-monopolize rail transportation and demining of territories, the issue of lack of qualified personnel, domestic grain trade without VAT, lack of clear solutions for electronic TTNs, and the need to actively implement artificial intelligence (AI). Due to these challenges, agro-producers incur financial losses, so new approaches should be sought to improve efficiency.

EU Trade agreements

In recent years, the share of the EU in exports of agro-industrial products has not been lower than 50%, which indicates the critical importance of the European market not only for Ukrainian producers, but also for the Ukrainian economy as a whole.
Ukraine sees several possible options for the continuation of the Free Trade Agreement and is already working on some areas, including in the EU. The strategic areas of work in this matter to date are:

Protecting the interests of the Ukrainian agricultural sector

Modernization of infrastructure and logistics

Development of the processing industry and introduction of innovations

Harmonization of regulations and adaptation to EU requirements

Effective management of export quotas

Political dialog and defense of national interests

To successfully extend the agreement, it is important to actively involve Ukrainian officials and business associations in negotiations with the EU. Strategies should also be developed to avoid political manipulation around trade restrictions and to ensure that Ukraine remains competitive in the European market. In addition, work should be done to gain the support of European industrial consumers of Ukrainian imports.
The implementation of the above-mentioned areas is aimed at helping Ukraine to maintain duty-free access to the EU market, strengthen its competitive advantages and integrate into the European economy on favorable terms. The key task of the Ukrainian side today is to ensure predictability of trade conditions with the EU so that Ukrainian agrarians can plan their activities and maintain a competitive position in the European market.

Internal challenges of Ukraine’s agricultural sector: logistics, human capital and technological innovation

The agricultural sector of Ukraine continues to demonstrate resilience and adaptability in the face of instability. However, a number of unresolved internal problems that require immediate attention stand in the way of the sector’s development. In particular, logistics issues, insufficient human capital, as well as the need to introduce innovative technologies, in particular, artificial intelligence, to reduce costs and increase efficiency.

Logistics as a factor of competitiveness

As the practice of recent years shows, the state of logistics and its efficiency has a direct impact on the cost of production and the ability to maintain a competitive position in global markets. Restoration of infrastructure damaged during military operations is a priority for the development of the industry.
In the field of road transportation, the most critical are the restoration of war-damaged roads and the implementation of infrastructure projects that were started before the war.
Rail transportation is also an important area for agribusiness. The problems of Ukrzaliznytsia, in particular the monopoly and lack of transparency in tariff policy, limit the efficiency of transportation. Therefore, in order to reduce transportation costs, it is necessary to radically change the rules of operation in the rail transportation market and ensure real competition.
Seaports, although they have excess capacity for transshipment, also face problems. Many ports, especially in southern Ukraine, were damaged by the war. Restoring port operations, particularly in the Mykolaiv and Kherson regions, requires not only financial investment but also security for cargo. Restoring navigation on inland waterways is also a priority, as it will reduce the burden on road and rail transportation.

Human capital and innovative technologies

In the context of war and labor migration, agrarians face a serious shortage of skilled workers. This problem can be largely solved through automation and the introduction of innovative technologies, in particular artificial intelligence.
In parallel, agrarians should work to develop localized incentive systems for workers to keep them engaged and increase productivity. Taking into account demographic changes and adapting to new conditions, in particular by recruiting workers to previously male positions, is an important part of a sustainable agribusiness development strategy.

Need for tax and customs reforms

Equally important is the issue of tax and customs reform, especially in the context of changes related to export operations. One of the major challenges is the introduction of new mechanisms for registering tax invoices before exports, which improves control over tax payment. However, despite the positive changes, problems remain with the lack of interaction between tax and customs authorities, which makes it difficult to do business.