The EBRD is extending a $10 million long-term loan to the Ukrainian food producer Chumak to buy equipment to expand its edible oil business, together with a further $5 million of short-term for the purchase of sunflower seeds at harvest.
Under the EBRD's warehouse-receipts programme - which is said to be increasing the availability of post-harvest financing to farmers and food processors not only in Ukraine but around the region - the seeds will be used as collateral for working capital.
Chumak was established in 1996 by two Swedish entrepreneurs who started a small food-processing company in Kakhovka, in rural southern Ukraine. Since then it grown rapidly to become one of the most recognised consumer brands in Ukraine, with a leading market position in each of its product segments: ketchup and sauces, edible oil and mayonnaise.
Chumak buys most of its raw materials from local farmers. Hans Christian Jacobsen, EBRD director of agribusiness, said he believed the expansion of Chumak's activities will promote a stable market for farm outputs and timely payments to local farmers. It will also enhance competition in the edible-oil production sector in Ukraine, where the EBRD is already a significant investor.
Carl Sturen, co-founder and managing director of Chumak, said the edible-oil division is one of Chumak's fastest growing businesses. He also said the the cooperation with the EBRD will enable the company to take advantage of market opportunities, spur an even higher growth and contribute positively to the development of the whole Chumak group.
Currently the EBRD is the largest investor in the agribusiness sector across its 27 countries of operations, with 211 investments worth in excess of €3.25 billion. In Ukraine, the EBRD's cumulative investment stands at €1.3 billion through 58 projects.
Emerging from a post-1998 economic crisis, 2003 witnessed a shift in food consumption patterns towards more sophisticated processed food products as Ukraine's economic situation improved, underpinning rises in income and boosting purchasing power for consumers, which is something Chumak has been able to tap in on.
A former USSR territory Ukraine - referred to as the 'breadbasket of Europe' - has a strong agrarian tradition. Wheat is the country's major crop, in the 2001/02 marketing year Ukraine became the 7th largest world wheat exporter and the 8th largest wheat producer. But it also produces barley, rye, oats, peas, maize, sunflower seeds, sugar beets, milk, poultry meat, pork, and beef.
The growing and processing of sunflower seeds for vegetable oil is also big business. Sunflower oil constitutes about 95 per cent of all vegetable oil consumption in Ukraine. The country remains the third largest world producer of sunflower oil.