Deere

Why foreign CEOs should care about Ukraine

March 3, 2014: 1:04 PM ET

Europe's second largest country is suffering immensely, but it's a key food producer, which is why it's critical to companies like Deere and Caterpillar -- and why China recently secured rights to use 7.4 million acres of its arable land.

By Geoff Colvin, senior editor-at-large

140303124011-ukraine-620xaFORTUNE -- Ukraine is a sad country. That's not my opinion -- well, actually it is, but setting that aside for the moment, it's also a finding of the UN's most recent World Happiness Report, which combines massive quantities of research to rank 156 nations by happiness. Ukraine is No. 87, just a bit happier than Latvia and slightly more miserable than Ghana.

Such deep gloom is no surprise. In a ranking of 224 countries, Ukraine's birth rate is No. 202, while its death rate is No. 2 (behind only South Africa). People are dying almost twice as fast as they're being born. In theory a country can counter that population-draining effect by attracting immigrants, but Ukraine is doing the opposite: People are moving out faster than they're moving in. Thus the population is shrinking, while corruption, political turmoil, and instability have hammered the economy so badly that it's still smaller than it was when the country declared independence from the Soviet Union in 1991. If you lived there, you'd be unhappy too.

MORE: Ukraine crisis: Why it matters to the world economy

So why would a foreign CEO care about Ukraine? For a few reasons, of which the largest may well be food. Americans of a certain vintage learned in elementary school that Ukraine is "the breadbasket of the Soviet Union," and it's still a breadbasket. Grain is in Ukraine's soul; the country's flag, a band of blue over a band of gold, symbolizes a clear sky over a field of grain. Ukraine can't consume nearly as much food as it produces. As food becomes a more contentious global issue with the world's population growing richer and more numerous, sad, shrinking Ukraine becomes more important -- economically and geopolitically.

That's why Sam Allen and Ray Lane, the current and former CEOs of Deere (DE), and Doug Oberhelman, CEO of Caterpillar (CAT), have all told me how critical the country is to their strategies. It's also why those companies plus Archer Daniels Midland (ADM), Cargill, DuPont (DD), Mondelez (MDLZ), Monsanto (MON), and other U.S. agribusiness companies have operations there.

Perhaps most important, it's why China last year negotiated an extraordinary 50-year deal to rent 5% of Ukraine -- 7.4 million acres, about the size of Massachusetts or Belgium. China consumes some 20% of the world's food, a share that is increasing fast, but it has only 9% of the world's arable land, a share that is declining as urbanization takes over more farmland. The country needs a piece of the breadbasket. China's official government news agency has published articles warning of threats to the country's "grain security."

MORE: El-Erian: How the markets should read Ukraine's crisis

Vladimir Putin is well aware that Russia and the West aren't the only players that want a degree of influence over Ukraine.

We'll see lots of political and military news from Ukraine in coming days, and almost none of it will mention the country's significance for the world's food supply. Let's remember that that issue is always lurking in the background.

  • John Deere plows ahead

    After record growth in 2012, world's largest farm-equipment company Deere has no plans to downshift.

    By Anne VanderMey, reporter

    FORTUNE -- A lot of things about Deere are as outsize as its big green tractors (the largest comes in at 560 horsepower). The company's growth, for instance: After 10 successive quarters of record revenue gains, Deere (DE) reported $32.6 billion in sales for 2012, another record. Its ambition is outsize too: MORE

    Feb 26, 2013 5:00 AM ET
  • How do great companies groom talent?

    You can't build a great business without nurturing from within. Meet the firms that are doing it right.

    By Richard McGill Murphy, contributor

    FORTUNE -- IBM (No. 1) sends leadership SWAT teams around the world. Hindustan Unilever (No. 6) ships young executives out to live in Indian villages so that they can understand the needs of impoverished rural consumers. At farming equipment manufacturer Deere (No. 14), rising managers receive coaching from distinguished MORE

    Nov 3, 2011 5:00 AM ET
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.