Market Power in Ukraine’s Farmland: How Large Firms Influence Land Prices

A World Bank study finds that large farming companies in Ukraine use their dominance in local markets to pay lower rents, showing clear evidence of market power. This results in significant income losses for landowners and highlights the need for smarter land market regulations.

A new study by the World Bank's Development Research Group is shedding light on a critical but often overlooked issue in agriculture: who really has power in land markets. Focusing on Ukraine, the research explores how large farming companies interact with small landowners and whether competition truly works as expected. Using detailed data on land leases and sales between 2021 and 2024, the study finds that the balance of power may be tilted in favor of big agricultural firms.

Ukraine is a fascinating case. After the Soviet Union collapsed, land was distributed among millions of citizens in small plots. On paper, ownership is still widely spread. But in practice, large agribusinesses now lease and operate much of this land, sometimes across several villages. This growing concentration has raised questions about whether these firms can influence prices to their advantage.

When Size Means Power

The study reveals a clear pattern: the more land a company already controls in a village, the less it pays to lease additional land there. In areas where many companies compete, landowners tend to get better rental prices. But when one firm dominates, competition weakens and rents fall.

This situation is known as monopsony power, where buyers have the upper hand. Instead of landowners setting prices, large tenants can push them down. The research shows that when companies control a significant share of local land, they consistently secure cheaper deals compared to areas where they face stronger competition.

Big Impact on Small Landowners

While the price differences may seem small at first glance, their impact is large when applied across millions of hectares. The study estimates that this imbalance leads to tens of millions of dollars being transferred each year from landowners to big farming companies.

For many rural families, leasing land is a key source of income. Lower rents mean less money in their pockets. Over time, this can affect living standards and economic opportunities in rural areas. The study also finds that dominant firms are able to secure longer lease contracts, locking in favorable terms for years and strengthening their position even further.

War Changes Activity, Not Power

Russia's invasion of Ukraine in 2022 disrupted the country's economy, including its land markets. The number of land transactions dropped sharply, and activity slowed down in many regions. However, the study finds that the underlying power dynamics remained largely unchanged.

Even during the war, large companies continued to benefit from their dominant positions. They were still able to secure lower rents and favorable terms. This suggests that the issue of market power is not temporary or crisis-driven but a deeper structural feature of the system.

Rethinking Land Policy

For years, Ukraine tried to limit land concentration by banning the sale of agricultural land. This policy was meant to protect small landowners. However, the study suggests that it may have had the opposite effect. By restricting the market, it reduced competition and made it easier for large tenants to dominate.

When the ban was partially lifted in 2021, lease prices began to rise, likely because of increased competition and better transparency. This finding highlights an important lesson: simply restricting markets does not always protect weaker players. In some cases, it can make things worse.

The study points toward smarter solutions, such as improving data systems, increasing transparency, and monitoring market behavior more closely. As agriculture becomes more modern and farm sizes continue to grow, similar challenges could appear in other countries as well.

In the end, the research makes one thing clear. Land markets are not just about buying and selling property. They shape incomes, livelihoods, and economic growth. Understanding who holds the power in these markets is essential for building a fair and efficient agricultural system.