Market Power in Ukraine’s Farmland Leaves Small Landowners at a Disadvantage

In Ukraine's vast agricultural landscape, a quiet economic shift is reshaping who truly benefits from the land. A recent study by World Bank economists Klaus Deininger and Daniel Ayalew Ali from the Development Research Group finds that large farming companies may be using their dominance to pay less for leased land. This raises concerns about fairness in a system where millions own land, but a smaller number of powerful firms control how it is used.

Since the breakup of the Soviet Union, Ukraine has redistributed land to rural households, creating millions of small landowners. But over time, farming has become concentrated in large enterprises cultivating thousands of hectares. This gap between ownership and control is at the heart of the problem. While many people own land, fewer players decide how it is farmed and at what price.

How Market Power Works on the Ground

The researchers used detailed data from land transactions between 2021 and 2024 to understand how prices are set. Their method compares what the same company pays for similar land in different villages. The key factor is how much land the company already controls in each location.

The results are clear. When a company has little presence in a village, it pays higher rents. But as its share of land increases, the rent it pays goes down. If a firm controls between 10 percent and one-third of local land, rents drop by about 4 percent. When control exceeds one-third, rents fall by around 7.5 percent.

This means that landowners in areas dominated by a single large operator may be earning less than they should. Over time, these small differences add up. The study estimates that landowners collectively lose tens of millions of dollars each year due to this pricing power.

Beyond Rent: Longer Contracts, Lower Flexibility

The influence of large tenants goes beyond just lower rents. The study shows that dominant firms also secure longer lease agreements. While this may seem harmless, it limits landowners' ability to renegotiate terms in the future.

In a changing market, flexibility matters. If land values rise, long-term contracts can lock owners into lower payments for years. This puts smaller landowners at a disadvantage, especially if they lack access to information or bargaining power.

Even in land sales, where companies were recently allowed to buy land, similar trends appear. Firms that already control a large share of land in a village tend to pay less when purchasing new plots. This suggests that market power affects both renting and buying.

War Disruption, But Not the Root Cause

Russia's invasion of Ukraine in 2022 disrupted agriculture across the country. Land transactions dropped sharply, and many farms faced damage or labor shortages. However, the study finds that the war did not create the problem of market power.

While the conflict reduced the number of deals and affected prices, the pattern of large firms paying less remained unchanged. This shows that the issue existed before the war and is deeply rooted in how land markets function.

In short, the war made the system more fragile, but it did not fundamentally change who holds power within it.

What This Means for Policy and the Future

Ukraine has long tried to regulate its land market, including a ban on land sales that lasted for years. The intention was to protect small landowners and prevent excessive concentration. But the findings suggest that such broad restrictions may not work as intended.

In fact, limiting land sales may have reduced competition and kept rents lower than they could have been. When more buyers and tenants compete, prices tend to rise, benefiting landowners.

The study points toward smarter solutions. Improving transparency in land deals, ensuring better access to information, and monitoring how much land companies control in each area could help create fairer markets. Strengthening property rights and reducing informal land use would also make a difference.

As Ukraine continues reforms and looks ahead to rebuilding after the war, getting land policy right will be crucial. Agriculture is a major part of the economy, and fair land markets can support both growth and rural livelihoods.

The broader lesson goes beyond Ukraine. As farms grow larger in many parts of the world, similar patterns may emerge. Without proper checks, market power can quietly shift income away from small landowners toward large operators. Recognizing and addressing this imbalance will be key to building more inclusive and efficient agricultural systems.