Ukraine’s Grain Sector Faces Potential $3.2 Billion Losses in 2023 Due to War
Logistics and Price Hikes Threaten Ukraine’s Grain and Oilseeds Crop Sector
Ukrainian farmers unions have warned that the country’s grain and oilseeds crop sector could suffer losses exceeding $3.2 billion in 2023. These losses are primarily attributed to the high cost of logistics and significant price hikes in fuel and fertilizers. As a result, there is a looming threat of reduced sown areas in the upcoming years. This comes as a significant blow to Ukraine, which has been a leading global producer and exporter of food, with its agrarian sector traditionally known for its profitability.
Challenges Faced by Ukrainian Agriculture
Ukraine’s reliance on deep-water ports in the Black Sea for exporting its products has been severely impacted by the ongoing war and subsequent blockades. With limited export opportunities now available through the small ports of the Danube River and the railway to Eastern Europe, the logistics component has multiplied, leading to reduced prices offered to farmers by traders.
The closure of ports has also resulted in a sharp increase in the prices of imported fuel, seeds, fertilizers, and spare parts for agricultural machinery. Consequently, the cost of wheat production in 2023 has risen to around $146 per metric ton, while farmers can only sell it for an average price of $102. Similarly, maize farmers spend $149 on production but can only sell it for $94. Even the production of sunflower and rapeseed is expected to be unprofitable in 2023, with soybeans being the only crop that may yield some profit for farmers.
Impact on Plantings and Future Prospects
The substantial losses incurred by farmers have already resulted in reduced plantings for the upcoming 2024 crop. Farmers are now forced to determine the areas they can sow based primarily on their financial capacity. The Ukrainian agriculture ministry, however, maintains its winter wheat sowing forecast at around 4.4 million hectares, despite the challenges faced by the industry.
Aside from financial difficulties, unfavorable weather conditions may also significantly reduce the sowing area this autumn. Ukraine, traditionally known for growing winter wheat, barley, and rapeseed, is currently experiencing a prolonged absence of rain across most regions, leading to unfavorable conditions for both ongoing sowing and the plants already sown.
State weather forecasters have reported that up to 20 cm of upper soil layers in regions like Odesa, Kherson, Mykolaiv, Kirovohrad, Vinnytsia, Cherkasy, and Kharkiv have completely dried out due to the lack of rain. Despite these challenges, farmers have managed to sow 3.02 million hectares of winter wheat as of October 16, 2023, compared to 2.5 million hectares at the same time last year.
The Ukrainian agricultural sector now faces an uncertain future as it grapples with the devastating impact of war, logistical challenges, and unfavorable weather conditions. It will require significant support and resilience from farmers to overcome these obstacles and restore profitability to the once-thriving grain sector.