Ukrainian farms battle for survival and global food security
© O Lypa/Adobe Stock Six months since Russia launched a full-scale invasion of Ukraine, farm leaders in the war-torn country have been reflecting on the conflict and the outlook for its agricultural industry.
In a webinar hosted by the Ukrainian Agribusiness Club (UCAB) on Thursday 1 September, industry leaders agreed the country’s farmers are facing a new reality and are in a fight for their economic survival.
Ukraine’s deputy minister of agrarian policy, Denis Bashlyk, said war had changed everything for farmers.
See also: Farming in Ukraine: Q&A with agricultural journalist in the war zone
“Before the war, the main message of the market to the ministry was, ‘Please, do not disturb the business. Do not intervene from government’,” said Mr Bashlyk.
“Right now, the main message is, ‘We need support of government in many spheres’.”
The minister said helping Ukraine’s agricultural industry and its farmers is one of the biggest problems facing the country today.
Multiple challenges
The biggest challenges include farmer cashflow problems and cost pressures, clearing Russian mines from fields, occupation of territories and land where farmers grow crops, temporary storage for the 2022 grain crop and export logistics.
Mr Bashlyk said the industry spent the first three months of the war “firefighting” and tackling new problems.
Now it is trying to make mid-term plans for working during the war and how it should develop and rebuild after the war.
In this respect, he is grateful for the support and opportunities offered by the US and EU countries for Ukraine’s agricultural industry.
Farmers Weekly asked Mr Bashlyk how the UK government could help Ukraine’s agricultural industry and its farmers both now and in future.
He said: “We are already co-operating with the UK government on temporary storage.
“They provided a huge amount through FAO [Food and Agriculture Organization of the United States] for procurement of temporary storage. We are expecting to receive this at the end of October.
“Also, we started negotiations with the UK Export Finance agency to support the next shrink in our agricultural sector.”
‘Life will never be the same’
Kateryna Rybachenko, vice-president of UCAB and member of the supervisory board of Ukraine farming company Agro-Region, described the situation six months on from the start of the war as “challenging” and “life-changing”.
But Ukrainian people are adjusting step by step and celebrating the small victories on both economic and war fronts.
“The life and work changed upside down and it will never be the same again, probably for most of us,” she added.
“Six months ago, our biggest challenges were the unpredictability of land markets and what’s going to happen. Now, we have so many more challenges.
“Having a neighbour, Russia, that crossed all the red lines, there is no reason to believe they will not cross much more and would stop at anything.”
Staying put
Georg von Nolcken, chief executive of Continental Farmers Group – a large agri-business with vast tracts of land around western Ukraine – decided to stay put and not leave his country and team when war broke out.
Unlike other Ukrainian farming companies, Mr von Nolcken said his organisation had not experienced Russian ground troops on its assets or any damage, but faces the same challenges.
“My biggest worry we have, as a company, is the 2022 season.
“The majority of crops is coming in at good yields all over Ukraine, not only in our case… we have definitely produced the highest-ever oilseed rape yields,” he said.
“The irony is that’s part of our headache. Because part of the storage we planned for the sunflowers, the maize and the soya in the second wave of harvest is now completely blocked with the first wave of crops.
“Daily life has changed from 24 February up to the first couple of weeks, trying to understand if we would have ground troops in our area, to one question… to logistics, logistics, logistics. And now it’s about affordable logistics.”
On 22 July, Ukraine, the UN, Turkey and Russia signed a deal to unblock Ukraine’s sea ports and resume grain exports through the Black Sea.
Ag exports up
Ukraine’s total exports of agricultural products, including grain, rose 12% month-on-month to 4.6m tonnes in August, Mr Bashlyk said.
Mr von Nolcken said the big challenge facing Ukrainian farmers was how they could sell their grain to at least break even.
“The message that I think is very important for the world to understand is, it’s fantastic that the grain corridor works and the ports have started working again.
“But, even though every single ship is a success, these days, it’s just not enough.
“Even if we manage to truck it [grain] out and we manage to find the rail carts to get through Europe, there is just not the work capacity.”
The longer the situation with unstable exports continues, the longer Ukrainian agriculture will convert into a survival game, which is driven by cashflow.
Mr von Nolcken said the successful 2020 and 2021 seasons had helped farmers immensely to build cashflow and liquidity reserves, but these will be “eaten up” at some point.
Before the war, Ukraine’s farmers had become more efficient, got better at growing crops and increased export volumes.
“The question now is how we are going to make sure we come out of this where the damage level to Ukrainian agriculture is bearable for world,” he added.
Spring ‘a long way off’
Alex Lissitsa, chief executive of IMC, one of Ukraine’s top 10 agricultural companies, said Ukrainian farmers usually prepare their spring plantings at the end of August.
But right now, many are not thinking about this and are focusing on the costs and logistics of harvesting summer crops.
He said harvest for sunflowers and oilseeds “looks more or less competitive”. But in northern and western Ukraine, where sunflowers will likely have good yields, high humidity is causing problems.
Last year, Dr Lissitsa said farmers enjoyed an excellent maize harvest, making more than US $1,000/ha (£865/ha), but this year it’s a “big minus”.
“For many companies, it doesn’t make sense even to start harvesting corn with the price of $2,000 for 1,000cu m of natural gas,” he added.
“When you start to think about that, agriculture doesn’t make any sense.”
Regardless of the outcome of the war and even if Ukraine wins, Dr Lissitsa believes life will never return to normal.
“I speak to a lot of small farmers. They do not realise where we are. Some are still dreaming that we just sneaked away for a few weeks and everything will be like 2021,” he said.
“If I tell them that we will never return to 2021, they say I am being pessimistic. But it’s just a new reality. It’s just completely unpredictable.
“That new reality can be very good, but also very bad. That new reality should be just accepted.
“In terms of logistics and finances, Ukraine has enjoyed 15 years of success due to its scale, input prices, available labour, etc.
“But it will change. It is changing already. The real question is where it is heading to.”
Ukraine war is deepening global food insecurity, says analyst
Leading agricultural economist Hubertus Gay has given his verdict on what the Russian invasion of Ukraine will mean for global markets.
Over the past 20 years, Ukraine has increased its share of global exports, especially for maize and sunflowers.
It has become more important in providing grain to feed the rest of the world.
“The production increased faster than the domestic demand for crop products,” said Dr Gay, senior agricultural policy analyst at the Organisation for Economic Co-operation and Development (OECD) in Paris.
“Ukraine is increasing its share in global exports and it’s getting more and more important to provide calories for the rest of the world.
“Crop production in Ukraine in 2021-22 increased for most crops and it enjoyed a record harvest.
“But due to the export constraints over the whole season, not everything that could be exported was exported.”
For the current harvest, a decline is expected and exports will be hit even more, which will have a “substantial impact” on global availability of grain in the coming season, Dr Gay said.
Lots of countries depend on Russia and Ukraine for wheat imports.
North African countries including Tunisia, Libya, Yemen and Egypt have a high dependency on Ukrainian grain, which is used directly for food.
But Dr Gay also noted that Russia is a major exporter important inputs used for crop production, such as natural gas, crude oil, urea (N-fertiliser) and potassium (K-fertiliser).
Prices for these inputs have already risen considerably and further increases could add further constraints to production.
Russia is also a major exporter of wheat and other crops, and it has continued to export these products to countries that depend on them, especially in North Africa.
“For food security globally, it’s a good sign that those products are available because we need wheat for poor people around the world.
“But on the other side, it’s of course a benefit for Russia,” said Dr Gay.