New AG International has spoken to a number of participants in the agribusiness sector in Ukraine, including an adviser to the Minister of Agrarian Policy and Food, to find out how the invasion by Russian military has impacted the country’s agriculture sector, the availability of inputs, and what it means for the spring season and the all-important export trade. There were stories of support from agribusiness for the Ukrainian army - not just giving food and fuel, one company said it had given its drones to the military. (NOTE: “interviewee” used to protect identities of sources)
Luke Hutson writes
“We don’t speak about productivity, we speak about surviving,” said Alex Lissitsa CEO of IMC, one of Ukraine’s large agribusinesses and board member of Ukrainian Agribusiness Club (UCAB).
With land in Chernihiv and Sumy regions, his company had some of their lands occupied by Russian forces. By the end of March, the territory was back in Ukrainian hands, but he was quick to point out this does not mean it is safe to farm. In some previously occupied regions, there are mines in fields, as well as along the roads.
Lissitsa’s agribusiness is planning to sow around 70,000 hectares (ha). He said the latest date for sowing in North Ukraine is 20 May.
Another source said the compaction caused by tank tracks also made farming some fields difficult.
Estimates for the amount of arable land lost vary, and will continue to vary as the situation evolves.
An estimate from one source was that 30 percent of farming land is either currently occupied, unsafe or unable to be farmed.
“From our land bank at the moment, there is no access to an area of about 5,000 hectares - agricultural trials are cancelled,” Inter, an agribusiness with 30,000 ha, told New AG International (NAI) in a statement.
Another farm owner speaking to NAI said they had lost one-third of their land, equating to around 1,000 ha. This land was still occupied at the time of writing.
To help farmers, the government has given the country’s banks 9.3 billion hryvnia (USD$308 million) to lend to farmers, Markiyan Dmytrasevych, adviser to the Minister of Agrarian Policy and Food of Ukraine told NAI.
The loans are at a zero percent interest rate, and 80 percent guaranteed by the government. “But we still have a problem with the small farms, those with around 10-30 hectares. Often, they are not registered, work with cash and no accounts, and that’s a problem for our banks to lend money to them,” explained Dmytrasevych.
“That’s why we asked the EU Commission for direct cash grants – euro 200 per hectare – so small farmers can buy seeds, fertilizer. That’s the best to support these small farmers.”
A decision is still pending on the cash grants. More immediately, Dmytrasevych said the Food and Agriculture Organization (FAO) is rolling out its programme by supplying seeds directly to these small- and medium-scale farmers.
In its rapid response plan (RRP), the FAO says it requires USD$115.4 million, increasing its initial request of USD$50 million, to support 376,660 households (979,320 people) in Ukraine through March-December 2022. Support includes vegetable and crop seeds. “The FAO plans to use multi‑purpose cash (MPC) transfers in combination with other assistance, or on their own, as part of its response,” says the RRP document. The FAO provided seed to farmers in eastern Ukraine during 2017.
Estimates of spring sowing
The UCAB estimated that 70 percent of usual spring area, equating to 14 million ha, will be planted in 2022, according to a UCAB presentation 7 April.
Dmytrasevych agreed with the figure of 70 percent of the usual spring planting, and said overall the ministry was projecting to harvest around 50 percent of the yield compared to last year, which was approximately 100 million tonnes of grains and oilseeds.
The UCAB said the biggest land losses were in the northeast, east and south of the country.
One interviewee estimated that sowing in the southern oblast, or region, of Kherson would be around 50 percent of the usual area.
Farmers are planning to seed less corn, and more soybean and sunflower, according to the UCAB.
Corn has been a major growth export for Ukraine in recent decades (see NAI country report here) with around 33 million tonnes. Without the ability to export, there is a disincentive to plant and spend resources on this crop.
Damage to infrastructure
The estimates of land lost is just the starting point. There were reports from interviewees of the destruction of farming equipment, buildings, storage silos, and even the theft of farm vehicles.
One interviewee claimed a Land Cruiser 200 had been stolen from their land and they had located it using GPS in Belarus.
There are also reports of a loss of livestock. One interviewee said they lost 300 cattle in the first month of the war because of a lack of fodder. Egg production is already threatened in the country. One of the country’s leading producers, Avangardco, has sustained losses and up to three million chickens are at risk according to its parent company UkrLandFarming.
In terms of fertilizer plant infrastructure, some nitrogen plants are understood to be running. Cherkasy Azot, part of Ostchem Holding, is reportedly still producing. This plant is Ukraine’s largest producer of ammonium nitrate. One interviewee said that because of the shortage of fuel, inputs such as fertilizers in some regions were available only by collection.
The ammonia pipeline that carries ammonia from Russian territory has not been damaged so far, according to one interviewee. He thought there was probably little sense in destroying, not only because it takes ammonia from the Russian fertilizer plant of Togliatti but also it cannot be exported from Odesa, where the pipeline ends.
Problems to overcome
From the conversations there were a number of core problems that needed to be overcome.
From an inputs’ perspective, farmers are looking to reduce the number of fertilizer applications, due to limited availability and a surge in prices. UCAB estimate availability of fertilizers at 80 percent.
One interviewee planned to make only two fertilizations on their wheat. They had sown 600 ha.
Another interviewee said they had bought extra fertilizer volumes at the end of last year as a precaution. His business farms 2,000 ha in Kyiv region, mainly soya and rapeseed.
Another grower said they would reduce fertilizer usage by 30-40 percent. In the past, a lot of their fertilizer had come from Belarus, he said.
Seeds appear to be one of the least disrupted inputs. Although UCAB put availability at 75 percent, the agribusiness leaders speaking to NAI felt that supply levels were sufficient. One interviewee explained there is seed production in Ukraine, so there is less reliance on imports, compared with pesticides. The availability of pesticides is pegged at 60 percent by UCAB for the spring planting campaign.
The frequently cited problem was fuel. Availability can depend on location, and according to one interviewee, prices have increased by 30 percent in some areas. Some farms in the north gave their fuel to the Ukrainian army in the early days of the occupation.
Fuel for the planting season is a concern, estimated at 40 percent by UCAB, and one interviewee was even more worried about the situation for the harvest period.
Fuel storage tanks were hit by missile strikes. One interviewee thought most fuel storage facilities along the Belarus border had been hit by missiles.
One idea that is being explored to overcome a persistent fuel shortage is to turn some of the rapeseed oil into biofuel.
In the early stages of the invasion, some farm workers were conscripted into the Ukrainian army. There were negotiations, according to one interviewee, between the government and various large-scale companies, and a consensus was reached whereby a certain level of farm workers was needed to grow the necessary food for the population and army.
Dmytrasevych said they had 200,000 workers on farms and was confident this would be sufficient given the smaller area being worked. Typically, around 500,000 workers would be employed, he said. The broader number for workers in agriculture is much higher – around 17 percent according to the National Investment Council of Ukraine, which is roughly 7.5 million of Ukraine’s population of 44 million before the conflict.
As well as workers on the actual farms, there are also employees working across the various inputs.
BTU-Center, a leading producer of biofertilizer and soil remediation products in Ukraine with a total staff of around 500, told NAI they had closed their head office in Kyiv. “For those people who needed evacuation, BTU-Center provided free accommodation in Vinnytsia region. BTU-Center tries to save jobs and financially support team members who have been particularly hard hit by the fighting. As at the end of April, 90 percent of the staff are comparatively safe,” the company stated.
There are also curfews in some regions. Inter said that in the Chernihiv region, “they are not allowed to work around the clock, which means that the sowing period will be delayed.” Another interviewee made a similar point that typically during the sowing period, farms would operate non-stop and work through the night.
Finance and domestic prices
Farm credit is a major issue, and particularly for smaller farms as outlined above. One interviewee said they had debts still to pay on a farm that was now occupied.
Banks are reluctant to lend to farmers. “There’s no insurance in case of war,” one interviewee noted. But loans still need to be repaid.
The economics for farms are particularly challenging given that the domestic prices for some crops, such as soybeans, have declined. However, soybean meal has actually increased, and this is a problem for dairy farmers who use it as a feed.
As one dairy farmer explained on a UCAB webinar 21 April, the price of soybean meal had increased but the price they receive for milk had decreased. So, while the prices of their products were declining, input costs were going up.
The domestic corn price has reduced by 40 percent. Farmers cannot easily export, and so the surplus is weighing down on prices. One interviewee said they would try to sell their stocks to air purification end-users, or keep and sell next year.
Some input suppliers have maintained their prices. “BTU-Center has not changed prices for its products to actually support agricultural producers. The payment procedures are maximum flexible. For those agrarians who suffered the most, BTU-Center provided biologicals for free,” stated BTU-Center.
Low domestic prices make the need to export even more acute, but there are several obstacles.
The first obstacle is that major export routes for Ukraine’s agricultural output is via three ports in the Black Sea – Odesa, Mykolayiv and Mariupol. At present, there are no export from these ports and they are blocked.
Another key problem is there are still large volumes of stocks to be exported, before the new crop is even harvested. Estimates in storage are 15-17 million tonnes, with UCAB putting an even higher estimate of 20 million tonnes of grains still to be exported.
Typically, Ukraine would export around six to seven million tonnes of grain and oilseeds per month. So even in normal circumstances, the current volume in storage would take several months to clear.
One interviewee who grows rapeseed was concerned about storage, saying it was hard to store, with moisture needing to be controlled below 10 percent.
Exporting via railway is not as easy as first seems. Around 200,000 tonnes was exported in March 2022 via railway, according to one interviewee.
Rail exports could be expanded to between 600,000 tonnes to one million tonnes, but as UCAB notes, at this rate, it would take 18-24 months to clear the current inventories, and that’s before any new crop has been added.
“Honest to say, it’s a disaster,” one interviewee told NAI. Not just because it could lead to Ukrainian companies defaulting on bank loans, but also for those countries who rely on importing Ukrainian grains and oilseeds, he explained.
When discussing how non-seaborne trade could be expanded, one interviewee did say they were looking at road haulage to Poland and the Baltics.
The critical physical problem is the different railway gauges from Ukraine to other European countries. Any exports need to be re-loaded at the border.
One interviewee said that when working as an adviser in the Ministry of Agrarian Policy and Food there was a proposal to make a railway hub in Poland for quick re-loading, and then being moved on to Germany and Netherlands. But it never made it past the drawing board.
But that might be about to change – discussions were taking place to export out of the Baltic ports. One option is the Lithuanian port of Klaipeda. This port has lost the volumes from Belarussian potash prior to the Russian invasion, due to sanctions on Belarus by the U.S. from December 2021. However, moving grain via rail from Ukraine to Poland to Lithuania would involve two changes due to different gauges – wide in Ukraine, narrower in Poland, wide again in Lithuania.
“We will increase exports,” says Dmytrasevych. “If we were exporting five million tonnes per month by the Black Sea ports, by railway in the best situation we can reach 1.5 million tonnes per month.”
Another problem is the need for phytosanitary checks at the border with Poland. There is a plan to increase inspectors at the Polish border.
Some other options include railing grain to Izmail, a port on the Danube River in Odesa Oblast. Taking by barge to the Romanian port of Constanza is not possible at the moment, according to Dmytrasevych. Not only is Constanza reportedly full of grain, but volume from Romania’s harvest will be arriving in the coming months. A temporary measure might be to store grain on vessels.
When discussing the future with the interviewees, much depends on their type of farm and circumstances.
One interviewee has a 3,500 ha no-till farm in the region of Vinnytsa. He felt he was in a better position with less reliance on inputs, although he was quick to point out that no-till formed less than one percent of farming in Ukraine.
For the moment, the consumption balance can support the population and war effort. One official from the Ministry of Agriculture speaking during the UCAB webinar on 21 April said that consumption was lower due to the number of people who have been displaced by the war, and who have moved to other countries. Out of 100 million tonnes in grains and oilseeds, around 20 million tonnes are typically required for domestic consumption.
On the face it of it, production could fall by some margin to cover domestic consumption, but this would be ignoring two key knock-ons – the reduction in revenue, both for farmers and the government, and the lack of supplies to the usual overseas buyers. The buyers of wheat in North African countries are one reason for maintaining close-to-near normal productivity levels.
Uncertainty abounds since 24 February when Russian tanks rolled over the border. The only certainty is there are more battles to come for Ukraine’s farmers.
To network with companies across the inputs sector, the New AG International Annual conference and exhibition is taking place in Warsaw, Poland, 10-12 May. More information here.