Ukraine's agricultural sector is in a 'critical situation', financially, at present, the Ukrainian Agri Council (UAC) has said, with direct losses by the end of this year set to amount to more than $3 billion (€2.85 billion).
The current situation, which has been driven by the blockade of the Black Sea – Russia unilaterally withdrew from the Black Sea Grain Initiative in July – means that many farmers are likely to face bankruptcy, it added.
In addition, the situation has been exacerbated by the cost of logistics, including the cost of fuel, agrochemicals, and spare parts, which has led to higher production costs amid lower purchase prices.
Financial Performance
“We tried to estimate the financial performance of the agricultural sector this year, focusing on the crop production sub-sector," commented Andriy Dykun, head of the Ukrainian Agri Council. "We used the production of the main crops – wheat, corn, sunflower, barley, soybeans, and rapeseed – in the central regions of Ukraine.
"Due to low purchase prices and high production costs, all crops, except soybeans, are unprofitable this year. According to the forecast, crop production losses will exceed $3 billion. Under the scenario that provides for improved working conditions of seaports, the figure may drop to $1.2 billion, but the industry will still suffer large losses, even under the optimistic scenario."
As well as pulling out of the Black Sea initiative, Russia has carried out a number of attacks on grain storage facilities throughout Ukraine, destroying more than 300,000 tonnes of Ukrainian grain, and damaged and partially destroying 105 Ukrainian port infrastructure facilities.
As a result of the attacks on the Danube cluster ports and the blockade of seaports, grain exports to Asia, Africa, and Europe have decreased by almost three million tonnes per month, and Ukraine has lost 40% of its port export potential.
Making A Loss
This year will be he first for 20 years when the agricultural sector in Ukraine runs a deficit this year – in the past, profits in wheat production have run close to zero, but sunflower production has never been unprofitable, UAC members said.
'This is despite the fact that this year's favourable weather conditions supported agricultural production,' the members said in a statement. 'Last autumn, winter crops were reduced, but thanks to the weather, we had a normal gross harvest. Next year, the acreage will decrease further.
'Farmers are saving on fertilisers and machinery, which will have a negative effect on the accumulative system, and the gross harvest will decrease significantly. The average Ukrainian will have enough food. But the issue of exports will become even more acute, and there will be no foreign exchange earnings in Ukraine.'
