Challenges-2023 for the agrarian sector: What experience the agro-industrial complex enters the new year with
What the war has changed and how these lessons may be useful
2022 was an unprecedented ordeal for all sectors of the national economy. For the agricultural sector, these ordeals were directly proportional to the industry's capacity and its leading place in Ukraine's GDP. The full-scale invasion on the eve of the spring sowing campaign, blocking of maritime exports, physical destruction of agricultural assets, temporary occupation and contamination of areas with ammunition – all these factors made the scenario of the destruction of the industry quite real. However, agriculture, like the Ukraine in general, survived. Oleksandr Kravchuk, CEO of Syngenta Ukraine, one of the leading suppliers of crop protection products and seeds for the agro-industrial complex, exclusively for Mind reflects on the main challenges the industry had to face in 2022 and what experience agrarians take with them into the new year.
The agricultural sector suffered proportionally from the consequences of the war, but at the same time managed to survive in the absence of many important components. Particularly, without much external assistance, based on its own resources and initiatives – probably due to the unique historical experience of Ukrainians, our centuries-old genetic "agrarian memory." And this is what we should certainly be proud of.
There was but a single sector in the industry that was not affected by the war. Everyone suffered; the enemies destroyed our production assets and looted irrespective of specialisation.
But in agriculture, everything is interconnected. Livestock or poultry farming cannot exist without crop production. If there is no forage provided by crop production, there is no livestock and poultry farming, and the increase in the cost of crop production affects the cost of livestock output. So we are all in the same boat.
We can generally highlight the following key changes in the work of the agro-sector provoked by the war.
Blocking of exports and complete rearrangement of the logistics system. Before the war, more than 95% of agricultural products were exported by sea. After the blocking of sea routes, it was necessary to rapidly find an alternative, help farmers sell grain and get working capital, ensure liquidity, clear spaces for storage, and at the global level – to prevent the food crisis from unfolding, as nearly 400 million people in the world depend on Ukrainian grain.
"Syngenta has invested in the production of Ukraine's own special railway containers to ship grain across the western borders of the country. We found foreign buyers for Ukrainian grain, accepted commodity output from the farmer as payment for our products and provided full logistics to the ports of Poland and Lithuania with further delivery to countries that wanted Ukrainian grain.
We transported crop protection agents and seeds from the East to the central part of Ukraine, rented additional warehouses in the western part of Ukraine and started to make deliveries together with our distributor partners.
Reorganisation of agrotechnological approaches and restructuring of cultivation areas. The export crisis led to a change in the structure of cultivation areas and cultivation technologies, adjusting to what people had "in hand." Classical and innovative cultivation technologies took the back seat. A number of agricultural producers left "autumn fallows" – fields out of crop, avoiding risky investments, because there was no understanding of what should be expected tomorrow.
But despite all the challenges, the sowing campaign in the conditions of war was executed, exceeding analysts' estimates.
An important challenge was the harvest of winter crops that had been sown in autumn. Although the ports of Odesa were already partially unblocked at that time and logistics routes within the country were more or less established, the fuel shortage and prices triggered a surge in logistics costs – both for exports and imports.
Prices have doubled or more. Accordingly, the Ukrainian market diversified to the prices of agricultural products, logistics entailed huge additional costs. A tonne of grain for sale in US dollars in Dnipropetrovsk Oblast or in Odesa Oblast differed almost twice.
Accompanying challenges. In addition to all of the above, the following aggravating factors cannot be discounted:
Mobilisation and movement of people within the country and abroad, especially in the first two or three months of the war, changed all work processes.
Lack of electricity, internet and mobile communication significantly affect the efficiency and increase the time of operations.
The financial sector, which previously used to support farmers more or less predictably, though not always swimmingly, stopped lending during the war. Access to working capital became extremely limited.
Loss of many grain storage facilities, which were located primarily near the ports of the Azov and Black Seas and used as hubs for accumulation and transshipment. Only one damaged Mykolaiv transshipment elevator owned by Nibulon company is a big loss in the logistics and export chain in general and for the "grain corridor" in particular.
Grain elevators and terminals built inside the country continued to operate, but given the exclusion of port capacities this is not enough to meet the needs of the industry. And with the volume of harvest that Ukraine collects per year, there is not enough storage space if there is no balance of grain movement, that is, the dynamics of export shipment does not correspond to the movement of loading elevators.
As for Syngenta's business in Ukraine, it is quite logical that sales volumes have decreased if we compare the results of 2021 and 2022. But there were no significant shifts in business indicators. One of the factors that ensured the continuation of the business was the long-term cooperation with key customers and partners and willingness to support each other.
Prospects for 2023. We are optimistic about this year, but with no illusions. There is no doubt that it will be hard for the agricultural sector.
The tendency to optimise cultivation technologies, and in some cases, austerity or even refusal to sow, is going to continue. Add to all this inflation – the rise in prices for everything from fertilisers and other inputs to fuel and materiel, and we will get a rather difficult choice before the farmer for the next season.
We need to take a responsible and balanced approach to the choice of crop rotation, the crop, the hybrid and the cultivation technology. But the main wish from all responsible market actors is to continue working, sowing and cultivating the land, growing the best sunflower and grain in the world. And thus, to save the world from hunger.
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