Reap as you have (un)sawn: How Ukraine forms the 2023 harvest

Two weeks at most the autumn sowing campaign is going to start in Ukraine, which will form a great deal of 2023 harvest, the food one in particular. The starting conditions for it have improved dramatically literally the day before, when the ability to export agricultural cargoes via the Black Sea ports appeared. 

Earlier in the face of sea blockade and uncertain prospects for its lifting, chances for a full agrarian season 2023 looked low, if not zero. In the condition of overstock that had brought down grain purchase prices below the cost of most crops, agri-producers had neither resources, nor economic sense to invest in new production.

But restarting the sea agrarian export under the quadripartite Grain Initiative signed by Ukraine, the UN, Turkey and russia allows unloading the market at least partially and gives understanding of perspectives to its participants.

Despite that the main factor that challenged the sowing campaign–the blockade of ports–had been eliminated, operational problems left which have not disappeared and which are going to influence the autumn sowing campaign’s result. To reiterate, it is in autumn when the main part of the next year’s harvest of wheat is formed. That is the food security – not only in relation to Ukraine, but also the wellbeing of third countries considering the restored export and international contracts – depend on the successful performance of the sowing campaign. So Mind learnt, in what conditions agrarians will have to begin sowing-2022 in autumn. 

What is happening to lands?

The potential acreage under winter crops significantly shortened due to the war factors at first.

In the autumn 2021, 6.5 million ha of winter crops were sown on harvest 2022. Thanks to the fact that this figure was close to record breaking as well as to favourable weather conditions, Ukraine lost minimum in wheat harvest, although it temporarily lost in territory.

This year the sown area may be 4.7 million ha – it is the maximum, if the whole government-controlled territory will be sown.

As Mind Intelligence wrote, as of the mid-summer up to 20% of arable farmlands in Ukraine, or 4-5 million ha, suffered more or less from active hostilities. According to FAO, that namely include up to 25% farmlands in Kyiv Oblast, ~ 10% in Zhytomyr, ~ 50% in Chernigiv, ~ 70% in Sumy, ~ 20% in Kharkiv, ~ 100% in Kherson, ~ 50% in Zaporizhzhia provinces. This estimate does not include losses in Donetsk and Lugansk oblasts that have been damaged by the war since 2014.

Aside from physical shortening of cultivable area, the course of the campaign is determined by hostilities that go on in Ukraine –  it is virtually unreal for their hot phase to cease down until the autumn. Thus, there surely will be uncultivated lands that are conditionally close to the current front line, since there is a great risk of its shifting to both directions..

What is the change in profitability?

Financial components affect the sowing campaign along with war ones. Since March, prices for farming products have been decreasing dramatically on the domestic market, being 30-50% lower than in the last year. Their level was the lower, the farther from the western border, through which all exports went during the blockade of ports and farming was located. Thus, when the price for barley is around $240 (over 8500 UAH) per ton in the vicinity of border crossing points, in the South the farmer was offered less than 1000 UAH per ton.

After exports had been realised through Greater Odesa ports, the domestic prices started to rise gradually, but not enough to compensate for the half year slump. According to the APK-Inform system, 3rd-class wheat rose in price from 4700 UAH/ton to 5000 UAH/ton from 25 July to 10 August.

From 15 July to 10 August, fodder barley increased from 3900 UAH/ton to 4200 UAH/ton. Ironically, the opening of Ukrainian ports affected the world prices that began to go down, expecting the increasing supply in the global market. The farmer must also subtract freight costs that have risen in price and insurance premiums that have also increased due to war risks, from his purchase price.

At the same time costs for fertilisers, fuel and other inventories have risen significantly for agricultural producers. The variation between the needed and available resources in the agri-sector can only be covered by state subsidies – this year they function primarily as the 5-7-9 Affordable Loans programme. Market players privately understand that industry specific subsidies from the Ministry of Agrarian Policy are not to be waited, so they get ready to economise.

So, Petro Evich, the AgroRos company CEO, said in an interview, that this year, the company is going to use complex fertilisers and reduce their application rates by 10-20% due to the considerable rise in their price.

Can the situation be changed?

The coming deficit of funds is so crucial that the relevant associations wrote a joint letter, asking the Cabinet of Ministers to secure financial conditions for doing agricultural business in Ukraine.

“An average agrarian is forced to sell the last year's harvest at low prices that are sometimes below its cost. All parties to the farming manufacturing process have been on the edge of survival so far due to the lack of financial resources, which poses a threat to further doing of agro-business in Ukraine,” their statement says.

Given that literally recently the government reduced the rate of incentives for deputy ministers and mass redundancy of public servants are preparing for the autumn – there is no spare money not only for the agrarian sector, but for anybody at all.

All these factors in total may lead to reducing arable land under winter crops by 35-45% compared with the last year’s level, according to the Ukragroconsult analytics. 

In the spring 2022, 6.6 million ha were sown, of this land around 4.4 million ha ended up in the harvesting. The harvest forecast is at the 55–70 million tons range. Due to the blockade of ports, the transit stock is estimated at 18 million tons – this practically complies with the total domestic consumption in Ukraine.