The autumn sowing campaign is hopelessly behind the plan: A quarter of the area has been sown. The war was not only to intervene, but also the weather

Ukrainian farmers are approaching the calendar "equator" of the sowing season for the 2023 harvest. The actual result of field work is considerably behind last year's, even adjusted for the fact that some areas were not originally planned for cultivation due to the occupation, proximity to the front or contamination with explosives.

As of the first decade of October, 1.2 million hectares were sown in all provinces. For comparison: as of 11 October 2021, this figure was 4.73 million hectares, which is four times more. The greatest progress this year is noted in Ternopil Oblast where sowing has already been done on 32,000 hectares, or 41% of the plan.

Mind investigated what, besides the obvious – the war, has led to such a deplorable result, whether there is a chance to improve it, and what the farmers' main pain spots are.

How far forecasts diverged from reality? The current dynamics is worse than forecasted, as the plan is fulfilled only by 26% based on the expected area of 4.56 mln ha. A year earlier, in early October, farmers had already sown 60% of the forecast of 7.8 million hectares.

In fact, the reduction in the area under winter crops may be even greater than the industry-wide temporary loss: 40% against 30%. That is, the current figures are pessimistic even taking into account the lowered bar for the industry.

Who suffered the heaviest damage by the rains? Late August and September were surprisingly difficult for field work, and historically unfavourable in some respects. On average, the usual agricultural cycle shifted by two weeks.

According to the Hydrometeorological Centre, the average September precipitation in most regions was 128–198% of the norm (55-99 mm), and in Zhytomyr, Rivne, Lviv, Ternopil, Ivano-Frankivsk and Transcarpathian oblasts this figure ranged from 201 to 233% of the norm (115–175 mm). The weather was relatively favourable in Odesa, Kherson and Zaporizhzhia oblasts, where the monthly precipitation was close to normal (34-41 mm). But this had little impact on the general picture due to the loss of part of the area from agricultural turnover in the last two provinces.

Rainy weather affects not only the pace of sowing, but also slows down the harvesting of corn and sunflower. That is, even when the weather permits, it will be necessary to harvest the current crop first before sowing the next one. Last year, the autumn weather conditions, on the contrary, were extremely favourable, which largely allowed the formation of a close to record winter crop field.

However, the weather is not the only sectoral factor that is strikingly different this season (Mind, of course, takes the war out of context).

How did farmers have to rebuild their financial models? The main resource for the autumn sowing campaign was obtained from selling the harvest. This year, due to the blockade of the ports, the grain market has reduced its activity to a record low, and the overstocking caused a collapse in prices. Partial recovery of exports occurred only in August – too late to form a resource before the start of field work.

"Now there is practically no opportunity to buy in full, to put all the cash on the table," says Dmytro Skorniakov, Director of HarvEast Holding, speaking to the Price of the State Project. He adds that saving on technology inevitably ends up being a reduction in yields: "We [Ukrainian companies] will start to lag behind our [global] competitors."

The downward price trend, which is observed for agricultural products for the fifth month in a row, makes farmers to be too frugal. "Next season, prices for commodities will be lower than this year," Skornyakov says.

In the midst of rising costs for agriproduction and lack of liquidity, this forecast sounds like a sentence. All this creates rather pessimistic expectations about the future harvest.

What should be expected from the harvest-2023? In the last pre-war year, Ukraine harvested 106 million tonnes. Such figures or even comparable ones will be irrelevant for several more years. The consensus expert forecast of the current year's harvest is 55 million tonnes. Mind previously wrote why the level of official expectations of bureaucrats at 67 million tonnes is inadequately inflated.

At the same time, the situation in the fields is very difficult to reduce to a common denominator. It is quite different in various areas – including in terms of stability. Although no one can predict 100% of the work, farms in the west of the country show great confidence – up to the readiness to expand areas under crops.

Even if the minimum forecast of 55 million tonnes of the harvest volume comes true, it may turn out to be an excellent result compared to the upcoming season, the prospects of which market participants are beginning to carefully analyse.

However, the structure of the harvest will also change: food crops will inevitably decrease in favour of technical ones. This can already be seen in the example of the autumn sowing season, where the area under rapeseed is almost the same as last year, but there is a reduction in the sowing of spiked grains – wheat and barley. If winter wheat is sown, it is for technological purposes – for seeds, not for consumption. It is also quite realistic that part of the land will simply remain fallow.

Next year, the most dramatic reduction of areas will be under corn, market participants predict. This crop is expensive in production and refinement, storage, and prices for it leave much to be desired. At the same time, technical crops look relatively attractive at a price that will provide them with a place on the field.

Another factor changing the list of crops in Ukrainian fields are the prospects for export.

How and to whom to sell all that we grow? Full-fledged export is a guarantee and a necessary condition for the work of the Ukrainian agro-industrial complex, more than half of the production of which before the war was directed to foreign markets. The blockade of ports not only deprived farmers of revenue, but also led to market overstocking and capacity overload.

The main markets for Ukrainian agricultural products in recent years have been four regions: Asia, the European Union, Africa and the CIS. In 2022, there is an increase in domestic agro-food exports only to the European Union, which is ahead of the long-term leader – Asia. "The EU share increased from 28% last year to 52% this year. For eight months of 2022, European countries purchased Ukrainian food for $ 7.029 billion," says Mykola Pugachov, Deputy Director of the Institute of Agrarian Economics National Research Centre.

Simply put, the European market is more friendly to Ukrainian rapeseed and sunflower. But corn and barley were mainly bought by China, which became indefinitely unavailable.

The good news is that export volumes are recovering. Thus, according to the State Customs Service, exports of agricultural products in January–August 2022 amounted to $ 13.56 billion. This is $ 1.579 billion – that is, 10% less than the corresponding figure for the first eight months of 2021. The share of agricultural products in total exports is about 47%.

In September, due to the boost in maritime trade, agricultural exports accelerated even more and reached pre-war levels of 7 million tonnes. Agricultural categories in foreign trade accounted for 62% of the price and 71% of the volume of exports.