KYIV, UKRAINE — Last year, Ukraine sustained horrible damage due to the Russian invasion, causing grain production to plummet. There are reasons to believe that 2023 will bring new destructions, casualties and losses and that the global market could be braced for new shocks, even worse than those seen in 2022.

In 2022, Ukraine harvested 67 million tonnes of grains and oilseeds, 30% lower compared to the previous year, the Ukrainian Agri Council estimated. The farmers hope to maintain this production level this year, but in the current circumstance, this looks highly unlikely.

Andriy Dykun, head of the Ukrainian Agri Council and SaveUA Charity Fund, estimated that farmers sowed 26% less hectares of winter crops compared to the fall of 2021 in the territories controlled by Ukraine and 43% compared with the total figure planted in the previous year. The spring sowing campaign also is expected to be a big challenge.

“According to farmers, grain production (in 2023) will decrease by 37% compared to 2022 and 60% compared to 2021,” Dykun admitted.

Ukraine now has less land to produce grain than before the invasion. Svitlana Lytvyn, an analyst of the Ukrainian club of agricultural business (UCAB), estimated that Russians, since February 2022, captured 3.8 million hectares of Ukrainian farmland. Another 3.8 million hectares cannot be sown because of the proximity to the frontline, or contamination with mines, Lytvyn said.

Price matters

However, the problems of the Ukrainian grain industry are not limited to the physical loss of land. UCAB admitted that farmers largely abandoned wheat production in northeast and central regions, those located relatively far away from the hostilities.

“The reason for this trend is the limited ability to export grain, expensive logistics and, as a result, a significant difference in prices across regions,” Lytvyn said, explaining that regions located close to seaports and bordering with the EU have a higher price for agricultural products compared to regions in the north and east of Ukraine.

“Many farmers in the de-occupied territories often have nowhere to return to because their farms have been destroyed or are in conditions that are dangerous to human life.” - Andriy Dykun, head of the Ukrainian Agri Council and Save UA Charity Fund 

For example, she estimated in Transcarpathia, the corn price currently stands at 6800 UAH ($184) per tonne with VAT, while in the Sumy region, it is as low as 4900 UAH ($132).

“However, even in the western regions, the price makes grain production unprofitable,” Lytvyn said.

Dykun noted: “Most farmers have no working capital. They could not harvest and sell last year’s crops. (Their) agricultural machinery was stolen or destroyed by the occupiers, logistics costs skyrocketed, fertilizers have also jumped in price and are in short supply, and the cost of demining one hectare of field is high.”

All Ukrainian grain producers are in dire financial condition, Lytvyn agreed. There are massive liquidity problems. Farmers still have stocks of products, but they cannot sell them at profitable prices. As a result, spring sowing will be carried out with minimal use of fertilizers and plant protection products, which will inevitably hinder yields.

In the second half of 2022, Ukrainian armed forces launched a counteroffensive liberating large territories in the Kharkiv and Kherson region. There are hopes that this should bolster Ukrainian grain production in 2023, but for some farmers resuming operation could be difficult.

“Many farmers in the de-occupied territories often have nowhere to return to because their farms have been destroyed or are in conditions that are dangerous to human life,” Dykun said.

“However, most farmers remain optimistic and will resume farm operations as soon as it is safe for the lives of workers,” Dykun said, adding that labor shortage is another challenge to be reckoned with. “Farms have lost a large number of men who went to defend our homeland. Of course, this affects their operations, but we understand that if we do not protect the state, we will not be able to work at all.”

Grain Deal concerns

The Black Sea Grain Initiative and Solidarity Lanes helped the Ukrainian grain farmers to resume grain exports in 2022 and make it through last year. UCAB estimated that since the deal was struck in August 2022 until the end of the year, Ukraine exported 16.1 million tonnes of agricultural products through the grain corridor, including 12.5 million tonnes of grain. This is better than nothing but still lower than the Ukrainian grain industry needs. In early 2023, the supplies declined further.

“In January 2023, 77 ships exported 3 million tonnes of agricultural products from the ports of Greater Odesa to Africa, Asia, and Europe,” Dykun said. “This is 25% less than in December 2022, when 94 vessels departed the seaports carrying 3.7 million tonnes of agricultural products.

“The only obstacle to the access of Ukrainian agricultural products to world markets is the actions of the Russian side in the Joint Coordination Center (JCC), which by all means and under false pretenses blocks inspections of ships in the Bosporus and registration of new ships to the initiative.”

Dykun estimated that on average 2.5 ships leave Ukrainian ports per day, which is critically low.

“Three vessels per day out of the proposed nine are inspected in the Bosphorus and receive permission to move to Ukrainian ports,” he added.

Lytvyn also complained about the artificial delay in the inspection of ships by the Russian side, which, she said, leads to long queues of more than 100 ships waiting for a check in the Bosphorus, and the waiting time can last from two to five weeks, which leads to even greater losses.

The Ukrainian Infrastructure Ministry reported the JCC originally planned to conduct 10 inspections a day, but Russian inspectors successfully completed only half of them. In January 2023, out of 204 checks, only 173 were successful, and 31 examinations were not completed, among other things, due to the premature and unauthorized end of the working day by Russian inspectors at 3:30 p.m., rather than the original agreement of 5:30 p.m., Dykun said.

Concerns about a new offensive

Since the beginning of 2023, Ukrainian government officials and Western leaders have discussed a possible new Russian offensive. Oleksiy Reznikov, Ukraine’s defense minister, said in early February that his country expected Russia’s invading forces to launch a new offensive in the Donbas and southern areas. In addition, concerns are rising in Ukraine that Russia is preparing to launch a new offensive against Ukraine from Belarus, including possibly aiming to capture Ukraine’s capital.   

The growing uncertainty over the battlefield situation makes long-term planning for Ukrainian farmers nearly impossible, Lytvyn said. This spring, there also will be no sowing in the 20-kilometer zone on the border with Russia and Belarus.

Since October, Ukraine has struggled against constant power outages as Russia is pounding critical energy infrastructure.

New escalation could further worsen working conditions for Ukrainian farmers. As estimated by the State Emergency Service of Ukraine (SES), as of January 2023, 250,000 square kilometers, or 40% of the Ukrainian territory, were contaminated with mines.

“During the 11 months of the war, deminers have checked about 760 square kilometers of Ukraine’s territory,” Dykun said. “Currently, the SES pyrotechnic units are working around the clock, some of them manually, due to a lack of necessary equipment and an insufficient number of qualified specialists.”

He added that the situation is the most critical in the east and south of the country, particularly in the de-occupied territories of Kharkiv, Kherson and Mykolaiv regions, where many settlements have been destroyed, infrastructure and agricultural fields are heavily mined.

Since October, Ukraine has struggled against constant power outages as Russia is pounding critical energy infrastructure. Dykun said the shutdown for several hours could cause tremendous problems for grain storage.

“During the harvesting, it is extremely important for the grain storage to have electricity, as the grain storing and drying requires maintaining the necessary temperature,” Dykun said. “The lack of electricity makes it virtually impossible to comply with the production requirements, leading to grain spoilage and, as a result, loss of money and, above all, essential products for food security.”

Speaking about the prospects of the new Russian offensive, Dykun said if there are no positive improvements, Ukrainian farmers will not be able to conduct spring sowing. This will exacerbate the global food crisis, jeopardizing 400 million people depending on the Ukrainian agricultural sector. But Dykun said no matter what aggressive actions Russia takes, the Ukrainian population has faith in victory. 

“Since the first days of Russia’s full-scale invasion of Ukraine, Ukrainians have proved themselves to be a nation of strong, brave people who are ready to defend their home and will not allow the enemy to seize their territories,” Dykun said. “Our belief in victory over the invader is unquestionable, and we have no doubt that we will regain our territories and restore Ukraine.” 

International aid is critical

The Ukrainian Agri Council recently appealed to European Union leaders to preserve and indefinitely extend Ukraine’s preferential trade regime with the EU. Ukrainian grain farmers have expressed gratitude for the support they received in 2022. However, additional measures might be needed this year to prevent a collapse in the grain industry.

“Because of the war, the situation in the agricultural sector is catastrophic: farms are destroyed, equipment is destroyed, animals are killed, fields are mined,” Dykun said. “Today we need to launch a global fund to restore the Ukrainian agricultural sector, which will raise funds to help specific farmers who have lost their farms.” 

There are measures needed to be taken to provide Ukrainian farmers with the minimum required volumes of seeds and fertilizers, as well as launch a large-scale simplified lending program, since their own resources are extremely limited, Lytvyn agreed.

“Unfortunately, in the conditions of war, Ukraine does not have the ability to manage this on its own and needs further help from our partners,” she said. “It is about the survival of the agricultural sector.”