A year of war in Ukraine: Agriculture sector hit hard

22-02-2023 | Raw materials | Article

A year ago, the world was shocked by the Russian invasion of Ukraine. Now 12 months on, and the country is still fighting Russian troops with all its own resources and those it gets from friendly nations. The damage is great, also in agriculture. But the determination of Ukrainians is unprecedented.

February 24 marks one year since Russia invaded Ukraine. A year in which the agricultural production and exports of Europe’s granary, according to estimates by the EU and the FAO, have suffered a major blow. The production of arable crops in the 2022-23 season is estimated at 55 million tons compared to 90 million tons a year earlier. Exports are expected to plummet by another 50 million tons in 2021-22 (estimate) to just 30 million tons (forecast) in 2022-23.

Until the Russian invasion, Ukraine was a global superpower, especially in the export of sunflower oil, barley, maize and wheat with 50, 18, 16 and 12% share in global exports respectively. But due to blockades, bombardments and occupations of important ports on the Black Sea and rivers in eastern Ukraine, exports came to a halt. In order to get as much grain out of the country as possible, the UN launched the grain initiative in July last year. Grain was transported to Turkey from 3 ports on the Black Sea. On 17 January 2023, more than 17 million tons of grain and other foodstuffs had been exported via this grain corridor.

New export corridors

In addition to the UN action, the EU quickly provided extra ships and trucks last year, more mobile grain loaders for terminals at the border and more grain storage capacity in the EU. For the medium term, work is underway on what are referred to as new export corridors. New ways to get agricultural products out of Ukraine by road, rail or water.

At the end of last year, the FAO announced that it would support Ukraine for a total of €192 million this year. The largest part (€93.6 million) goes to 500,000 households in rural areas near the front line. Ukraine has large farms, but there are also many small businesses that are mainly self-sufficient. To prevent them from becoming dependent on food aid, the FAO wants to provide them with seeds, fertilisers (arable farming) and feed, temporary stables and veterinary medicines (livestock farming). €79.6 million will be earmarked for, for example, the supply of generators and temporary grain storage in the form of plastic hoses, which are mainly used in the Netherlands for the storage of feed.

The remaining €18.8 million will be spent on setting up more alternative export routes, veterinary support and clearing farmland.

Until the Russian invasion, Ukraine was a global superpower, especially in the export of sunflower oil, barley, maize and wheat. Photo: Canva

GRAIN TYCOON KILLED IN RUSSIAN BOMBING: SON PICKS UP THE TORCH
Ukraine was shocked last year by the death of Oleksiy Vadatursky and his wife Raisa. They were killed during a Russian bombing raid on the Black Sea port of Mykolaiv at the end of July. Oleksiy was a grain tycoon, one of Ukraine’s richest businessmen, and “Hero of Ukraine,” the highest honour a citizen of that country can receive. He founded the company Nibulon in 1991 which quickly grew to become one of the 20 largest companies in Ukraine with a turnover of €654 million. The most important branch of the company is grain export. Prior to the Russian invasion, Nibulon exported nearly 1 million tons of grain per quarter. Oleksiy’s son, Andriy Vadatursky, is now the new CEO and he paints a harrowing picture of the consequences of the war on the World Grain.com website.Andriy: “I was in France when I received a phone call that my mother had died. 3 hours later we heard that my father and 3 employees of Nibulon had also been killed. When I heard the news I kissed my children and immediately drove to Ukraine.” The consequences of the Russian invasion for his company are major. In 2021-22, Nibulon exported another 4.5 million tons of agricultural raw materials to 34 countries. “Since the invasion, we have not been able to use our fleet at all because of the blockade of seaports and passage of rivers through occupied territories. That is why we divert our exports via land routes, but at a much higher cost. As a result, our exports fell sharply. From January 1 to November 15, 2022, Nibulon exported 1.7 million tons of grain, a decrease of 164% compared to the same period in 2021.”

GRAIN CORRIDOR
Andriy Vadatursky is ambivalent about the UN’s grain initiative, which was launched together with Turkey at the end of July last year to facilitate the export of grain from the Ukraine from the 3 Black Sea ports of Chornomorsk, Odessa and Pivdennyi as much as possible. Andriy: “The grain initiative has been an essential short-term solution to the extreme challenges the Russian war has posed for export logistics. The deal will allow Ukraine to ship more than 10.5 million tons of grain and lower food prices worldwide. It has also helped Ukrainian farms remain viable in extremely difficult conditions. However, the deal does not include Mykolaiv ports, which are among the largest in Ukraine and shipped 35% of our food exports before the war. Without access to these ports, exporters have to use alternative routes that take much longer and in some cases cost 10 to 40 times more. The grain corridor must also become much more transparent in order to work efficiently and fairly. There are too many mandatory inspections and a shortage of staff, leading to costly delays. As a major trader and agricultural producer, Nibulon supported the extension of this temporary agreement, but the terms need to be improved significantly.” Nibulon’s brand new CEO is determined. “It is my mission to ensure that Nibulon remains a strong and healthy company for years to come — in the interest of Ukrainian society, our employees and the farmers we serve. Our continued success will strengthen Ukraine’s economy and global food security. The war will eventually end and when that day comes, Nibulon will be ready to take the lead in rebuilding and restoring Ukraine.”

Drop in purchasing power

René Kremers, director of trading and consultancy with Difco in the Netherlands, is in Ukraine. Difco delivers supplies for dairy farming in particular, from semen to management programs. According to Kremers, a large part of Ukraine continues to operate, from Ternopil, about 500 kilometres west of Kiev. “The war is raging mainly in the East, but it has been since 2014. Although it is now more intense there with more victims.”

The way for Ukraine is Europe, period!

In the rest of Ukraine, he says, the impact of the war is mainly noticeable due to the inadequate power supply and the sharp drop in purchasing power. “Many companies and restaurants, for example, now have a generator here. But that of course costs a fortune.” This is partly the cause of the sharp drop in purchasing power, as a result of which the milk price in Western Ukraine, for example, is still only a meagre 30 cents per kilo, according to Kremers.

Kremers is very confident about the future of Ukraine: “The road for Ukraine is Europe, period! That political decision has been made and will not be reversed.”

FAO: BILLIONS IN DAMAGE AS A RESULT OF WAR
The damage to the entire agricultural sector in Ukraine in the first 6 months after the Russian invasion is estimated at more than €2 billion. This is what the world food organization FAO says in a report published in December 2022.The sum of all losses is estimated by the FAO at €26.5 billion. A total of €28.8 billion. The damage amount was calculated based on interviews with 5,230 rural households, spread over the whole of Ukraine, including the provinces near the frontline at the time. 25% indicated that they had completely or partially stopped farming as a result of the war. Around the front line it was 38%.The damage (destruction of machines, buildings, livestock and crops) and the loss (loss of production, higher production costs and lower prices) in arable farming amounted to more than €1.1 billion. In the livestock sector this was almost €1 billion. In total more than €2 billion. No less than 72% of arable farmers and 64% of livestock farmers indicated that they are facing a drastic and significant decrease in their income.