Since March, that Russia aggression in Ukraine was punished by extensive economic sanctions and the isolation of Russia, we have faced the first consequences of these developments. First of all, it is already comprehensive and sustainable inflation, new challenges in the availability of energy and other raw materials, and the reorientation of many sectors to other supply chains. One of the most affected sectors is agriculture – many countries around the world are concerned about the declining availability of wheat, maize and sunflower oil.
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Farmers, on the other hand, feel the most about the availability of mineral fertilizers and rising prices, as well as more expensive fuel. Along with the availability of raw materials, the logistics of agricultural products are also difficult. War Ukraine has suspended much of its exports this year, however European, ASV and support from other countries Ukraine in the fight against the aggressor state makes you see the light at the end of the tunnel.
The biggest problem – transport routes
It is estimated that Ukraine’s share of world wheat exports was around 10% and Russia’s at 16%. Assuming that some of these exports are canceled (due to war or sanctions), this has a major impact on the world market. It is no coincidence that the Food and Agriculture Organization of the United Nations is currently talking about a global food crisis that could pose a particular threat to African and the countries of the Middle East. For Ukraine, the main problem is the damage to ports and land transport infrastructure: Ukraine’s grain exports were four times lower in March than in February. Wheat prices have risen from around € 200 per tonne at the end of last year to € 350 per tonne this year.
The main export route for Ukrainian agricultural products is the Black Sea. 80% of grain is exported through Chornomorsk, Mykolaiv and Odessa ports in the south-west of the country. Reluctant to take risks, many shipping companies are reluctant to send their ships to Ukraine, and the war situation has made cargo insurance significantly more expensive.
The cessation of hostilities would mean that Ukraine, together with international support, could begin to rebuild its transport infrastructure. It should be noted that an alternative to the infrastructure, which allowed an average of 4.5 million tonnes of grain to be transported per month, cannot be developed in the short term. For the time being, therefore, it must be borne in mind that the cost of transporting grain through, for example, ports in neighboring Romania will be three to four times higher. Poland The press reports that Poland is not ready to reorient Ukraine’s food exports because crossing the border in eastern Poland is too tense. Ukrainian grain exports look the most promising Lithuania and Latvian ports. But the EC is working on transit routes to ensure the supply of raw materials and prevent excessive food prices from rising.
The decline in Ukrainian exports will be felt by all
Most of last year’s harvest has already been taken from Ukraine, but this year’s harvest and its transportation are under threat. It is already estimated that between 5 and 6 million tonnes of wheat (about a quarter of annual exports), 15 million tonnes of maize (about half of annual exports) and 3 million tonnes of sunflower oil (about half of annual exports). A shortage of this magnitude cannot, of course, go unnoticed – it leads to a huge increase in demand, followed by rising prices.
During the summer sowing, Ukrainian farms are short of fuel and labor, as well as seeds and fertilizers. This will have a significant impact on the maize and sunflower crop sown in April, which is estimated to be 30% to 50% lower. It must be borne in mind that the war will make it difficult to harvest. Although wheat and rapeseed fields are sown, the Russian invasion is expected to reduce this year’s cereal harvest by at least a fifth compared to last year (average wheat harvest in Ukraine is between 27 and 29 million tonnes; exports are usually around 20 million tonnes).
The Baltic States as a global producer
The annual grain harvest in Latvia is about 3.5–4 million tons, which is the second largest indicator in the Baltic States (7.3 million tons after Lithuania last year). Leaving about a third of the harvest for self-consumption, the Baltic States can supply a significant part of the global demand for cereals – we are currently the second largest exporter of wheat in the EU, only slightly behind the leader. France. We are one of the largest players in rapeseed exports in Europe. However, a significant challenge Baltic farmers have and will have adequate fertilizer security, – from Russia and Belarusian imported fertilizers will have to be replaced in the coming seasons (their prices have tripled). Reducing the use of fertilizers and plant protection products would mean lower yields. The second major factor affecting the agricultural sector is the sharp rise in fuel prices and other energy prices.
It should be remembered that before the Russian invasion of Ukraine, the main concerns of farmers were related to the introduction of a European green course and requirements to reduce harmful emissions. The sustainability goals defined by Europe have not been abolished, so when planning the future of Baltic agriculture, it is necessary to think about both energy use and technological innovations (so-called precision agriculture), which would increase efficiency and reduce the use of plant protection products. One way to meet these challenges is through cooperation, which, on the one hand, gives greater strength to negotiations on logistics solutions, supplies and procurement, and, on the other hand, creates a very valuable environment for knowledge transfer.
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