Wheat production in Ukraine in 2023-2024 will fall by 21%, to 16.5 million tons, while exports will drop to 10 million tons. Meanwhile, a number of EU countries are refusing Ukrainian agricultural products. How will the reduction in supplies from Ukraine affect the world grain market, and what are the prospects for the Russian agro-industrial complex? About it writes columnist for the magazine “Profile” Irina Badmaeva.
Grain of Ukraine
Once upon a time, Ukraine was considered the breadbasket of the Soviet Union. Record-breaking harvests of wheat, corn and other agricultural crops were grown on the fertile black earth soil. As the people say, plant a shaft – the cart will grow.
After the collapse of the USSR, the agricultural sector remained the key to the Ukrainian economy. The country actively sold agricultural products, ranking fifth in the world in wheat exports, third in barley shipments, second in corn, and first in sunflower shipments. Among the main buyers are Romania, Poland, Turkey, Hungary, Egypt, Moldova, Lebanon, Qatar, Tunisia, Libya. The Netherlands, Germany, and Spain also bought Ukrainian agricultural products.
However, with the start of a special military operation (SVO), Ukraine has lost a significant part of its agricultural land. “Compared to 2021, the sown area has decreased by 25%. The agricultural territories of the Donetsk and Lugansk People’s Republics, Zaporozhye and Kherson regions accounted for more than 15%. Lands where hostilities continue remain uncultivated – this is approximately 8-10%, ”says Associate Professor of the International Economic Security Program at the RUDN University Institute of World Economy and Business Hadjimurad Belharoev. In addition, many highly skilled workers in the agricultural sector of Ukraine left the country or were mobilized, the expert notes.
Ukrainian farmers also need to repair and renew their agricultural machinery fleet. And with this there are difficulties due to disrupted logistics.
There is a shortage of mineral fertilizers needed to feed the depleted soil.
“Farmers do not receive funding. Despite this, Ukraine became the ninth wheat producer in the world at the end of last year,” financial analyst says Fedor Sidorov.
In 2021, more than 33 million tons of wheat were harvested in Ukraine. In the 2023/24 agricultural year, according to USDA estimates, this figure will be 16.5 million tons – 21% less than the previous year, and 38% below the five-year average. The collection of other crops will decrease by 16%: from 34.06 million tons last year to 28.67 million tons. Thus, corn, according to estimates, will harvest 22 million tons, barley – 5.9 million tons, oats – 350 thousand tons.
As a result, as the American agricultural department warns, the export of Ukrainian agricultural products will also decrease. For example, 10 million tons of wheat will be delivered, and not 15 million, as last year. Corn deliveries will decrease by 10.4 million tons.
The high probability of a two-fold drop in wheat production in Ukraine in 2023 compared to 2021 may lead to some shortage of grain, believes Professor of the Basic Department of Trade Policy of the Russian University of Economics. G.V. Plekhanov Ibrahim Ramazanov.
Against the backdrop of a reduction in the supply of Ukrainian grain, experts expect an increase in world prices.
“There will be a correction towards an increase of 10-15%. Exporting countries will begin to receive additional profits,” Belkharoev believes.
The reverse side of the cancellation of duties
In the spring of 2023, a number of European countries abandoned Ukrainian agricultural products, from grain to honey. Poland was one of the first to take such a step.
“Grain cargoes from Ukraine going through Poland will be under the control of a special system that will make sure that not a single ton of grain from Ukraine remains in Poland, so that the products go in transit,” – said the Minister of Agriculture of the country Robert Telus.
Poland remains a constant friend and ally of Ukraine, but the interests of its citizens are a priority, explained the chairman of the ruling Law and Justice party Yaroslav Kachinskytherefore it is necessary to protect the Polish farmers who suffer losses.
The fact is that in May 2022, the European Union canceled duties on the import of Ukrainian grain and other agricultural products in order to “significantly support the economy of Ukraine.” In May 2023, the EU extended the measure for another year.
Poland has become the main land transshipment hub for Ukrainian grain. However, instead of re-exporting goods to Africa, where the issue of food shortages is acute, Polish companies themselves began to buy cheap Ukrainian grain. As a result, prices collapsed on it, which caused discontent among local farmers, whose incomes were rapidly falling.
The example of the Poles in refusing Ukrainian agricultural products was later followed by Hungary, Bulgaria, Slovakia, and Romania. The reason is the same – the situation threatens local farmers. Restrictive measures are in effect from May 2 to June 5. Transit through these countries remains permitted – grain can flow freely to other European markets.
In early May, Moldova, following the EU countries, decided to limit the import of Ukrainian grains and oilseeds. Kyiv warned that it would regard this as a “highly unfriendly step” and, in response, would ban all imports from the country. During a meeting with the head of the European Council Charles Michel in Japan, the President of Ukraine Vladimir Zelensky stated that the extension of restrictions on the import of Ukrainian agricultural products in a number of EU countries is unacceptable.
Grain of Russia
Only Russia can stabilize the world grain market, experts say. According to Rosstat, the harvest of grain and leguminous crops last year amounted to a record 157.6 million tons. This is almost 30% more than in 2021. The wheat harvest exceeded 104 million tons (+37% compared to 2021). Barley was harvested 23.4 million tons (+30%), rye – 2.17 million tons (+26.5%), corn – 15.8 million tons (+5%).
“Russia accounted for more than 13% of the world’s gross harvest of wheat and almost 16% of barley. Such a harvest increased the export potential of our country not only in terms of grain, but also in the whole agro-industrial complex,” said the Minister of Agriculture Dmitry Patrushev during a speech at the opening of the second All-Russian Grain Forum.
In the current season, it is unlikely that it will be possible to beat the historical record, analysts believe. Sanctions, economic difficulties and a difficult winter will have an effect. Nevertheless, this year it is planned to harvest at least 123 million tons of grain, and it is possible that the forecast can be adjusted upwards. As Dmitry Patrushev noted, Russia will continue to supply grain to traditional buyers and countries in need. In 2023, it is planned to ship more than 55 million tons of grain to global markets.
“The agro-industrial complex of Russia has a significant margin of safety and growth prospects,” Belkharoev is sure. “In the coming years, the industry will dominate and increase the export volumes of food and agricultural raw materials.”
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2023-06-02 12:49:00
