Ukrainian Farmers Prepare to Reduce Grain Exports: Innovation in Action

Innovation in action

Ukrainian farmers are set to drastically reduce their grain exports in the upcoming 2023/24 marketing year. This decision has been influenced by both external obstacles and the farmers’ own reluctance, as they have learned from the challenges faced in 2022.

Yury Shchuklin, a logistics expert and member of the Logistics Committee of the European Business Association (EBA), made this prediction in a comment to the EP. According to him, the mass of agricultural export cargo from Ukraine in the 2023/24 marketing year will be halved compared to previous years.

Shchuklin identified three factors that will drive agricultural producers to limit grain exports in the next season. These factors include the actual stop of the “grain corridor,” the European embargo on Ukrainian agricultural products, and the adaptation of agricultural producers to the economic shocks of the first year of the war.

“The producers will no longer sell at zero or in the red. Farmers who suffered losses last year have emerged stronger and wiser. They have reevaluated their goals, objectives, and business strategies, and they will not allow another unprofitable year,” emphasized the expert.

In 2022, Ukrainian farmers exported grain at any cost due to various circumstances such as the next harvest, debts, salary payments, and the need to save businesses and teams. However, these pressures no longer exist, except for debts, which are partially written off due to force majeure. As a result, farmers who survived the challenges of 2022 can now afford to hold onto their crops and wait for better prices.

Shchuklin also highlighted that farmers have revised their crop rotations this year, favoring niche crops with different logistics and export timeframes. This will eliminate the rush demand for grain transportation after the harvesting campaign, which has previously driven up logistics costs.

“The mass of the entire export cargo will be half of what we usually exported. Therefore, there will be less pressure on limited logistics compared to previous years. The increased demand for transportation in the past was due to the urgent export of wheat in July-August to free up warehouses for corn, which then had to be urgently transported before December,” explained the expert.

Corn, with its high yield of up to 120 centners per hectare, has been the main contributor to the mass of grain cargo transported by rail. However, corn production suffered the most in 2022 due to the high logistics costs that made it unprofitable. This year, corn marketing problems have been compounded by logistical issues.

“They want to buy it, but you can’t reach buyers for any amount of money because the grain corridor is closed and Europe is closed. The worst outcome of this situation is that our producers have lost the financial sense in growing certain crops. Therefore, farmers have turned to crop rotations, abandoning corn and focusing on sunflower, rapeseed, and other niche crops that can be sold with added value,” noted the expert.

Shchuklin concluded that the logistical problems faced by the Ukrainian agricultural sector in 2022-2023 will lead to the long-term loss of agricultural markets by Ukrainian exporters. Other countries, such as Brazil and Poland, quickly occupied markets that Ukraine failed to reach due to the embargo. These countries have benefited from the embargo, as their markets have expanded, providing them with stability.

“We will have to regain these markets. Perhaps, for this, we will have to work with smaller margins for several years. Simply waiting for better times, such as high prices, the unblocking of the corridor, the lifting of the embargo, or the opening of ports, is not a strategy. It is necessary to create conditions for our producers to enter the markets without falling into logistical traps. This is the responsibility of the state and the Cabinet of Ministers. Are they fighting for our victory?” emphasized Yuriy Shchuklin.

Overall, Ukrainian farmers are taking a strategic approach to their grain exports, prioritizing profitability and long-term sustainability. By reducing grain exports and focusing on niche crops, they aim to overcome the challenges posed by logistical issues and embargoes, and regain lost markets in the future.

How have Ukrainian farmers adjusted their approach to crop rotations and logistics in order to reduce the rush demand for grain transportation and lower logistics costs

Ukrainian farmers are set to significantly reduce their grain exports in the upcoming 2023/24 marketing year due to a combination of external obstacles and a strategic shift in their approach. Yury Shchuklin, a logistics expert and member of the Logistics Committee of the European Business Association (EBA), predicts that agricultural producers will halve their grain exports compared to previous years.

Shchuklin identified three main factors driving this decision. Firstly, the “grain corridor” has been temporarily halted, which has impacted the transportation of grain. Secondly, there is now a European embargo on Ukrainian agricultural products, limiting the market for Ukrainian farmers. Lastly, agricultural producers have learned from the economic shocks of the first year of war and are more cautious about selling their grain at low or unprofitable prices.

In 2022, Ukrainian farmers faced various pressures that led them to export grain at any cost. However, with the challenges of last year behind them, farmers are now in a better financial position and can afford to hold onto their crops and wait for better prices.

Furthermore, farmers have adjusted their crop rotations this year to focus on niche crops that have different logistics and export timeframes. This will reduce the rush demand for grain transportation after the harvest, which has previously driven up logistics costs.

Overall, the reduction in grain exports from Ukraine in the upcoming marketing year will alleviate pressure on limited logistics compared to previous years. With a strategic shift towards niche crops and a more cautious approach, Ukrainian farmers are adapting to the challenges they have faced and positioning themselves for a more profitable future.