Ukraine Warns Of Drastic Reduction In Wheat Harvest If Russian Blockade Continues

Ukraine’s farmers will plant up to two-thirds less wheat later this year if the country’s main export route is still blocked, prolonging the global food crisis, its agriculture minister predicted. Mykola Solskyi said farmers faced a financial crisis if the Russian blockade of the Black Sea was not lifted. Many would lack the cash to pay for seed, fertiliser, herbicide and fuel for winter wheat and would grow rapeseed instead, which is not used in cereal or bread production but commands a higher price and has a lower yield, meaning there would be less to transport.

Russia’s blockade of the Black Sea has hit Ukraine’s grain exports, pushing up food prices and leaving some poorer countries in the Middle East and Africa struggling to secure wheat. Known as the breadbasket of Europe, Ukraine produced a record 33mn tonnes of the cereal last year and before the invasion had been forecast by the US agriculture department to export 24mn tonnes in 2022, almost the same as the US. It is the world’s fifth largest wheat exporter and accounts for 80 per cent of Lebanon’s imports and is a major supplier for countries including Somalia, Syria and Libya. Solskyi told the Financial Times in an interview that a prolonged blockade would deprive farmers of cash flow and “break the financial cycle” of agriculture in Ukraine, leading to further big declines in exports. “Farmers will reduce winter sowing, wheat and barley from 30 to 60 per cent,” he said.

Ukraine is in talks with Russia over a deal to resume food exports through the Black Sea. But if Ukraine’s ports remain closed next spring, Solskyi said farmers would “dramatically decrease” the planting of corn and would grow soyabeans and sunflowers instead, again because of lower yields and higher prices. Lower output of wheat and corn in 2023 would prolong worldwide grain shortages and push up food prices for longer.

Russia’s war has taken a heavy toll on agriculture in Ukraine — one of the world largest exporters of cereals and edible oil. Farmers have struggled with a lack of manpower and trucks, unexploded munitions and mines in their fields as well as higher prices for fertiliser, herbicide and fuel. But the biggest problem is the inability to export by sea because of the Black Sea blockade. The country exported 54mn tonnes of grain out of 106mn tonnes harvested last year, according to the Ukrainian Grain Association. Exports by rail are limited because Ukraine and its EU neighbours use different track gauge sizes and there are few trans-shipment facilities.

Alternative routes by road and barge on the Danube river represent a fraction of normal maritime shipments, which last year ran at 6mn-7mn tonnes a month. Some 20mn tonnes of Ukrainian grain are stuck in storage. Ukrainian farmers close to the frontline are endangered by the fighting, with Russian artillery causing fires in dry fields © Dmytro Smolyenko/NurPhoto/Reuters Many countries are struggling with a decline in wheat imports. BlackRock founder Larry Fink told the FT last week that the “geopolitical” ramifications of food inflation were being underestimated by investors. Solskyi was upbeat about this year’s harvest despite the fact that Russian forces occupy some 30-40 per cent of Ukrainian farmland while farmers close to the frontline are endangered by the fighting, with Russian artillery causing fires in dry wheat fields. Although only 75 per cent of Ukraine’s arable land was sown this year, the government expects the total arable harvest to be 10 per cent larger than forecast a few months ago, at 60mn rather than 55mn tonnes, thanks to good growing conditions. A lack of storage was not a critical problem, he said, because farmers could use “ag bags”, or long plastic silage tubes, to store grain. But the lack of export sales would cripple them financially. Ukraine has some very large agribusinesses, but 70 per cent of its crops are grown on midsized farms, he said. Kyiv would have to step in with subsidies to farmers. “In the worst case the government would need to turn on the funding taps,” he said. Solskyi said occupying forces were continuing to steal large quantities of grain from farmers in territories captured since Moscow launched its full-scale invasion in February. Ukrainian officials have said 500,000 tonnes of grain had been plundered. But Solskyi said the true figure was likely to be much higher since farmers in Russian-controlled parts of southern Ukraine had already harvested several million tonnes.

punishment when the conflict was resolved.

“We will make some conclusions about our trade policy for wheat and corn in the future,” he said.

Source:  https://www.ft.com/content/21065943-4b8c-4f22-a91a-806b5d571860