Despite all the difficulties, the agricultural sector is the most dynamic industry of our country

Due to the war and its consequences, Ukrainian farmers harvested 40% less of wheat, 42% less of barley, and 33% less of corn this year. A total of 53.6 million tons of grain was harvested – down 38% from the last year.

The situation with oilseeds is not better. In particular, the harvest of sunflower is 36% lower. At the same time, rapeseed crop is 3% higher and soybeans crop is up 2%. In total, they harvested oilseeds by 25% less compared to 2021.

However, it is worth remembering that next year we may have an even smaller crop of grains and oilseeds. This is due to the delay in sowing winter crops, problems with material resources, fuel, fertilizers, etc. Considering the rise in prices, many farmers simply refused to buy fertilizers, because currently saltpeter costs UAH 36-40 thousand/t. In addition, agrarians who are locating in temporarily occupied or recently liberated territories have not start working at all.

Regarding the exports. According to the results of 2021, Ukraine sold agricultural products to foreign markets for almost at $28 billion. At the same time, in 2021/22 MY (July - June) they exported 61.52 million tons of grains and oilseeds with an estimated value of $22.2 billion. For comparison, the export of metal and ore costed about $21.1 billion. That is, before the full-scale war, these two categories were the main fillers of the country's foreign exchange earnings. Currently, the bet is only on the agricultural market.

Of course, the "grain corridor" helps a lot to export agricultural products, including the export of grainы from the last year's harvest, which stocks are still enough. Grains of the new harvest are placed in sleeves and granaries and then processed. It is clear that this is not very convenient, but it is necessary to adapt to the conditions of war.

It is quite interesting that Spain and Turkey are currently the leaders among importers of Ukrainian grain. China ranks fourth in the overall structure. However, everyone understands that Spain, in fact, is a "transshipment point" - then the grain goes to other countries. It is also not news that Turkey, buying Ukrainian wheat, processes it into flour and supplies ready-made products to other countries of the world. No wonder Ankara is the leader among flour exporters in the world. Therefore, in Ukraine, certain difficulties may arise with milling varieties of wheat. From year to year the quality of grain decreases and only about 30% of wheat of 2-3 grades is suitable for flour production. Instead, Ukraine exports a lot of milling wheat. Therefore, our flour millers and bakers will again have to figure out how to produce products of more or less adequate quality. There may also be small problems with rye, which planting areas are decreasing every year. We all remember how rye and rye flour were imported from belarus.

But the huge problem is that through the "grain corridor" we trade grain at a very large discount. So, second-class wheat costs UAH 6.5 thousand/t, feed wheat on CPT terms with VAT – UAH 5.3 thousand/t. The prices were decreased for other crops as well. The situation is the same in European ports. That is, Ukrainian grain is currently the cheapest compared to the products of other world producers. Therefore, Ukrainian farmers under-earn and even export at a loss in order to sell grain. In addition, since December 1, Ukrzaliznytsia has raised rates for the use of grain wagons by 50%. And this despite the fact that trains are standing at the borders for 12-16 days or more. Against the backdrop of expectations of rising prices for seeds, fertilizers, fuel, etc., the profitability of growing grain becomes completely illusory.

Despite all the difficulties, the agricultural sector is the most dynamic infustry of our country. Everyone has already understood that it is necessary to go into deep processing and stop being a raw material appendage. After the end of the war, the West of Ukraine, the South, and the ports of Great Odesa will be developed. The only condition for such development is money and no military action. Considering the fact that Europe helps us, including with financing, it would be appropriate to build factories for deep processing of corn, for example, the payback of which could be 5-7 years. Of course, now the EU has given the green light to our products. But, most likely, after the end of the war, the EU countries will again return to a certain regulatory policy. Everything will depend on the political negotiations and conditions of Ukraine's accession to the EU. Therefore, it is worth taking into account different development scenarios and being ready to adapt to them.

Svyatoslav Tkachenko, СЕО Agro Marketing Agency