By Pavel Polityuk and Gus Trompiz
KYIV/PARIS, Nov 23 (Reuters) – Ukraine’s efforts to
revive sea exports in defiance of Russia’s military blockade
have given a glimmer of hope to a teetering farm sector in which
loss-making producers are abandoning some land in one of the
world’s biggest grain belts.
With no end in sight to the war with Russia, access to the
Black Sea is critical if Ukraine is to preserve an agricultural
industry that was the fourth-largest grain supplier globally
before the conflict and in value terms accounted for half of
Ukraine’s total exports last year.
While makeshift export routes and abundant supply elsewhere
have tamed record global food prices since last year, the strain
on Ukrainian agriculture has worsened as a UN-backed export deal
collapsed and EU neighbours baulked at land shipments.
Agriculture has suffered losses of over $25 billion since
the war began, Ukrainian grain trader association UGA estimates.
Ukraine’s grain exports so far in the 2023/24 season that
started in July are running 28% below the year-earlier volume,
according to agriculture ministry data.
The area planted with corn, its flagship grain export, has
shrunk by a quarter since the start of the war and total crop
planting could suffer a double-digit decline in 2024, producers
say, as cash-strapped farms leave some land idle.
A new Black Sea shipping channel may offer a lifeline, like
for Ukraine’s depleted steel industry.
“The sea corridor is essential for Ukrainian farming to
survive,” Jean-Francois Lepy, head of grain trading at French
agribusiness group InVivo, said.
“Without a corridor there is going to be a serious problem
in 2024/2025,” he said on the sidelines of this month’s Global
Grain conference in Geneva.
The “humanitarian corridor” established by Ukraine’s
military in late August has expanded steadily, with Kyiv
estimating over 3 million tons of grain shipped so far.
Its future remains clouded by military risks, with several
vessels struck by mines or missiles, but Ukrainian producers are
encouraged.
“It gives us breakeven because before the ports opened
almost everyone was loss-making,” Dmitry Skornyakov, CEO of farm
operator HarvEast.
EXPORT ROUTES
Ukrainian producers see scope to reach 2-2.5 million tons of
monthly grain exports through the corridor, which combined with
volumes through land routes and transhipment via the Danube
river could bring overall trade back towards a pre-war rhythm of
5-6 million tons per month.
Spike Brokers, which tracks exports in Ukraine, said on Nov.
1-17 Ukraine exported 404,000 tons of agricultural goods via the
Danube and 352,000 tons from Black Sea ports. An additional
943,000 tons should leave from Black Sea ports and 464,000 tons
from the Danube by the month-end.
“The situation in the coming months will be better than in
September and October, as large ships are starting to arrive and
the number of insurance companies that insure risks is growing,”
said Denys Marchuk, deputy head of the Agrarian Council,
Ukraine’s largest agribusiness group.
Some in the market are cautious given the still perilous
security situation. A Russian missile strike on port
infrastructure in Odesa on Nov. 21 added to a series of attacks
on Ukraine’s Black Sea and Danube grain ports.
Despite expansion at Romania’s Constanta port, trade via the
EU remains dogged by logistical bottlenecks and tensions with
Kyiv’s neighbours. Border protests by Polish lorry drivers have
slowed food exports this month.
PLANTING DILEMMA
The new growing season could be a tipping point.
Winter wheat sowing will be down almost 10% on year,
Ukraine’s agriculture ministry estimates, with a dry start to
autumn adding to farmers’ problems.
HarvEast plans to leave uncultivated more than 10% of the
34,000 hectares it currently operates as it sacrifices less
fertile fields seen as generating more losses, Skornyakov said,
forecasting a general trend of 10-20% of unplanted land next
year versus 3-5% this year.
Yuriy Stelmakh, a grower in northern Ukraine, said his farm
drilled 30% less area with winter crops due to a lack of funds.
Ukraine’s agri-food industry is trying to adapt. Farmers
have planted more oilseed crops like sunflower that can offer
better margins, while high world sugar prices and cheap local
grain to feed poultry have spurred exports of those products.
But as the war drags on, the sector faces a lack of
visibility, labour shortages and structurally low prices, said
Roman Gorobets, director of FE ASTRA in central Ukraine.
A huge wheat surplus in Russia and record corn and soybean
harvests in Brazil have helped the world adapt to stop-start
Ukrainian exports. A trade gap may be felt next year, though, if
weather hits Brazilian crops and the Kremlin intervenes further
in Russian exports.
Ukraine has sharply reduced exports of farm goods to Asian
and African countries this year, according to agricultural
business association UCAB.
Major importer Egypt has various supply sources for wheat,
but few alternatives to Ukraine for corn and vegetable oil,
Hesham Soliman, president of Egyptian merchant Mediterranean
Star, said.
Much hangs on the spring planting season and whether
Ukrainian growers cut back further on corn, relatively costly to
produce.
“I don’t think the world can afford for Ukraine’s
agriculture to suffer. We do need them, particularly on the corn
side,” said Scott Wellcome, director of grains risk management
at GoodMills, Europe’s largest miller.
(Reporting by Pavel Polityuk in Kyiv, reporting and writing by
Gus Trompiz in Paris, additional reporting by Nigel Hunt in
London, editing by David Evans)