Grain production in Ukraine in 2022 drops by 37% due to war – UCAB

KYIV. Feb 24 (Interfax-Ukraine) – According to the results of 2022, the production of grain crops in Ukraine dropped by 37% compared to the previous record levels in 2021 and amounted to about 53.9 million tonnes, while the production of oilseeds contracted by 24%, to 17.5 million tonnes, reported on the website of the Ukrainian Agribusiness Club (UCAB) on Friday.

According to the report, such a drop in gross crop volumes was caused by the temporary occupation of part of Ukrainian territories, hostilities in a significant part of the country’s territory, a large number of mines in the de-occupied territories, a decrease in yields last year compared to 2021, as well as difficulties in harvesting due to bad weather conditions.

Similarly, due to the aggression of the Russian Federation in Ukraine, the livestock sector suffered: in 2022, the production of meat of all types fell by 11% compared to 2021, to 3.0 million tonnes, milk – 7.7 million tonnes (12% less) and eggs – 11.6 billion pieces (18% less). The reasons for the reduction were the occupation of part of the production facilities, their destruction and the physical death of part of the livestock in the hostilities, as well as a temporary break in the production chains for providing enterprises with young animals due to the uncertainty of working conditions at the beginning of the war (mainly for poultry farming).

“It is quite a logical consequence of the reduction in production volumes that exports are reduced. However, the main reason is not in production, but in the blocking of seaports by Russian troops, which were the traditional export route for Ukraine. Only due to significant shipments at the beginning of the year on the eve of the war, painstaking diligence in building alternative routes through the western borders and the operation of the grain corridor managed to achieve relatively good results in the current conditions,” the UCAB said in the report.

The union recalled that in 2022, 38.4 million tonnes of grain crops were exported (24% less compared to 2021), 7.9 million tonnes of oilseeds (2.1 times more) and 4.6 million tonnes of vegetable oils (17% less). The dynamics of growth in exports of oilseeds, mainly sunflower seeds, is explained by a decrease in exports of their processed products (oil and meal) and the need for farmers to receive funds for their further activities. In turn, this trend is downward for the Ukrainian economy, since the domestic production of value-added agricultural products is decreasing.

“However, the most painful and significant problem for the future activities of farmers is the increase in the gap between world and domestic prices. Before the war, this gap was about $40 per tonne, now it is about $150 per tonne for grain. These are additional costs for the producer, which include logistics costs, insurance and all the risks that only the Ukrainian side now bears. Under such conditions, it is difficult to talk about the profitability of production and this directly affects the next sowing season, which will be extremely difficult due to limited financial resources,” the organization said.

As reported with reference to the data of the National Academy of Agrarian Sciences of Ukraine, the total direct damage caused to the agricultural industry of Ukraine due to the full-scale Russian invasion amounted to $9.3-9.8 billion by the end of 2022.

This figure includes the damage from the blockade of Ukrainian seaports and the forced change in the logistics of export transportation ($7.5-8.0 billion), the cost of last year’s unsold grain ($0.5 billion) and the cost of warehouses and elevators destroyed or seized by the invaders ($1.3 billion).

This amount of damage caused to the country’s agribusiness is comparable to the total profit of the country’s agricultural enterprises for 2020 and 2021.

In turn, the Center for Food and Land Use Research of the Kyiv School of Economics KSE reported that the total amount of indirect losses inflicted on the agricultural industry of Ukraine due to the full-scale invasion of the Russian Federation amounted to $34.25 billion for the period from February 24, 2022 to September 15, increasing compared to mid-June by 47%, or $10.8 billion.

According to the study, 54% of the indirect losses of the country’s agricultural industry fell on the factors of shortfall in income due to lower prices for agricultural products exported by Ukraine and problems with its export abroad – $18.5 billion. Other factors were the reduction in crop production – $14.2 billion (34% of total losses), an increase in agricultural production costs due to an increase in the cost of fertilizers and fuel – $862 million (2.5%), a decrease in livestock production – $348.7 million (1%) and a decrease in the production of perennial crops – $322 million (1% less).