Ukraine entered the TOP-10 world wheat producers
Despite the military, the agricultural sector of Ukraine was the engine of our economy this year. What is in store for the industry next year?
In the conditions of the full-scale invasion of Russia into Ukraine, the agricultural sector became the only one of the key export-oriented sectors of the domestic economy. this year, despite problems with logistics, Ukraine entered the top 10 largest grain producers in the world. However, farmers also have problems. How will the industry develop next year?
The locomotive of the economy
Since the beginning of Russia’s full-scale invasion of Ukraine, there have been changes in the structure of exports. If last year metals occupied the first place among the export categories of goods, this year they gave way to the agricultural sector. Thanks to the grain agreement, the share of agricultural and food products in the total export of Ukraine increased from 36% last year to 46% this year.
Oleksandr Okhrimenko, president of the Ukrainian Analytical Center, believes that the agricultural sector is the most attractive for investments.
“The war demonstrated that Ukraine is strong in agribusiness and therefore we need to bet on the production of products. From 2024, the land market will be launched, then it will be possible to invest in the land itself, in the food industry, in machine building for the agricultural sector, in logistics and even in biotechnology,” says the expert.
According to the results of 2022, despite the war and problems with logistics, Ukraine entered the top ten producers of wheat in the world with. Our indicator is 20.5 million tons, which is a third lower than last year due to Russia’s unleashing of full-scale aggression.
This year Ukraine was overtaken in grain production by: China, EU, India, Russia, USA, Canada, Australia and Pakistan.
For its part, Ukraine produced more wheat than Argentina, Turkey, Great Britain, Iran, Kazakhstan, Egypt, Brazil and Uzbekistan.
To a large extent, Ukraine contributed to such indicators of the grain agreement.
Since the launch of the Black Sea Grain Initiative, more than 15 million tons of food have been exported from Ukraine.
Difficulties faced by the agricultural sector
Despite the fact that the agricultural sector survived the war year better than others in Ukraine, it also faces problems and they will not go anywhere next year if the war continues.
In the words of Kyryl Kryvolap, director of the Center for Economic Revival, the agricultural sector has always been a “saving stick” for Ukraine in times of crisis, but it has steadily provided foreign currency income and jobs. Currently, the situation is such that the agricultural sector needs state support. The key problems of the agricultural sector caused by the military are: the increase in the cost of logistics, limited access to finance, the problem of VAT refunds, the increase in the cost of production of goods and the exchange rate difference.
In turn, Dmytro Livch, head of the analytical department of the Center for Economic Recovery, believes that the main problem affecting the agricultural sector is the increase in the cost of grain transportation by more than 4 times. In fact, shipping costs are about 2/3 of the price of grain, making its production unprofitable. Also, partially unblocking the ports does not solve the problem. A wide range of farmers will have access to ports only later.
The presence of a whole range of problems in agricultural sectors will cause a reduction in the production of grain crops by more than 20%, which in turn will lead to losses in the Ukrainian economy in terms of employment and tax revenues. Global food security will also be significantly affected.
How to overcome problems?
According to the results of the study “Analysis of the impact of the war on the agricultural sector of Ukraine”, conducted by the “Center for Economic Recovery” and EasyBusiness, the factors that allow preventing such a development of events were identified. This is gradual from currency restrictions and restoration of understanding of the floating exchange rate, restoration of the normal functioning of the automatic VAT refund mechanism, strengthening of financing, including the access of major players to the market with the assistance of international financial organizations.
At the same time, the Minister of Agrarian Policy and Food of Ukraine, Mykola Solsky, emphasizes that the situation is quite uneven according to the regions, therefore, the support that suffered more damage from the war should be more substantial. According to him, some other point programs that will soon be launched and have priorities for the de-occupied territories.
The state, despite the crisis and insufficient funding sources, is trying to support farmers.
Thus, the chairman of the VRU Committee on Finance, Tax and Customs Policy, Danylo Hetmantsev, singles out the effectiveness of the 5-7-9% available loans program, under which 38 thousand farmers took out loans for more than UAH 81 billion, which is 53% of the loans provided under this program . We also have international financial support in many directions. In addition, work is underway to approve the list of territories affected by military operations.
First Deputy Minister of Economy of Ukraine Denys Kudin sees the answer to the crisis because agricultural producers have started processing their products. In a word, they need to go beyond their traditional activity – cultivation, and look for solutions in the extension of chains of creation of additional value, that is, including processing in the portfolio of activities. Because in this case, the cost of logistics immediately decreases, because the volume of exports in tons decreases, and the producer’s earnings in dollars.
At the same time, the former Minister of Economic Development and Trade of Ukraine Aivaras Abromavychus believes that other faster solutions are needed.
“Today, in a situation with rapid reductions in acreage and harvest prospects, the creation of favorable conditions for processing is a more urgent long-term perspective for farmers, and now other quick solutions are needed – shortening the terms of invoice checks, optimizing the queue at the border, reducing the cost of logistics. The focus should be on restoring the harvest level and the stability of the agricultural sector, and then we should talk about processing,” he says.
Andriy Dikun, head of the All-Ukrainian Agrarian Council, also agrees with this opinion. He believes that small and small processing will not save Ukrainian farmers. In my opinion, such Ukrainian producers will be uncompetitive in the EU. Our future added value must be based on large-scale industrial processing. Their launch requires large investments. Therefore, in parallel with the search for financing, it is now necessary to make efforts to solve logistics issues.
“Currently, the issue of liquidity is in the first place both in the short-term and in the medium-term perspective. The countdown has already started – we have three to four months until the sowing campaign, because already in March farmers must understand what to do next. We are talking about tens of billions of hryvnias, and the currently available programs do not cover such expenses. And if these funds are not found, agricultural producers will not weed out in the spring of 2023, which means the loss of Ukraine’s position in the coming years, both on world markets and technologically,” concludes Alex Lissitsa, general director of IMC.
Victoria Khadzhiradeva