And the year has gone…

13 March 202311 min reading

According to the conclusions of the “Review of Damages from the War in the Agriculture of Ukraine”, which was prepared by the Center for Food and Land Use Research (KSE Agrocenter) and the Ministry of Agrarian Policy (data as of November 11, will be updated soon), direct losses in the agriculture of Ukraine as a result of the war in the Russian Federation reach $6.6 billion, indirect - $34.25 billion.

 84,200 units of machinery and equipment were completely or partially damaged.

 In total, silos with a total capacity of 9.4 million tons of simultaneous storage were damaged or destroyed (this volume does not take into account the capacities that remain unavailable due to temporary occupation).

 The approximate number of animals that died as a result of the aggression of the Russian Federation is almost 400,000 bee colonies, 95,000 goats and sheep, 212,000 cattle, 507,000 pigs and almost 11,700 poultry.

 More than 14.3 thousand hectares of perennial plantations were destroyed in the affected territories.

 0.6 thousand tons of plant protection products, 124 thousand tons of fertilizers and 11.5 million liters of fuel were destroyed and stolen.

 As a result of the full-scale invasion, 2.8 million tons of grain and 1.2 million tons of oil crops were destroyed or stolen (the latest data from NASA - 6 million tons).

 Indirect losses take into account foregone income from reduced production and lower domestic prices, as well as additional costs that producers are forced to bear because of the war.

The specified amount of $ 34.25 billion covers losses due to disruptions in logistics and lower prices for export-oriented goods, lower production and increased costs. The main challenges are to pass the sowing; demining and starting the process of restoration of rural lands damaged by missile attacks; to increase the liquidity of the market, which lacks credit funds. Our focus is on ways to support farmers. For this, in particular, we have already initiated, together with the World Bank and the IFC, credit programs for Ukrainian farmers, which will allow us to provide the necessary resources for the sowing and harvesting campaigns of 2023.

Despite this, according to the results of 2022, even in war conditions, Ukraine has become the world’s ninth-largest producer of wheat and provides food not only for itself but also for dozens of countries in Asia and Africa. At the same time, there is some concern that 2023 will be no less difficult for Ukrainian farmers than the previous one.

The area under sowing will decrease both in comparison with 2021 and in comparison with 2022. The total area of grain crops (winter + spring) should be 10.6 million hectares, which is 5.7 million hectares (45%) less than the figure for 2021. But war years are unpredictable and this year farmers will often make last-minute decisions for obvious reasons. 

In general, in 2023, Ukraine will lose 25 million tons (32%) of grain to the average of the last 3 years (67.1 million tons), sunflower seeds - 3.9 million tons (29%), soybeans - 242 thousand tons (7 %). In particular, agricultural lands are contaminated with improvised ammunition, cluster shells, anti-personnel mines, and anti-tank mines. In these territories, Ukrainian farmers cannot carry out economic activities. Demining is painstaking and time-consuming work that requires expertise and time. Many links are involved in the process. 

About half a million tons of grain were stolen from the territories that were occupied in the first months of the war. The following facts were recorded from all temporarily occupied regions - Kherson, Zaporizhzhia, Luhansk, Donetsk, and Kharkiv. The grain went either to Russia, primarily from the Kharkiv, Donetsk, and Luhansk regions, or through the temporarily occupied Crimea - from the Zaporizhia and Kherson regions.

As per Bloomberg December investigation/NASA Harvest uses satellite imagery to simulate a wheat harvest. NASA confirmed the other day that Russia collected $1 billion worth of wheat in occupied Ukraine. A quarter of wheat in Ukraine is grown on lands claimed by Russia. Almost 6 million tons of wheat were collected from territories not controlled by Ukraine. About 88% of the winter crops sown in the occupied territories were harvested. Uncollected areas were mainly along the front line. Russian vessels are exporting grain taken from the occupied regions to Syria and, probably, to Libya and Iran. Shippers hide the origin of the cargo.

Main legal route for Ukrainian grain is Grain Corridor

The closer the next date of the “extension” of the agreement on the export of Ukrainian grain from the ports of Greater Odesa, the more information appears in the press. But often this information has nothing to do with the truth but is only aimed at manipulating public opinion among people who are far from business. At the same time, the flow of grain is weakening every day, which is beneficial only to one side. The one with the largest stocks in history. The one that is forced to dump. Any stop or delay pushes the price up and makes that side richer. 

As of March 1, 776 vessels had left the ports of the Greater Odesa carrying 22.74 MMT of Ukrainian crops. The Ministry of Infrastructure reported that currently 15 vessels are loading in the ports of the Greater Odesa while this number could be much higher. As of February 27, 112 vessels were approved and were waiting for inbound inspection and 25 loaded vessels were waiting for outbound inspections, carrying around 1.1MMT of Ukrainian agricultural products, per Joint Coordination Center (JCC) data. 

During February 1-28, the average daily number of outbound vessels was 2.3, with an average tonnage of 25.2 metric tons (MT) vs 2.5 and 38.57 MT in January. The number of daily inspections is still low compared to market needs. The largest daily average number of inbound vessels was 5.9 in September 2022, while the average tonnage was the lowest, 22,000 MT.

The business community, united by European Business Association, AmCham Ukraine, and Association “Ukrainian Agribusiness Club”, calls on the Black Sea Grain Initiative parties – United Nations (UN) and Turkey – to facilitate the stable operation, prolongation, and expansion of the Black Sea Grain Initiative (the Initiative) and ensure free commercial navigation in the Black Sea Region.

To ensure free navigation in the Black Sea Region and unblock the full-scale operation of the Initiative business community calls on the UN and Turkey to:

Take measures to ensure the stable and timely operation of inspectors/commission representatives operating under the JCC to speed up the movement of vessels with Ukrainian grain and to eliminate the queues;

Ensure free commercial navigation in the Black Sea for all parties or introduce inspections for all Russian vessels shipping in the Black Sea by establishing equal conditions for Ukrainian and Russian export;

Support the extension/prolongation of the Initiative for at least one year with automatic prolongation for the same periods unless a party thereto notifies the other of intent to terminate or modify the Initiative and provides respective official communication;

Include the Mykolaiv Seaport, as well as other ports and terminals located in the Dniprovsko-Buzkyi channel, Olvia specialized seaport to the Initiative, to increase the throughput capacity for grain export. 

The Verkhovna Rada has approved amendments to the Law of Ukraine “On the State Budget of Ukraine for 2023”, which provide charterers, operators and/or owners of sea vessels and inland navigation vessels with compensation guarantees for damage caused as a result of Russian aggression. Up to 20 billion hryvnias are provided for these purposes.

The relevant changes were developed by the Ministry of Reconstruction in cooperation with the People’s Deputies of Ukraine and together with the Budget Committee. “People’s deputies have taken an important step today to fully restore civil navigation in the Black Sea. Together we are looking for ways to ensure the operation of Ukrainian ports and expand the nomenclature for trade turnover,” Olexander Kubrakov, Deputy Prime Minister for the Restoration of Ukraine, Minister of Community Development, Territories and Infrastructure, said. “I am sure that the risk compensation guarantees will be a powerful signal for stabilizing the Ukrainian and global economy,” he added.

The amendments adopted by the Parliament refer to ships that sail both under the flag of Ukraine and the flags of foreign states. The Government of Ukraine will allocate funds for compensation of harm. Due to the sabotage of inspections in the Bosphorus by the Russians, more than 140 ships get stuck in the artificial queues every month. This has led to a decrease in the efficiency of the Grain Initiative. Now, it does not exceed 40% of the available export capacity. A year ago, in February 2022, a similar decision was made for the aviation industry. Then the Government, in coordination with the Budget Committee of the Verkhovna Rada of Ukraine, allocated UAH 16.6 billion to ensure flight safety in Ukraine for insurance companies, reinsurers, leasing companies, and air carriers.

Due to constant problems with logistics since the beginning of the war, manufacturers were forced to purchase and increase their own vehicle fleet as an element of sustainability of their own business. The opening of new sales chains of agricultural products in European markets with delivery by road transport has created a stable demand for road transport in the direction of Europe. Foreign carriers who want to provide services to the Ukrainian manufacturer are already visiting Ukraine. The gradual increase in the capacity of borders and the adaptation of commerce to the queues at the border created the prerequisites for a constant flow of goods and an increase in the potential of exporting agricultural products by road transport to 1 million tons per month.

The cost of sea freight for vessels of the handy class (25 thousand tons+) and Panamax (50 thousand tons+) is decreasing. Increased demand for river transportation has led to an increase in river barge freight.

At the meeting of experts of the Danube Commission (DC) on hydraulic engineering, the head of the Ukrainian delegation Dmytro Barinov noted that given the slowing down ship inspections by Russians within the framework of the Black Sea grain initiative and threats of unilateral refusal of the Russian Federation to implement the agreement, the Danube region remains the only stable way for the export of agricultural products from Ukraine and, as a result, an important element of ensuring World Food Security.

The Ukrainian side also informed the participants of the meeting about operational dredging in the ports of the Danube region in order to restore passport characteristics. This is provided for by the сonvention of the navigation regime on the Danube, which obliges the Danube states to keep their sections of the river in a navigable State for river vessels and sea vessels. It also obliges you to perform the necessary work to ensure and improve navigation conditions. It is being implemented jointly with the European Commission’s “ways of solidarity” initiative to create new logistics chains through Danube ports and find ways to increase the efficiency of existing ones. 

After the canal’s opening, 840 vessels passed through the Bystro estuary, which increased cargo turnover by 10 million tons. And after the restoration of passport depths on the Ukrainian section of the Danube River and the declared draft of 6.5 m, the Danube ports reached a record value of 12 ship calls and 90 thousand tons per day. Elimination of natural silt and maintenance of the passport depths of the mouth is something that took place annually before the war and is necessary for the further development of navigation in the Danube Region.

The question is not about extending the corridor, but about its effectiveness - Russia in today’s conditions will not want to be accused of provoking hunger (once again), but making the corridor ineffective is their main goal. 

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