Current developments in the Ukrainian agricultural sector
Dr. Heinz Strubenhoff is our expert in the German-Ukrainian Agricultural Policy Dialogue (APD), which is funded by the Federal Ministry of Food and Agriculture (BMEL) and conducted by IAK Agrar Consulting GmbH as the lead partner in a consortium with AFC Agriculture and Finance Consultants GmbH and the Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
Dr. Strubenhoff, how will the harvest in Ukraine turn out this year? Will yields be high or low?
The weather in spring was good and the crop outlook is not that bad despite the decreasing production intensity due to the price gap. Although the record figures of 2021 will not be reached (100 million t of cereals and oilseeds), the total harvest of about 65 million t of cereals and oilseeds is considered satisfactory by market players. Domestic demand will not exceed about 30 million t, so about 35 million t will have to be exported. This corresponds to about 3 million t per month. In general, the figures for cereals are declining; the figures for oilseeds remain constant. The rapeseed harvest even reaches the previous year's level.
Russia has terminated the grain agreement. Where to put the harvest? How can the grain now be exported?
The termination of the grain agreement by the Russian side is a cause for concern. At the moment it is not clear what will happen next. The ports on the Ukrainian-Romanian border, Ismajil and Reni, and the most important Romanian export port, Constanta, are now crucial for exports. But the "Solidarity Lanes" [editor's note: set up by the EU Commission to help Ukraine export agricultural goods] across the western border by rail and truck remain just as important. Farmer protests in five neighbouring countries of Ukraine (Poland, Romania, Hungary, Slovakia and Bulgaria) have led to national restrictions on the import of wheat, maize, sunflower and rapeseed in each of these countries. Transit through these countries to other EU countries is exempt. In September, the national import restrictions are to be lifted; however, this is not yet certain, as elections will be held in Poland in autumn and the developments there will also spill over into the neighbouring countries.
Transit to European seaports, the animal feed and biodiesel industries and the food industry in the EU, which demand Ukrainian grain and oilseeds, will probably continue. The decisive factor here is the border controls, which make the already expensive transport by truck and rail even more expensive.
The most important importers of Ukrainian grain are Asian countries (especially China), Arab countries (especially Egypt), African countries and EU countries that import feed grains and oilseeds.
How could this development affect German farmers (e.g. in terms of prices)?
The grain agreement has a certain signalling effect, but the price jumps are not comparable to those at the beginning of the war last year. The problems are now priced in. Prices in Germany also depend much more on global markets than on Ukrainian exports to the EU. Weather outlooks, crop forecasts, stocks etc. play a big role here. However, if weather-related crop failures are added to Ukrainian export problems in an important exporting country, prices may rise again.
The EU is a net importer of oilseeds and vegetable oils; in the case of cereals, mainly feed grain is imported and bread grain is exported. In summary, it can therefore be said that for German farmers who produce high-quality products, Ukrainian imports are less relevant than the situation on the global market.
1.8.2023, from Kiev