Ukraine sums up the harvest of the second war year. Its results are 10% higher than in 2022, although the cultivated area, on the contrary, decreased by approximately the same percentage.
Investments in technology have also decreased significantly. If a year earlier the industry relied on the pre-war autumn sowing campaign 2021, and also had a reserve of material and financial resources, then this season both of these parameters were irrelevant. The farmers carried out the entire cycle of work under wartime conditions, and their financial base was replenished very poorly due to the impossibility of full-fledged maritime exports. Therefore, the initial harvest forecasts were justifiably modest: at the beginning of spring, the likely result of agricultural production was announced at a level of no more than 65 million tons — this is the equivalent of the harvests that Ukraine harvested ten years ago.
As the campaign progressed, the forecast was revised upward several times. And its actual finale — 81.3 million tons — is considered a result above average even for the pre-war years, although it is far from the record. Let us remind you that in 2021 Ukraine harvested its historically largest harvest since independence – 106 million tons of grains and oilseeds in total.
The only thing we need to thank for the unexpected agricultural “victory” is the weather. The combination of favorable factors and the absence of climatic disasters made it possible to achieve record yields for the grain group and high yields for oilseeds.. These indicators turned out to be so high that they made it possible to compensate for the subsidence of cultivated areas.
So, if in 2022 the average grain yield per hectare was 45.8 centners, then in 2023 it was 54.7 centners/ha. This is even more than in the record year 2021 — 53.6 c/ha. The result obtained many times exceeds the needs of the domestic market, especially taking into account the correction for population decline.
In the conditional pre-war period (until February 24, 2022), the capacity of the domestic market was about 19 million tons of grain and 2 million tons of oilseeds. Updated balances have not been officially published, but now it is estimated that this is no more than 19 million tons in total. The generated surplus must be exported. And it is at this stage that the main problems of the agricultural industry begin, the solution of which will determine, among other things, the result of the agricultural campaign of 2024.
analyzes how the result of the current year was achieved and whether this resource can be managed wisely.
How much did you sow and what did you harvest? In absolute numbers, in 2023, 980,000 hectares less were sown with spring and winter grains than last year — 10.895 million hectares. In total, taking into account other types of crops, the area decreased by more than 2 million hectares.
At the end of the first ten days of December, the harvesting of grain and leguminous crops in Ukraine was actually completed — the harvest was collected on a total area of 10.433 million hectares (96% of the forecast). Active harvesting continues only for corn: the crop has been threshed on 3.52 million hectares, or 87% of the planned area.
The result, as already indicated, does not correlate with the reduction in crops.
A total of 59.7 million tons were threshed with a yield of 54.7 c/ha, of which 22.2 million tons of wheat and 5.8 million tons of barley. It is expected that corn harvesting will also be completed above forecast — more than 30 million tons versus the previously expected 28.5 million tons.
The traditional maximum production was recorded in Central Ukraine — the leaders in grain threshing are the farmers of the Vinnitsa region, who collected more than 5 million tons of grain, as well as the Poltava and Cherkasy regions — 4 million tons each. This rating corresponds to the pre-war one, with the only difference that then the Odessa region also became a leader.
What about oilseeds? This season, oilseeds remained the mainstay of profitability in the industry thanks to simpler logistics compared to grain and the availability of internal processing.
The harvest volumes of oilseeds amount to 21.6 million tons.
As of the end of the first ten days of December, sunflower was harvested from 5.014 million hectares (99%), of which about 13 million tons of seeds were threshed with a yield of 23.8 c/ha.
Soybeans sown on 1.804 million hectares are 100% threshed. The gross harvest of soybeans is 4.78 million tons with a yield of 26.5 c/ha.
The harvesting of rapeseed has long been completed — the result exceeded 4 million tons.
Harvest in the occupied territories. According to a study by NASA Harvest, a NASA consortium on global food security and agriculture, the area under winter wheat in the occupied territories of Ukraine this year amounted to 1.64 million hectares, yield — 3.81 t/ha, production — 6.26 million tons. For comparison: in 2022, the crop area was estimated at 1.8 million hectares, yield — 3.22 t/ha, production — 5.8 million tons.
“ Comparing 2023 and 2022, we observe a significant decrease in cultivated areas in the occupied territories, which is accompanied by a noticeable increase in abandoned arable land. While favorable weather conditions this season have contributed to higher yields, our analysis also revealed significant areas of poor condition and neglected farmland concentrated along the front lines,” commented NASA Harvest Director Inbal Becker-Reshef.
What about exports? Based on the volume of harvested crops and domestic needs, Ukraine’s export potential in the current marketing year will be about 50 million tons of grains and oilseeds for the 2023 harvest. Plus another 10 million tons of processed products, in particular oil and meal.
The times when one could only rejoice at these numbers are already gone.. Now every additional ton that needs to be transported outside the country means the need to solve non-trivial logistics problems. To relieve the market, it is necessary to export at least 5 million tons per month, and preferably 6 million tons of agricultural goods.
Currently, exports are carried out through the so-called temporary sea corridor and an alternative route — through the Danube ports.
As of December 6, since the beginning of the new marketing year 2023/24, 13.72 million tons of grains and legumes have been exported from Ukraine.
How much does logistics cost? The cost and administration of exports is the main problem of the agricultural industry, after purely military risks.
Demand for logistics significantly exceeds supply. After the Istanbul deal stopped working, and navigation from Odessa was carried out situationally, the Danube became the main water export artery.
Logistics costs for delivering grain through the Danube ports or by rail are significantly higher compared to delivery through the Black Sea ports. According to the President of the Ukrainian Grain Association Nikolai Gorbachev, the cost of delivering a ton of agricultural products by road to the Odessa port ranges from $10 to $25, depending on the location of agricultural production. Logistics to Constanta can cost about $100 per ton. Before the war, the price of barge transportation was $9–10/t, but now it is $50/t.
Plus administrative costs, which increased further after five border Eastern European countries introduced a unilateral ban on grain supplies to their markets. The exporting company must comply with many formalities and draw up a bunch of papers to prove and confirm that its purpose is exclusively transit to the final buyer.
But even this final buyer — for example, if it is Asia, which was the key market for the Ukrainian agro-industrial complex before the war — is very difficult to deliver the goods. To send a heavy ship in this direction, it is necessary to accumulate 50,000–60,000 tons in Constanta, transporting this volume in small quantities in wagons, trucks or barges.
The problem will be solved when Ukraine becomes part of a single European space, and the movement of goods will not face intra-European restrictions.
What about prices on the world market? A high supply of products does not guarantee high profitability, and in the agro-industrial complex these indicators are often directly opposite.
Since seaports operate in a truncated version, the domestic and global grain markets exist in parallel realities. The world price, from which the grain price in Ukraine was derived, no longer serves as a guideline or is only a very conditional one.. The margin of the Ukrainian agrarian depends much more on the cost of logistics — its fluctuations determine the purchase price on the domestic market.
Nevertheless, the high world price expands the lag for increasing purchase prices from Ukrainian farmers, allowing them to partially win back the cost of transportation. But the global situation can hardly be called a help. According to FAO, in November, world food prices fell by 10.7% compared to the same period last year.. The grain price index decreased by 3% compared to October.
The organization estimates global cereal production in 2023 at 2.82 billion tons, up 0.9% from the previous year and 10.3 million tons above the previous record achieved in 2021.
The FAO expects global cereal stocks to rise by 2.7% through the end of the 2024 season, reaching a new record level.. World grain trade will decline slightly in 2023/24 to 468.4 million tonnes, 1.8% below the 2022/23 level.
All these trends will not contribute to an increase in world prices for at least the next year.
What's inside the country? A high harvest and low price have a stabilizing effect on the entire economy.
As noted by the NBU, due to high yields and faster harvest rates, as of December 1, 2023, harvest volumes exceeded last year’s figures on the corresponding date: soybeans — by 33%, sunflower — by 21%, sugar beets — by 33%, corn — by 6%. It was high yields that made it possible to reduce inflation in the second half of this year to 5.1%, the lowest level since 2020.
As a result, a number of products are cheaper today than in the same period last year. In particular, onions and carrots – by 60%, eggs – by 16%, butter – by 18%, buckwheat – by 60%. But it must be taken into account that this decrease is largely due to record high prices a year earlier, and thus the “cheaper” is only the effect of a high base for comparison. Food prices have not reached pre-war levels and are unlikely to ever be reached. But we can agree with the NBU that there are no visible reasons for a sudden increase in prices for basic food products in Ukraine in the near future.