May 23, 2024

War dims export prospects for Ukraine's agriculture industry for next 10 years

The aftershocks of the war in Ukraine are expected to continue taking a toll on the country's agriculture exports, flatlining prospects for the next decade, according to a new report from USDA's Economic Research Service (ERS).

Before the war, Ukraine's agricultural sector experienced significant and sustained production and export growth, making the country a top-five exporter for corn, wheat, sunflower seed and barley.

Ukrainian farmers have since faced power outages, theft, shortages of labor and materials needed for inputs, infrastructure damage and active warfare threats, according to ERS, while debris left from shelling and mined fields poses a hazard for farmers.

"Uncertainties surrounding the duration of the war — combined with projected price increases in key inputs and fuel, shortages in labor and inputs, infrastructure and field damage, and restricted trade — dim prospects for Ukraine's agricultural growth potential over the next decade," ERS wrote. "With prewar production levels still not being met, Ukraine's ability to meet rising global demand is uncertain."

Ukraine's grain and sunflower seed exports are projected to stabilise at lower levels than before the conflict and to demonstrate little or no growth. Its wheat production fell in the 2023-24 marketing year, making it the second-smallest wheat crop on record in 10 years, after the 2022-23 crop.

Meanwhile, the decrease in barley production was the second-largest decline in production volume since Ukraine gained its independence. USDA International Baseline projections implied minimal growth in corn production in the coming decade — although levels still would be noticeably lower than the prewar average production level of 36 million metric tons.

"Food prices are still high compared with their historical norms because of factors such as high labor costs, severe weather events, supply chain disruptions and global conflicts," the report stated. "War-related uncertainty is expected to continue to affect export markets, especially low-income countries that historically depend on imports from the Black Sea region."

Although ERS noted that war uncertainties could lead to outcomes that "deviate strongly" from those projected in USDA Agricultural Projections to 2033, Ukraine's projected production still is expected to outpace domestic consumption — allowing it to remain a top-10 global supplier of grains, sunflower seed and sunflower seed products.

- Michigan Farm News