The mines scattered in the Ukrainian fields, the closure of ports, the lack of labor and inflation punish a vital agri-food sector for the West
The endless plains of central Ukraine are now an ocher color that is accentuated by the rust of destroyed tanks and military vehicles that dot them. Going into the fields is not recommended either, because anti-personnel mines, unexploded explosives and, according to the authorities, also cluster munitions that can amputate a leg or an arm are hidden there. But farmers hope that the plains will soon take on more hopeful shades of green, and that the yellow will explode in a few months.
Ukraine is the breadbasket of Europe, and the war has caused agricultural and logistical disruption that is being felt around the world. Especially in the pocket of consumers. The country produces 46% of the world’s sunflower oil – worth 3.4 billion dollars – and that explains why it is scarce in European supermarkets, where its price has skyrocketed. As if that were not enough, Russia contributed another 22% of world production –1,700 million more– and the sanctions make its distribution difficult.
The problem does not only affect the oil. Last year, Ukraine exported agricultural products worth more than 27,000 million dollars, of which the European Union, its main client, bought 7,600 million. The biggest business is in corn, followed a short distance by sunflower oil and wheat. They are all items of more than 5,000 million dollars and basic products that the blockade of the main ports of the country -especially Odessa- prevents them from exporting abroad.
The gateway to the sea is in the area of greatest conflict, where Russian troops are now concentrating their offensive. To further complicate matters, the east of the country is also the one that concentrates most of the production of sunflower and wheat oil. “Without the port it will take us almost two years to get the harvest out and distribute it,” says Oleksandr Khlan, owner of an agricultural machinery company that supplies the main producers in the sector.
Added to these difficulties are others no less important: «Some four million people have left the country and another eight million have had to be displaced internally. Many are women, who are in charge of administrative tasks. Labor in the field is not so lacking, but it is necessary to manage purchases and permits. In addition, there are restrictions on the outflow of foreign exchange that affect imports of machinery and chemicals, ”adds Khlan.
Alexei Valuyskiy points out the added impact of rising fuel and fertilizer prices, the business he is in. “Interestingly, this is largely due to the sanctions imposed against Russia,” he analyzes. He has just returned to kyiv from a work trip to Peru, where he has been surprised by the social discontent fueled by inflation. “People are starting to take to the streets and this could just be the beginning of much more widespread protests,” he warns.
But not everything is the fault of the Russian invasion. The Ukrainian farmers’ strategy has also turned against them. “They usually store the grain until February or March to get better prices, but with the outbreak of the war now it is impossible to export it.” Nadia Mazun, an administrator in an agri-food company, delves into this problem: «The harvest was sold and we were already thinking about the next one, but the logistics have stopped working. Now the barns are full and we fear we won’t be able to get the same yield from the land.”
An impossible investment
Although storage is not a serious problem for cereal or sunflower oil beyond the lack of space for the next harvest, the impossibility of giving them a commercial outlet does leave farmers in a delicate situation. “Because they don’t have access to the capital they need to replant and harvest, which requires an investment they can’t afford,” Khlan explains.
Ironically, this situation is causing prices to fall within the country, the only one where they can sell their products. “And it is possible that they will continue to fall in the future. But as the prices of seeds, fertilizers and fuels have skyrocketed, the situation may end up becoming unsustainable,” says Mustapaev Altinbek, CEO of Zernová Baza, a company of mills and wheat flour processing and storage facilities. .
Complications will drag on regardless of whether the war ends soon. What no one knows is how much. Altinbek hopes that, if the bulk of the contest is closed by May 9 – Victory in Russia Day –, as some predict, some normalcy will return in the fall. “After all, we have been at war in Donbas for eight years and we have maintained exports. I hope that this time it will be the same even if the fighting continues there », he argues.
Khlan is far less optimistic. “I think we have to prepare for two years of scarcity and higher food prices. Inflation is going to be global and I wouldn’t be surprised if it reached 15% in countries like Spain,” he predicts. Of course, it also foresees a restructuring of global agricultural production in response to this circumstance. “Other countries, such as Iran, Venezuela or Kazakhstan, will jump onto the pitch,” he lists.
All those interviewed hope that the world will help Ukraine win this war. “Not being able to acquire seeds in our country will also affect crops in other areas of the world. So the effect can be twofold,” warns Altinbek.
“The lives of Russians are not being affected by the sanctions”
Few businesses live a good time in Ukraine. Oleksandr Khlan’s is one of them. He imports direct sowing systems that, using new technologies and latest generation agrochemical products, better conserve the soil and increase its productivity. “They are more expensive than traditional processes, but with the current difficulties, farmers are more receptive to adopting them,” he says. In addition, he stresses that they are important to combat climate change, “a crisis that will still be there when the war ends.”
Something similar happens to Alexei Valuyskiy, who is now engaged in the nitrogen fertilizer business. He is also going from strength to strength due to the need to replace those from Russia, the world’s leading producer. «Before he used to sell Ukrainian weapons in Latin America. Now it is we who need weapons from the West », he confesses. Whoever controls logistics networks enjoys a huge advantage over his competitors, and that is the case with Valuyskiy.
energy veto
Both point out that sanctions on Russia are having a much more limited effect than Western rulers would have us believe. “70% of Russians do not even have a passport and their lives are not being affected by sanctioning them,” says Khlan, emphasizing that the Russian population is used to difficulties and that only a fuel embargo will have the desired effect. , as advocated by President Volodymyr Zelensky.
«The key is in diversification and in the commitment to energy self-sufficiency, which is achieved through renewables. With them, two birds are killed with one stone: Russian fuels can be dispensed with and a solution to the climate crisis is given, ”says Khlan.
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