Currently, in Ukraine, three deep-water ports in the Odesa region serve as bustling hubs for exporting grain and agricultural products, as Pavlo Koval, CEO of the Ukrainian Agrarian Confederation, points out in an interview with The Ukrainian Week. Furthermore, he emphasises our utilisation of 15 railway crossings and our commitment to ensuring product supply to markets via roads.
Between March and April 2024, Ukraine exported approximately 5 million tons of agricultural products. Ukraine’s Ministry of Agrarian Policy has estimated that the total gross production of grains and oilseeds in 2024 will amount to around 74 million tons. Out of this total, 52.4 million tons will be grains, while 21.7 million tons will be oilseeds.
“The Russians are targeting railway, energy, and economic infrastructure. Recently, there was a bombing at a grain elevator in Poltava, and businesses in the Odesa and Vinnytsia regions were affected. We anticipated these risks, of course. However, we hope they won’t fundamentally alter our strategy. If things remain unchanged, we expect harvest collection and export forecasts to stay consistent with the volumes seen since January 2024. For instance, if we export 5 million tons monthly, that totals about 60 million tons of grain crops and their processed products annually. Additionally, we anticipate exports of other agricultural products, including dairy, confectionery, crop seeds, oil, vegetables, and berries,” Pavlo Koval explains.
Ukraine has traditionally been known for exporting goods such as grain, but there has been a recent increase in domestic farmers focusing on niche products and improving value-added production chains.
At present, efforts are being made to cultivate crops such as rapeseed, mustard, legumes, and cotton. There is a growing demand for the revival of rice cultivation. However, there are concerns regarding irrigation and the availability of lands that were previously suitable for this purpose. Regrettably, these lands are now partially occupied by Russian troops.
“It is important to understand that planting the same oilseeds in the same area repeatedly is not always beneficial. However, due to current challenges, farmers are often compelled to do so. This is especially true since our farmers still face issues with financing. The state agricultural registry has already stopped accepting applications for budget subsidies of 8,000 hryvnias per hectare. It is clear that the demand for support for farmers is much greater than the current possibilities,” explains Koval.
At the same time, farmers are responding promptly to current challenges. In times of war, it is easier to export processed products than to organise the supply of millions of tonnes of raw materials.
“For logistics, there is a difference between harvesting 100 hundredweights of corn per hectare and exporting it by millions of tons, compared to harvesting 35 hundredweights of rapeseed, processing it into oil with a 40% yield, and exporting 17-18 hundredweights of oil per hectare. In the latter case, the farmer even gets a higher margin. We used to have well-established markets where our corn was needed, including in European countries. However, conditions have changed, and farmers are reacting to them. But this does not mean that we will abandon the markets we have worked with for 20 years.”
“By the way, I wanted to share an example of a prompt response and a business reorientation towards economically justified decisions. Over the past two years, there has been an increase in sugar beet cultivation in our country. This is because there is a high demand for sugar not only in traditional markets in post-Soviet countries but also in European, African, and Asian markets. It’s worth noting that just seven years ago, this industry was considered unprofitable for us,” emphasises the expert.
Despite a reduced forecast for gross grain harvest, Ukraine is not facing a food crisis. In fact, farmers are continuing to build significant potential for export. “During the past two years of war, a significant number of medium-sized businesses have developed autonomous export chains for agricultural products that are transported by truckloads. However, to achieve this, you need to be at least a medium-sized business to generate export volumes that are attractive to European importers. If you have several thousand hectares of land and several vehicles of the required class, you can handle these tasks without the help of traders. However, small and medium-sized farmers find it challenging to sell their products without the assistance of traders. Moreover, the issue of price is another matter. Some significant players break the price policy and do not comply with the laws, mainly through the shadow market,” says Pavlo Koval.
Even amidst the war, there are Ukrainian farmers striving to supply their products directly to markets, bypassing major players.
One notable example is found in the Cherkasy region with companies like ‘OSK’ and ‘Urochyshe Zhuravske’. Spanning six thousand hectares, these farms cultivate a variety of crops, including corn, soybeans, sunflower, rapeseed, and wheat. Additionally, they operate flour production facilities. Their products, marketed under the brand “First Mill,” are sold both domestically and internationally.
“Before the full-scale war, we used to export both raw materials, such as grain crops, and processed products, including flour. Flour shipments were sent to markets in Asia, Africa, and the Middle East. However, we didn’t export flour to Europe due to the imposed quotas,” explains Ihor Novytsky, CEO of OSK LLC and economics director at Urochyshe Zhuravske LLC. “But after the start of the full-scale Russian invasion and the blockade of the ports of Odesa, the quotas were abolished, and we mainly redirected our exports to the European market. In this new scenario, we supplied flour to Germany, the Czech Republic, and Poland.”
The situation became more complicated after the start of protests and border blockades in Poland. Previously, a truck could deliver in one or two weeks, but now it takes a month. At the same time, transportation costs have tripled. “In Europe, we don’t hit the market price. That’s why we can’t even compete with the Turks. They are not European producers, but they successfully export their flour to EU countries.”
When it comes to farmers in western Ukraine, it makes more sense for them to ship their goods, including grain crops, to Europe by rail—using trains. “This option offers better logistics compared to exporting through Odesa. Exporting by trucks presents the same challenges as it does for farmers in central Ukraine. However, with the recent reopening of borders by the Poles, I’m hopeful that the situation regarding supply and transportation costs will soon improve,” explains the farmer.
‘With the maritime route through Odesa now open, farmers can export grain just as they did before the full-scale war. However, during the port’s closure, trade was redirected through Reni, a checkpoint on the Ukrainian-Moldovan border. Grain was transported by barges to Romania’s port of Constanta. From there, it was transshipped onto large ships, eventually reaching markets in the Middle East and Africa by sea, following routes familiar to Ukraine.”
When considering flour, the demand for it in the domestic market doesn’t look promising. All local producers have noticed a decline in the country’s population. Flour production relies heavily on the so-called bread consumption index per person per day. Essentially, the domestic market for consumption has shrunk. With exports also facing limitations, it’s natural that production will decline accordingly.
“And it’s not so simple for our producers to place their products in Ukrainian supermarket chains. It’s far easier and more transparent to collaborate with retail chains in Europe. For instance, we sell a lot more flour there than we do in Ukraine,” explains Ihor Novytsky.
He elaborates that the current focus lies in seeking out new markets. Specifically, the farm intends to carve out a niche in premium markets by transitioning towards higher-quality production standards. Priority is given to cultivating oilseed crops, while the acreage dedicated to corn cultivation has been reduced. Simultaneously, there’s a growing discourse globally about the potential surge in food prices. Bloomberg reported on the myriad challenges faced by farmers globally, from inundated fields in Western Europe and arid soils in Australia and the USA to constraints on export supplies from Ukraine due to the ongoing war. Experts caution about a projected 6% decrease in Ukrainian grain production compared to the previous year as farmers gradually reallocate areas from wheat to more lucrative crops, such as rapeseed.
