Speaking on a Zoom call from inside Ukraine, Ukrainian agricultural economist Antonina Broyaka gave a wide-ranging presentation on the effects of Russia’s invasion of Ukraine on its ag sector, imports, and exports. Broyaka is an associate professor in the business and economics faculty of Ukraine’s Vinnytsia National Agrarian University, founded in 1982.
The webinar was recently presented by Kansas State University. Allen Featherstone, head of the agribusiness department and director of the Master in Agribusiness program, hosted, along with Rich Llewelyn, a faculty member in the department.
Broyaka started with a brief background on the invasion, complete with maps, that stressed that Ukrainians have always been a separate people with their own traditions. She spoke about the history of Soviet-Ukrainian relations, including the Holodomor, the name given to the conflict during which Soviet dictator Joseph Stalin killed up to 10 million peasants, mostly Ukrainians, in his effort to impose collective farms and collectivized agriculture on the Soviet Union in the 1930s. Broyaka said the cause of the invasion is that “Russia does not want to let us go our own way.”
Grain basket
The Ukraine was historically the breadbasket of Russia and Europe and in the past 10 years it has been building up its ag portfolio to become a major producer and exporter of wheat, sunflowers and sunflower oil, and corn. In the years since independence, corn production has increased by 545%. In 1990, Ukraine produced 4.7 million metric tons of corn; that had risen to 30.3 million metric tons by 2020. In the 2021 crop year, the corn estimate was 39.8 million metric tons. Broyaka said the dramatic increases were due to “continuously improved agricultural practices, which the war is likely to end.” The main importers of Ukrainian grain are China, India, the Netherlands, Spain, Indonesia and Turkey.
Ukraine produced 70 million metric tons of sunflower seeds, with Russia the second largest producer. Together, they control 77% of the world sunflower oil market.
Besides grain, Ukrain’s top exports are fats and oils, steel, iron ores, electrical equipment and parts, and oil seeds. The ag sector makes up 10.73% of Ukraine’s economy and is a “main growth driver,” Broyaka said. It employs 20% of all workers. Crop production is 77.33% percent of the ag sector, with livestock raising at 22.67% and declining. Households still produce a significant portion of ag production. “The ag sector is the only one that has a constant positive foreign trade balance,” she said.
Costs of invasion
Russia’s invasion could cost Ukraine up to 50% of its gross domestic product, said Broyaka. The cost to the Russian economy, due to Western sanctions and war depletion, could go up to $250 billion. She said “danger regions” in her country include 36% of the total planted areas. Planted sunflower areas could be reduced by as much as 39%. While the war has stimulated demand for sunflower oil, “the rest of the world can’t totally replace Ukrainian sunflower production.”
Ukraine is currently exporting 1 million tons of farm products a month by rail through its western borders and hopes to expand rail capacity to make that 2 million tons a month. Russia has occupied or blockaded Ukraine’s Black Sea ports and is in the process of completely destroying the port of Mariupol.
In the question-and-answer period, Broyaka said Ukrainian train gauges, while incompatible with Western gauges, are compatible with those in Romania and Poland on its borders. Trains in Russia and former Soviet-occupied countries have wider gauges than those in the rest of Europe.
Seizing grain
When asked how long it would take Ukraine’s planting schedule and ag sector to recover, Broyaka said it is difficult to predict but could take at least a few years to rebuild infrastructure.
Echoing the U.S. Department of Agriculture’s World Agriculture Supply and Demand Estimates, Broyaka said stored wheat and corn is actually up, but it’s unclear how much of it is able to be moved. In March 28.6 million metric tons of grains were stored, but 12.51 million metric tons were in occupied areas. She was hesitant to answer questions about the war’s effect on Russian markets and agricultural prices but did note that Russian forces were seizing food and grain in Russian-occupied areas.
Dan O’Brien, a professor in the department of agricultural economics at K-State, then gave a presentation on world markets and the impacts of the war. He ran several scenarios assuming different conditions.
He said wheat seedings would likely increase worldwide, and wheat exports would increase from India and Argentina especially. The United States, he said, is almost a wheat supplier of “last resort” because of the high dollar, although U.S. wheat is prized. If none of the stored wheat in Ukraine can be moved, he foresees rationing in poor countries. If China is taken out of the picture, then world wheat stocks are facing a 10-year low.
Although Ukraine is not an important soybean producer, sunflower oil competes with soybean oils for cooking and fuel applications, so the sunflower picture will affect the price of soybean oil as well. O’Brien noted a 10-fold increase in soybean crush in a single one-week period, and said it partly reflected the shortfall in the sunflower oil market.
Slides from the presentation are available at https://agmanager.info/news/recent-videos/ukraine-russia-conflict-agricultural-ramifications-online-update.
David Murray can be reached at [email protected].
