War is just a shot away (The Rolling Stones, “Gimme Shelter”)

by Iurii Mykhailov

At the moment it is difficult to write about Ukraine, in general, and this year the agricultural outlook, in particular.

gimme-shelterThe turmoil in January and February evolved into the revolution that further evolved into the occupation of the Crimean Peninsula by the Russian army. Every moment the situation may change either for some stabilization or further escalation into a large-scale war between the biggest country in the world and the biggest country in Europe with absolutely unpredictable outcome but with predictable huge amounts of casualties on both sides. Neither the European Union nor the United States of America will interfere in the war in case it started. The worst outcome for Europe will be the break of oil and natural gas supply from Russia via Ukraine.

But there must be no illusion about the annexation of the Crimea by Russia. It is lost to Ukraine. Period.

So, the forecast of the Ukrainian production and export of the main crops this year must be analyzed from the points of two possible scenarios of the political development.

1.    The situation eventually stabilizes. Since Ukrainian farmers are prepared for the new season with the necessary volumes of inputs (fertilizers, pesticides, seeds, fuel) and the weather, until now, was highly favorable. The production of main crops (wheat, barley, corn, sunflower, rapeseed and soybeans) will be at least no less than the previous year.

The current forecast for the crops is as follows: wheat – 21.5 mln tons, corn – 27-28 mln tons, barley – 8.5 mln tons with total volume of about 60 mln tons.

The forecast for the oilseeds production looks like: rapeseeds – 2-2.5 mln tons, sunflower – 11 mln tons, soybeans – 3 mln tons.

The corresponding exports looks like: wheat – 10 mln tons, corn – 20 mln tons, barley – 3 mln tons with the total export of grain about 33-35 mln tons.

One of the largest Ukrainian grain export terminals (throughput of up to 4 mln tons a year, or about 10 percent of the total Ukrainian export throughput) is located in Sevastopol in Crimea. Obviously this year it will not operate as well as some minor export terminals are on the Azov sea. This may affect not only the grain export from Ukraine but also a grain export from Russia since part of its grain Russia exports using Ukrainian ports.

2.    The situation escalates into a real war. In this case Ukrainian Black Sea ports may be blocked by the Russian navy. The grain trade may also be paralyzed because foreign buyers may consider the grain import from this region as highly risky. The outcome will be disastrous both for the Ukrainian and Russian grain export as well as for the next year grain production. Right now the scale of the disaster is impossible to forecast.

Iurii Mykhailov is Editor-in-Chief of the “Agribusiness-Ukraine” magazine, and
President of the Union of Agricultural Journalists of Ukraine

Gimme Shelter by the Rolling Stones on youtube.

Related Posts