This summer's drought has many Ukrainian farmers in trouble. A poor winter crop and land rents that have doubled since last year could spell big losses for crop producers and higher prices come fall.
“The situation is particularly bad in six southern oblasts, where instead of collecting the average 2.2 tons of grains per hectare, farmers gathered only 1.6,” says Henadiy Novikov, head of the Agrarian Union of Ukraine.
Novikov said the rest of the country is looking at an average grain harvest, so the overall situation will not be catastrophic. “However, consumer prices might go up, and many farmers will be in major trouble,” Novikov added.
This year’s losses could reach a record Hr 10 billion ($1.25 billion), said Aleks Lisitsa, head of the Association of Agrarian Business of Ukraine. This will affect big agribusinesses, though small and medium producers will likely bear the brunt of the blow, he added.
According to estimates by the Association of the Agrarian Business, this year grain will cost Hr 1,800-2,000 per ton to grow, but will sell for only Hr 1,500-1,700 per ton, depending on the quality.
Farmers are asking the government to step in. During a meeting with Prime Minister Mykola Azarov last week, they asked to lower the price of land rent, which has almost doubled since 2011.
They also ask for help with their bank loans, suggesting the government cover their interest payments this year. Access to affordable credit has been a chronic problem for Ukrainian agribusinesses, whose bank loans bear rates of up 20-22 percent.
Azarov promised to “consider the suggestions.”
This year’s disappointing harvest will be considerably lower than last year’s bumper crop of 57 million tons.
At present, government estimates put the 2012 harvest at 45 million tons. But experts warn this may be too optimistic, lowering their own forecasts to 40-42 million.
Ukraine is not alone to suffer from the heat. Dry weather in the U.S. has damaged the corn and soy bean harvest. The situation is similar in Russia and Kazakhstan.
Aleksandr Gavrylyuk, partner at KPMG and agrarian expert, says Ukraine might benefit from the situation on the international grain market and increase sale, including leftovers from last year’s record harvest. “However, ahead of the parliamentary elections on Oct. 28 the government will do anything to keep prices for grain and flour stable, including export bans,” says Gavrylyuk.
The situation might get worse in central and northern Ukraine, where the harvest is about to begin. The national weather center expects the drought in those regions to peak in end-July and early August.
Kyiv Post staff writer Svitlana Tuchynska can be reached at [email protected].
