Opinion: Ukrainian agricultural sector may lose $10 billion this year

This year, the domestic agricultural sector may lose about $10 billion due to logistical problems. Only on blocking seaports and changing the logistics of export transportation, farmers can lose $ 7.5-8 billion, says Alexander Zakharchuk, an expert at the National Research Center «Institute of Agrarian Economics». Farmers lost $0.5 billion on the cost of last year’s unsold grain, and an additional $1.3 billion on the cost of destroyed or seized grain elevators.

«In total, this is $9.3-9.8 billion, or almost the total profit of agricultural enterprises received in 2020 and 2021,» said Alexander Zakharchuk.

The expert noted that now for agriculture the problem of tariffs for the transportation of crops and the cost of its storage is most acute. Only in January-February 2022, rail transportation tariffs increased by 15-20% compared to the same period in 2021.

«Further growth in the cost of rail logistics - an increase in tariffs for grain cargo by another 70% from June 29, 2022 - led to additional costs for farmers, which are estimated at $120 million per year», Zakharchuk said. 

In general, according to him, with the beginning of the blockade of ports, the cost of logistics in the export structure increased by 5-7 times and reached $180 per 1 ton of grain.

«Given such a cost of logistics, grain producers are forced to sell goods already below cost. According to average estimates, the cost of 1 ton of wheat in the field was forced to drop to $100-120 per ton, while the cost of production is at least $120-150 per ton», the scientist emphasized.

As Zakharchuk noted, since it is planned to harvest at least 50 million tons of grain crops and 15 million tons of oilseeds in 2022, taking into account carry-over stocks, a shortage of elevator capacities of at least 15-20 million tons is expected. It can also lead to significant losses due to the lack of appropriate storage conditions for the crop.

It should be noted that the restoration of the agricultural sector is possible provided that all losses caused by Russia's military aggression are fixed. Such an evidence base is important for proving, in particular, in international courts, the crimes of the Russian Federation and compensating for all losses by it. This was stated during the round table by the First Deputy Minister of Agrarian Policy and Food of Ukraine Taras Vysotsky, the Ministry of Agrarian Policy said in a statement.

«In order to receive a refund, it is important to have proof of damages. That is, fact and fixation are needed. It is clear that collecting such information is difficult and not immediately possible. This requires human and financial resources, but without fixing the compensation cannot be realized at all», the official emphasized.

According to him, virtually all the basic resolutions and orders on the methodology for determining the damage and losses caused as a result of the armed aggression of the Russian Federation have now been approved at the government level. Next in line is the regulation at the level of a resolution of the same methodology for private rural farms. After the approval of this document, the entire target audience will be covered, which may have a need and require compensation for losses incurred in the agricultural sector.

«The next step after we have the methodology, the regulatory framework and the fix is, of course, identifying the source of the coverage. We already have support at the level of the UN and other international institutions, so that from various sources (frozen assets of the Russian Federation, reparations, etc.), but unequivocally provide compensation at the expense of the aggressor country. These processes, as practice shows, are long in time, but we need to go through them together. Our state will always help fight for entrepreneurs to receive their funds through a transparent and efficient tool,» said Taras Vysotsky.

The USAID Agrarian and Rural Development Program (AGRO) and the All-Ukrainian Agrarian Rada Public Association have developed methodological recommendations for fixing crimes. Based on the information collected, an evidence database is being created to confirm the crimes committed by the Russian Federation against Ukraine. In the future, the collected evidence base will be used to file individual statements or join existing class actions in international courts in order to compensate for the damage caused.

In parallel, there is a free consultation line for affected farmers. In addition, there is an interactive map of the destruction of the agricultural sector of Ukraine. The portal was created to show the real losses of agricultural enterprises caused by Russian aggression.

The collected evidence can be used as an example for your own fixation. Also, the data displayed on the map will help charities and international investors to get information about the destruction in order to further support businesses.