Some Ukrainian farmers are switching from wheat and corn to soybean and rapeseed, in a bid to improve profitability, according to the association of farmers All-Ukrainian Agrarian Rada.
Ukrainian farmers are selling grain on the domestic market at an average price of 40% below the world’s average, Denis Marchuk, deputy chairman of the All-Ukrainian Agrarian Rada, estimated. The market still battles against oversupply, as the pass-through capacity of the available export infrastructure remains limited. This pushes farmers to switch to more profitable crops.
There are more profitable crops that are easier to store
A massive gap between the grain prices on the global and Ukrainian markets forces many companies to switch from wheat and barley to soybean and rapeseed, said Maxim Gopka, analyst of the Ukrainian club of agricultural business (UCAB). “There are more profitable crops that are easier to store,” he explained.
On the other hand, switching to other crops often is a risky step. “Changing the crop, you can fail to achieve the desired result. And the additional costs always come with great risks,” Gopka said.
Ukrainian farmers also experience difficulties selling grain at global prices to foreign customers. A recent study conducted by a group of Ukrainian analysts showed that the country keeps exporting its grain at huge discounts.
“We analysed Ukrainian wheat and corn export data from July to November 2022 and couldn’t believe our eyes – the average cost of half of the Ukrainian wheat was about 40% lower than the average price in the global market, and the price of Ukrainian corn was about 30% lower,” Julia Sameva, the head of the research group said
While the average wheat price on the global market stood at $362 per tonne, Ukraine sold wheat to:
Egypt at an average of $216
Turkey at $200
Greece at $176
Farmers sell corn at a similar discount. With the average global price of around $320 per tonne, Ukrainian farmers sign contracts to export corn to:
Egypt for an average of $212
Bulgaria – for $209
Turkey – for $175
In addition, Ukrainian farmers battle numerous challenges, all driving up production costs. One of the critical problems of the spring sowing campaign is a labour shortage. In addition, to the unprecedented immigration wave, a large number of workers joined the Ukrainian Armed forces.
“Since large territories remain occupied or mine-contaminated, the pace of preparations for the sowing campaign is slow. The mobilisation of workers also takes a toll,” Marchuk said, adding that farmers are actively recruiting new employees to fill the gaps left by the mobilisation. In the wake of the spring sowing campaign, the number of available vacancies in the agricultural sector jumped by nearly a third compared to the previous year.