Agrochemical Producers Not Deterred By Russian/Ukraine Conflict
Black Sea Grain Initiative to provide additional impetus for growth of European agrochemicals sector this year.
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By Eugene Gerden
Contributor
Russia, Turkey, and Ukraine, with the assistance of United Nations, announced the extension of the Black Sea Grain Initiative through mid-May and possibly longer.
That means that Ukraine will retain its status of the world’s second-largest exporter of wheat (10%), first in the supply of corn (15%), and more than half of the world’s supply of sunflower oil. |
Syngenta and BASF spokespersons, as well as the Russian Ministry of Agriculture, believe that the extension of the Initiative will further contribute to the growth of demand for agrichemicals in both Ukraine and Russia as well as the entire European continent this year and provide additional opportunities for growth for global producers.
The Syngenta Group considers the Eastern European region as one of the most promising for their growth despite the current events.
A Syngenta spokesperson said the company has made commitments of $400 million to provide Ukrainian farmers with products and services on commercial-credit terms, as well as support of logistics and scientific and technical programs.
Over the past four months, the average monthly export rate of Ukrainian agricultural commodities almost reached pre-war levels. Thanks to the coordinated activities of farmers, traders, international partners and the work of the grain initiative, Ukraine managed to export more than 50 million tons of grain and oil crops and their processed products in 2022.
“For the full year 2022, however, harvest decreased almost 50%. According to estimates, in 2022 the barley harvest fell by 40.9%, wheat by 33.3%, sunflower by 37.3%, corn by 44.8%. Agricultural land area lost equals 23%,” said a Syngenta spokesperson. |
“For 2023, a large amount (mostly on the South) of agricultural land still remains mined and there are a number of critical challenges such as low-market liquidity, limited access to finances, commodity price volatility, and restricted logistics, which complicates and slows down preparation for field works 2023.”
In general, the agricultural sector has fundamental importance to the overall economy of Ukraine, accounting for 30% of the country’s gross domestic profit (GDP), ensuring a stable demand for agrichemicals within the country.
For the current year, most producers and analysts expect the decrease of wheat production in Ukraine. This will be twice as much as is needed for Ukrainian internal needs but considerably less for exports. The projected harvest reduction is around 10%-15%, and the sown area is at least 20% less compared to 2021, said a Syngenta spokesperson.
On the other hand, the sown area under oil crops is expected to remain at the same level for rapeseed, soybean, and sunflower. This is due to the cost of one ton of oilseeds is higher, and the cost of logistics per ton is lower. The partial de-occupation of the Kherson region gives hope for a minor recovery in 2023 for vegetables, fruit, and berries production, a shortage of which was observed in 2022.
A BASF spokesperson told AgriBusiness Global that while BASF strongly condemns the attack on Ukraine, it continues to support business activities and its customers in Ukraine as much as possible and continues to supply customers in Russia with products supporting food production.
“Despite all adversities, we aim to maintain the supply of our agricultural solutions as good as possible in order to support global food security in compliance with all applicable international laws and sanctions,” said a BASF spokesperson. “In Ukraine, cultivated area was significantly lower in 2022 than in the previous year due to the Russian invasion. This led to significantly lower yields and a cautious investment behavior of farmers, that is also reflected in decreasing demand for crop inputs.”
As the situation is constantly changing, including the status of already imposed and potential sanctions, a BASF spokesperson said the company is following the developments closely and continues to evaluate its business decisions on an ongoing basis.
While some outlooks are positive, the Ukrainian Ministry of Agriculture believes that generally, the 2023 season is expected to be even more difficult due to limited resources and combination of other internal
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The infrastructure to transport and store grain has been massively destroyed in the war. Some of the transportation in the Black Sea has been destroyed and crop storage and loading equipment has almost completely been destroyed. Sea mines have also created complications for ships to load and unload. The same problems could be observed regarding the supplies of agrochemicals to the Ukrainian market. •