Ukrainenu has asked an agricultural expert about the 2021 harvest, how it is going with the landreform, and the sector’s problems with climate change.
2021 is almost over and it has been a great year for the farmers in Ukraine, explains Andrey Novoselov, who is an analyst at the company Barva Invest, to Ukrainenu. Ukraine has, for example, had a record corn harvest this year, and Novoselov says that the weather conditions have been almost ideal all year round.
“We have seen an absolute record in the wheat harvest of about 32 million tons, and the same has been the case for the total corn harvest. Farmers have been worried that they might not be able to sell all their corn, but it has not been a problem,” says Novoselov.
He adds that the worries have been connected to the extraordinary harvest, where farmers suddenly needed to find new markets. However, due to a bad harvest in other countries such as Russia and Canada, the big Ukrainian volumes have been easy to sell.
“Right now, we see prices increase week after week, and the big harvest is creating problems in some areas,” explains Novoselov, referring to the demand for transport, which has driven up prices and made farmers look for alternative ways.
Some Ukrainian farmers have, for example, decided to sell their harvest with delivery in April or May instead of right now as they expect the price of logistics to decline later on.
“We have also seen the costs of fertilizers increase by three to four times the price in the last marketing year. The costs of drying the harvest have also increased due to higher gas prices,” says Novoselov.
The landreform is only at the beginning
The long-awaited landreform went into force this year and ended a more than 30-year ban on selling Ukrainian farmland. Ukraine has 42 million hectares of farmland, and the reform should help release the potential in the agricultural sector, as farmers can now own their land. The Ukrainian Agri Council estimates that the Ukrainian state budget losses around 815 million dollars per year due to the land market working in the shadows.
The reform, however, hasn’t resulted in a lot of investments into the Ukrainian agricultural sector or a lot of trading, explains Novoselov. However, it is natural at this point, he says, because Ukrainians aren’t allowed to own more than 100 hectares per person until 2024. From January 2024, it will be allowed to own 10,000 hectares.
“We can see that only one percent has been bought so far and it is logical. It is very difficult to acquire a lot of land at this stage, and investors instead continue to rent,” says Novoselov.
He, however, says that the price for renting land in some areas of Ukraine has increased by 30 percent since the landreform came into force. Novoselov adds that the profitability of farmers remains high as the costs of rent aren’t so significant at this point.
“Farmers are more worried about the price of gas and fertilizers,” Novoselov says.
Climate change is a problem
Ukrainenu has previously written about how climate change is threatening the agricultural sector in Ukraine. The weather has been ideal this year and resulted in a record harvest, but 2020 was worse with heavy rains in some places and drought in others.
“Ukraine’s role as a growing agricultural superpower leaves the country particularly vulnerable to the negative impact of a changing environment. Over the last few decades, the Kyiv climate has gradually migrated south. Winters have become milder, and summers are now much warmer. The weather in the Ukrainian capital is increasingly similar to Odesa in the middle of the twentieth century without the benefit of the Black Sea breeze,” wrote Anna Ackermann, a board member of the Ecoaction Center for Environmental Initiatives, last year.
She called for Ukraine to adopt better irrigation methods and better selection of crops to battle climate change. Novoselov says that climate change is a real threat to the Ukrainian agricultural sector and that something needs to be done.
“In the last five years, I have seen a lot of farmers located from the south or south-central Ukraine to the center or to western Ukraine. We also see that some farmers in the south are planting sunflowers, which are more resistant to dry weather, now,” says Novoselov.
He points out that something needs to be done with irrigation. He points out that irrigation was really good during the Soviet Union but that it has been neglected ever since. Only 15 percent of the irrigation from that time is working today and the sector needs investments.
“Some of that old irrigation network could be used today with some investments and there is an interest in buildings new as well. However, the problem is that you need licenses to build and to take water from rivers. As it is right now, you need to pay some people to get permission, and not all companies are ready to do that,” says Novoselov.