An Industry That Feeds the World: What Has 2023 Become for Ukrainian Agriculture?

December 10, 2023
The Ukrainian agricultural industry has been operating in arduous conditions of war for the second year, and so Ukrainian agrarians have much to be proud of.

Ukraine’s agricultural sector is not only one of the key branches of the nation's economy but also critical for global food security.

What results have Ukrainian agriculture reached in 2023? What were the main challenges that agrarians faced? And what methods have been used to overcome them? UkraineWorld spoke with Taras Vysotskyi, Ukraine's First Deputy Minister of Agrarian Policy and Food.

Ukraine is unable to access 20% of its agricultural lands as a result of Russia's full-scale invasion, and the agricultural industry as a whole operates in precarious circumstances exacerbated by war.

However, Ukrainian agrarians managed to increase production volume and improve last year's indicators in 2023.

Yield indicators for Ukraine's basic crops - grain and oil crops - have increased. This year, approximately 80 million tons of these crops will be harvested, which is 10% more than in 2022.

Despite increased yields for both crops, agrarians have increased oil crop areas while decreasing grain crop areas. In addition, sugar beet production increased significantly - by 20-25%.

In 2023, the production of pork, poultry, eggs, and dairy was revived, and sugar production also increased. It is worth noting that the volume of production at private farms has decreased (particularly in animal production), while production at commercial enterprises has increased.

The export of agricultural products is a crucial aspect of the Ukrainian agricultural sector's operation. It’s important both for Ukraine and for the entire world.

Ukraine exports approximately 70% of its agricultural products, as the volume of its market prevents it from consuming all of them. At the same time, this export ensures global food security.

Despite logistical challenges, export has continued throughout the year. There is an increasing trend in the share of value-added products exported.

Due to the high cost of logistics, the export of raw materials has become unsustainably expensive. Hence, the export of agricultural products of processing is more profitable for producers.

E.g., if previously only rapeseed was exported, 20% now account for processed products such as rapeseed oil or meal. Similarly, the export share of soybean oil and meal has increased as has the export of sugar and bioethanol.

The volume of poultry, eggs, egg products, and dairy products exported have remained stable. Lastly, among raw products, the share of exports of oilseeds export has grown, while the share of cereals exports has decreased.

For the second year in a row, Ukraine's agriculture has been confronted with the consequences of a full-scale war. The first issue is agricultural land demining and since it is a primary source of Ukraine's revenue for this sector, access to the lands is critical.

However, the demining process is time-consuming and expensive. Within the de-occupied territories, it’s critical to demine about half a million hectares of land.

As of now, only 40% of this area has been cleared from mines. With further de-occupation, the land area that requires demining will only grow.

The second challenge is the absence of funding available for agrarians. Before the full-scale invasion, they could make future contracts, and insurance was available. Currently, there are no such opportunities due to the risks connected to war.

Agrarians must seek and fight for every dollar of financing. There are government programs that address critical needs, but they are insufficient to overcome the funding shortage.

The lack of free effective logistics is no less of a significant challenge. Ukraine still lacks proper exports to the Black Sea. The Ukrainian military is currently operating the temporary Black Sea export corridor.

However, product transportation remains difficult owing to factors such as constant Russian attacks on port infrastructure and other military risks at sea.

Furthermore, land corridors are not functioning properly due to border closures for Ukrainian carriers. Moreover, logistics have become considerably more expensive in times of war.

Agrarians have used different strategies to lessen the impact of negative factors and to increase production. The first is a shift in crop rotation. Agrarians have shifted to crops with a higher price per unit (ton).

In collaboration with the government, another mechanism is being used. The system of 'reservation' of critically important workers has been introduced to ensure the continuous systemic operation of agricultural enterprises.

It means that 'reserved' workers cannot be mobilized for military service. A worker's 'reservation' is valid for half a year with the option of a possible extension.

Agrarians have learned to use the direct export sales strategy to mitigate the negative impact of high logistic costs and a decline in production profitability. Given that there were fewer intermediaries involved in export operations, agrarians were able to retain more of their profits.

The government program of affordable lending at reduced interest rates has been introduced to provide agrarians with access to financial resources for uninterrupted operation of the sphere.

These mechanisms allow agrarians to endure the current climate. Current circumstances give no room for prosperity.

Ukrainian agrarians gained experience running the agricultural sector in dire conditions, such as a shortage of resources and broken production processes, as a consequence of the war.

Ukrainians hope that there will be no need to apply this type of experience anywhere else in the world. However, we’re living in an ever-changing world, so the knowledge and experience of Ukrainian agrarians will no doubt be a valuable asset for other countries in the years to come.

Taras Vysotskyi, Ukraine's First Deputy Minister of Agrarian Policy and Food