"So, to the facts and figures on how Ukraine is coping with the port blockade and a number of other logistical problems? And also what this means for the future of the country's agribusiness sector and global food security.
I am pleasantly surprised - almost twice as much to export now as the previous most optimistic estimates - that is, almost 2 million tons per month. This includes grains, oilseeds, vegetable oils, products of their processing - that is what we call #commodities.
Truth be told, I will add a little bit to these nice figures - 2 million tons is what was "pushed out", i.e. marked at customs. But that doesn't mean that these goods will reach their addressees as quickly as they used to by sea, because the traffic jams on the Danube and railroads are insane. The waiting time for delivery is accordingly, too. And the longer the goods go, the later the funds arrive. And let's talk about the price separately, below.
Even worse, even exports of 2 million tons is about 20% of what we would realistically need. If you have studied the theory of limitations, then you know what this means - it means that over time, if we do not expand this bottle neck, then all production will be adjusted to this volume. But more on that later, too.
Most agricultural analysts forecast grain exports from Ukraine, excluding oilseeds and oils, at 22-24 million tons. I believe that without ports, this volume will be extremely difficult to achieve. And not only because it is almost logistically impossible.
Even if Ukraine exports 24 million tons of grain during the 2021/22 season, it will be exactly half as much as in the 2020/21 season. Consequently, the world will miss out on about 24 million tons of Ukrainian grains. After all, the Rashists will have nowhere to steal them this time.
Exports of oilseeds, vegetable oils, meal will decrease even more drastically, and sunflower oil is a very important product for the hog industry of the world, and meal and oilseeds are a source of protein for livestock (milk, meat, eggs, fish).
The world market will begin to feel the decline in exports from Ukraine only in the second half of the year, because so far the world has used the 2021 harvest stocks harvested before the war. Seeds and materials for the sowing campaign in 2022 were also purchased before the war. With the 2023 harvest, the situation will get much worse.
But on Friday I talked to people working in Yemen and Syria. In Yemen, the food availability situation is critical. In Syria the food situation is also very difficult, so much so that the local bloody dictator, in the absence of Rashist support, is really afraid of being overthrown. And also why do you think the Turks buy stolen grain from the Russians in Ukraine? (if you don't know, read Osman Pashayev and raise the issue!). Because they too have a dictator whose throne is shaky under him and it would be hard for him to retain it without Ukrainian fodder, because Turkey is the second biggest consumer of our fodder after China.
Grain and oilseed production in Ukraine will sharply decline in 2022. Grain, according to various estimates, by 35-37 million tons (-40%), and oilseeds by 6-7 million tons (-30-35%).
There are two reasons for the decline: Area and yield. Areas will decrease because diesel shortage, some areas under orcs, some with mines, pollution by diesel and other elements of war, some under constant shelling, etc., and some farmers, even having diesel and seeds, decide not to sow, because of very low prices.
The second factor is the decline in yields due to lack of resources: financial, human, fertilizer, machinery, chemicals, etc.
But 2022 is just the beginning. With the sowing for the 2023 harvest, which, let me remind you, will start in more than 2 months, the situation really looks quite critical. Critical for our exports and critical for the world, but not so critical for the domestic market. Let me remind you, though, that exports are a source of income for the country and a source of stability for our currency, and a source of income for the rural population. So don't think it's not somehow unimportant.
Ukraine is the largest exporter of feed components (protein meal, bran, corn, barley, feed wheat, and soybeans processed into soybean meal) in the region. All other major exporters are in America. There is simply nothing to replace Ukraine with and it is physically impossible. The factor of Ukraine's absence on the market will begin to affect world prices for meat and dairy products in late summer and early fall of 2022.
The biggest problem, often for some reason, is not mentioned at all. Farmers in Ukraine now get very low prices for their products and even at that price it is difficult to sell them, and the costs have risen very sharply. At the moment, the cost of growing crops exceeds prices, which means that production is unprofitable (see bottle-neck above).
The kind of logistics that we are now setting up with the support of many countries with such efforts is insufficient and very expensive. Therefore, grain prices in the world will need to rise by at least $150 per ton if the world wants Ukraine to keep growing grains.
I note that all this time there is no threat of shortage of processed cereals and oilseeds products in Ukraine, and there is no shortage of fodder either. Moreover, all this is relatively affordable compared to prices in any other country in the world. But the owners of agricultural enterprises pay extra for this out of their own pockets, so do not forget to at least thank them for this.
And what will happen to crops in Ukraine in 2023? I know, it's a long way off. And I also hope that the ports will be unblocked, but the decision to sow winter crops should be made now - buy seeds, stock up on diesel fuel, etc. And right now the decision will not be in favor of growing crops, because the prices do not cover the costs.
Therefore, if the AFU does not liberate the south from the Rashist bad and does not unblock the shipping at least the Black Sea, I would not be surprised if the production of grains and oilseeds in Ukraine will drop to a level where there is almost nothing to export - certainly not to zero, but to volumes where the domestic market, not export is the driving force of the agribusiness.
And now to the global situation. Don't forget that the whole world is now paying a lot more for fertilizers and crop protection chemicals, which means that consumption is decreasing, especially in developing countries.
There are no miracles - if less inputs are used, yields decrease. Thus, the decline in yields in many other countries is inevitable. And this year's droughts are also abnormal. Accordingly, grain prices, after a certain stabilization in summer, when the Northern Hemisphere harvests, will start to grow rapidly again towards the end of the year. Maybe even earlier.
Consequently, the current high prices of grain, vegetable oil, meat, fish, and dairy products are now far from their potential peaks. In the second half of the year, the world may see a serious rise in all food prices, which will continue into 2023.
The resumption of agricultural production in Ukraine will be quite lengthy. But, if you, like me, have no doubts about our victory, right now hold on to agricultural assets. These unprofitable assets will turn into real gold.
That's how I had to go back to where I started my career - grain analytics. Hang in there and take care!"
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