ANALYSIS: Ukraine planting outlooks slashed amid Russia invasion

Ukraine’s new crop and planting campaign will definitely see a major reduction amid the ongoing Russian invasion of the country, but the current outlook is likely to change dramatically depending on how the situation develops - with spring crops facing a particular challenge.

The scale of the reduction is likely to be a critical element of price evolution over the coming weeks and months, with corn and vegetable oils likely to provide the next level of support after wheat prices posted record highs.

And, while the ability of Ukraine's farmers to sow spring crops in the coming weeks is likely to provide the next major pricing landmark, in truth year-round access is vital in order to tend, apply inputs, harvest and prepare the soil for the next harvest. 

The main challenges

The Russian invasion means Ukraine is facing the most difficult planting campaign in its history as an independent country, and now faces a catalogue of problems that will disrupt the normal sowing process.

Prior to the invasion, the supply of key inputs was the main concern, but trade sources have said that most of the country’s big producers have booked fertilizers and seed supply already.

According to the Ukrainian Grain Association, a trade lobby that represents the sector at government level, around 80% of the country’s farmers have enough supply of inputs.

But a shortage of oil - specifically diesel - is one of the biggest problems encountered so far, as around 70% of the supply used to come from Russia and Belarus, the two countries that are currently attacking Ukraine.

A second concern is that farmers may not be able to reach all the planted areas amid active conflict zones or in land currently occupied by the Russian army.

Winter crops

Ukraine planted its winter grains back in autumn and has already reported a decline in the wheat planted area of around 2.6% compared to 2021.

Overall, as 6.5 million hectares had been planted with the figure usually equating to around 98% of the all wheat planted in the country.

Winter barley accounts for around 50% of the total barley plantings and was already complete on an area of around 969,000 ha - which is already a 10% decline versus last year.

However, Ukrainian farmers capitalised on recent strength in oilseed markets by boosting rapeseed planting at the expense of wheat. 

Winter rapeseeds had been planted on 1.4 million ha, a significant 40% increase compared to last year on a strong margin for the crop.

Usually, the winter crop contributes around 97% of the whole planted - so the bulk of the country’s wheat and rapeseed crop, and half of the barley crop is already in the ground. 

Overlaying the planted areas with the areas either occupied by the Russian military or actively contested areas of fighting suggests that around 52% of winter plantings and around 43% of the winter barley planted area could already be at risk.

On top of that, around 32% of rapeseed plantings are likely to be affected based on official Ukrainian statistic data for the regions.

But that does not mean the entire region is not available for planting, just that it has to be considered that some parts are not available or could be unavailable by the time the harvest season begins.

That picture is further muddied by Russian tactics, which are focussed on city-based assaults and use of siege tactics, rather than maintaining a strong military presence across Ukraine’s fields.

Spring crops

The situation with spring crops is less predictable.

Despite the campaign starting in some regions that are untouched by the war, and the government releasing a list of support provided to producers - including providing a loan programme to provide around $845 million in support as well as introducing tax breaks - the biggest concern is the conflict and how far the invasion could have got by the time of planting.

Spring barley, which accounts for the other half of all Ukrainian barley production, is usually among the first crops planted and started on March 29 in 2021, but is expected to be delayed amid cold temperatures this year.

Looking at the typical regions that plant spring barley, and overlaying current military action, around 50% of the spring barley area is still safe for planting.

Corn, sunflower, soybean and spring rapeseed planting usually starts at the end of April and runs through to June, so there is still some room to manage the planting - and crucially time to undertake that planting should the war come to an end.

But the harsh reality of the situation means that even for the areas currently affected by war, it is uncertain how much of the region could manage to undertake any planting.

Currently, the regions most affected by fighting are the land around Kyiv, Sumy, Donetsk, Luhansk, Kherson, Mykolaiv, and Chernihiv, where Russian troops are actively engaged in military operations against defending Ukrainian forces.

As such, given the worst-case scenario where all the impacted areas won't be available to complete spring sowing - the total volume could amount to 36% of total corn production, 48% for spring barley, 24% for soybeans and 44% for sunflower.

Forecasts

While there is currently no official updated forecast from the Ukrainian government, local media has reported that Taras Vysotskiy - the deputy agriculture ministry - has said spring sowings will be completed on 50% of the planned areas. 

However, it is not yet clear if Ukrainian farmers will be able to plant an additional 20% of the area, and around 30% of spring plantings are expected to be lost for the 2022/23 campaign.

Mike Lee, the director of Green Square Agro Consulting that specializes in providing independent forecasts for Black Sea crops, told Agricensus that the initial forecast for the Ukrainian wheat crop pre-war was at 27.3 million mt, given expected above-average yields.

But in a situation where no spring wheat can be planted and only some of the required fertilizer and pesticides can be applied - a measure that would likely mean production can only attain 70% of full yield potential - the crop could drop to 18.6 million mt.

That would amount to the lowest production figure for a decade, according to USDA figures.

However, an even worse scenario could come if spring wheat could not be planted at all and only limited inputs applied - an outcome that could see the yield potential drop to 60% - while farmers are only able to harvest 60% of the winter wheat area.

Under that circumstance, production could fall as low as around 9.6 million mt - a 20 year low.

Against that, the estimate for domestic usage for the 2021/22 marketing year was put at 7 million mt, although it is likely to be lower in 2022/23 as many industries will have suffered damage during the war and are likely to show lower demand.

Barley

In terms of barley, the best scenario envisaged would be where all the planned areas are planted and the yields are slightly above the average, with Green Square Agro Consulting expecting the barley crop to reach 7.5 million mt.

However, at the other extreme, Lee warned that no spring barley plantings and insufficient application of inputs would result in realising just 60% of the yield potential from only 60% of the winter crop harvested.

Under those circumstances, production could fall as low as 1.4 million mt - coming in below the usual domestic usage, which typically stands at around 3.8 million mt, according to ministry data.

No forecasts for the late spring crops have been provided so far, as the situation remains unpredictable and will depend on the further developments across the conflict.

Ukraine was one of the main world grain suppliers and produced a record crop in the 2021/22 marketing year of 106 million mt, including 84 million mt of grains and legumes and 22.6 million mt of oilseeds.

Usually, the bulk of the harvested volume headed for export and constituted a significant part of the country’s budget income.

But after the Russian army invaded Ukraine on February 24 and started the war, the country will be unable to produce the same volume of crops and thus the main focus will switch to securing domestic food supply.