Grain crisis in Ukraine: farmers struggle as 2.5 million tonnes could rot in silos

The Ukrainian agricultural industry is currently facing a significant economic blow as ongoing negotiations for a fourth extension of the Black Sea Grain Initiative, set to expire on July 17, continue.

The failure to secure a long-term agreement has led to the unfortunate consequence of grain rotting in warehouses throughout the country, further exacerbating the existing global food crisis. This detrimental situation is affecting both large-scale factory farms and small farmers alike, resulting in a significant decrease in exports, despite the temporary deal being in effect.

52% decline in grain exports

The urgency for a long-term deal becomes crucial as the harvest season commences this month. Nevertheless, the data for June shows a worrisome picture, with a staggering 52% decline in grain exports this year due to impediments in the implementation of the agreement.

Inspection delays and blocked ships have severely hindered the seamless flow of exports. We must promptly establish a long-term and stable agreement to effectively tackle these implementation challenges, enabling farmers to expeditiously export their produce.

The destruction of the Khakovka dam on June 6 has worsened an already dire crisis, further impacting the region. Devastating floods have ravaged Kherson and neighbouring Mykolaiv, which played a crucial role in supplying agricultural products throughout Ukraine.

These areas, responsible for contributing approximately 4.6% of Ukraine's GDP through the production of cereal, sunflower, and vegetable crops, have suffered immeasurable damage to their irrigation systems. Repairs have been hindered by ongoing shelling, intensifying the catastrophic nature of the situation. Falling water levels have rendered three out of the region's four main irrigation pipes inoperable.

Disturbingly, statistics from the Ministry of Agrarian Policy and Food illustrate that 94% of irrigation systems in Khersonska Oblast, 74% in Zaporizka Oblast, and 30% in Dnipropetrovska Oblast have now become unusable.

Black Sea Grain Initiative

Cara Buck, the Director of Ukraine response at Mercy Corps, emphasizes the critical importance of renewing the Black Sea Grain Initiative. She asserts, "It is evident, one year after the deal, that Ukraine is not producing sufficient grain. Many farmers face the inability to transport their products to seaports for global markets." This issue is further exacerbated by the destruction of the Kakhovka dam. While industrial farmers are able to export a portion of their grain, it remains insufficient. On the other hand, small-scale farmers are unable to export any grain at all.

The economic ramifications of this inability to sell grain are severe. Reports from Kherson indicate that very few farmers have been able to plant their crops, leading to a shortage of food for farm animals. Farm supplies available on the market have become prohibitively expensive. With banks unable to provide farmers with cash, the limited crop is sold locally at a loss or left to rot in silos, unable to be exported.

The future could witness a potential collapse of the deal, despite its temporary prevention through a short-term renewal. The necessity to restart negotiations repeatedly creates a platform for future troubles. Ukrainian farmers will bear the brunt of disastrous economic consequences as exports experience a significant reduction. Moreover, global food supplies and prices will suffer an impact, irrespective of whether the agreement remains intact.

Industry stakeholders eagerly await a long-term solution that provides stability, and access to markets, and ensures the survival of the vital grain industry from Ukraine as the clock nears the expiration of the Black Sea Grain Initiative. The fate of countless farmers, the nation's economy, and the global food market hangs in the balance as the urgency to reach an agreement becomes ever more palpable.

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