Russian troops seize agricultural assets in Ukraine, could risk global food security

Russian troops in Ukraine are seizing and destroying agricultural machinery, fertilizer, seeds and fuel stocks, according to several farmers in Ukraine, putting in danger the new crops from one of the world's most important suppliers of wheat, corn and sunflower oil.

The actions of the Russian troops are also putting at risk the spring planting campaign and the yields of winter crops -- wheat, barley, rapeseed etc -- which were planted at the end of summer and autumn 2021. The agricultural production of Ukraine during the 2022/23 marketing year (July-August) is likely going to lower as a result.

One of Ukraine's biggest agroholdings Harveat has lost control over 98,000 hectares in the Donetsk region, in the eastern part of the country. The company also has limited access to the remaining 22,000 ha which is situated in Kiev, 70% of which is within the fighting zone.

According to Tatiana Alaverdova, Head of Sales at Harveat, the company had lost contact with its staff in the Donetsk region some time ago. This means that part of the assets, machinery in particular, may be destroyed or seized by Russian forces.

The company had planted winter wheat in about 38,000 hectares in the Dontetsk region. Fertilizers were used in less than 40% of this area, leading to a drop in yields. Harveast may not be able to get much work done on its spring crops planting campaign until it gains full control over its assets.

The company is also restricted from selling old crop as it had lost control over almost all its gains stocks, Tatiana said.

Agrogeneration -- another agroholding, which operates lands in Kharkiv region -- also reported difficulties in implementing field work due to its proximity to the fighting.

The company has been experiencing difficulty in purchasing agricultural inputs. It also had to remove or displace machinery following several attacks by Russian military currently occupying the Kharkiv region, according to Sergey Bulavin, Agrogeneration's CEO.

Russian troops had also targeted agricultural machinery in other parts of Ukraine, according to farmers working with different trading companies.

Spring crops, corn and sunflower seeds in particular, may be planted on 30%-40% of the initially planted area in Ukraine while winter crops -- wheat and barley -- may see lower yields, according to several sources on the ground. This would lower Ukraine's grains export potential for the 2022/23 marketing year, as well as for 2021/22. The export potential would also be reduced due to the blockage of the main sea ports, which account for over 90% of the export flows. This is likely to place global food security at risk and lead to further increases in price.

S&P Global Commodity Insights assessed FOB Black Sea wheat (Ukraine Deep Sea, 11.5% protein) at $415/mt March 18, $67 higher from Feb. 24 when the war started. FOB Black Sea 12.5% protein wheat (Russia) was assessed up $60 at $420/mt over the same period.

In the 2021/22 marketing year, Ukraine is expected to be the world's top exporter of sunflower oil with 5.5 million-6 million mt and a top four exporter of wheat with 24 million-25 million mt along with the EU (37.5 million mt), Russia (35 million mt) and Australia (27.5 million mt).

It is also expected to be in the top four exporters of corn with 33 million-34 million mt after the US (63.5 million mt), Brazil (43 million mt) and Argentina (39 million mt). It's also expected to export 5.8 million mt of barley, only below Australia (9 million mt) and the EU (7.5 million mt), according to S&P Global's Platts Analytics, the US Department of Agriculture and other sources in the market.