INTERVIEW: Ukraine farmers switching to beans from corn on export headwinds: agribusiness club

Farmers in Ukraine currently engaged in spring crop planting amid the ongoing conflict may have switched some of their corn acres to soybeans in the current season, general director of Ukrainian Agribusiness Club, Roman Slaston told S&P Global Commodity Insights in an interview.

Ukrainian Agribusiness Club, or UCAB, is a business association representing leading agriculture companies of Ukraine. Farmers switching from corn to soybeans implies there will be lesser corn available for global supplies that have been already projected to fall.

Ukraine's corn switch to other crops is happening also because the country is aiming to boost its food security for crops like buckwheat, Slaston said.

However, the bigger reason is stalled corn exports that have disincentivized farmers who typically plant corn mostly for exports, according to Slaston. In the marketing year 2020-21 (July-June), Ukraine exported 78% of the corn it produced, according to the US Department of Agriculture.

"Corn farmers are switching to soybeans as Europe needs a huge amount of soybeans, and for these exports we do not need access to ports, and we can just transport it in rail," said Slaston.

Ukrainian seaports have been blockaded after the Russian invasion, disrupting exports, leaving railways as the only feasible option for Ukraine to transport grain supplies.

The USDA sees a sharp decline in grain exports from Ukraine in MY 2022-23 due to the war.

Other reasons for farmers favoring soybean over corn in the country is that soybeans are more profitable currently when compared to corn and it requires less fertilizers for production, said Slaston.

Though the situation is changing every week, Slaston said that according to the UCAB's current estimates, acreage under most crops is seen falling except soybeans.

"For corn, we expect to have 4.2 million hectares in 2022 compared to 5.5 million hectares in 2021," said Slaston.

"When we talk about sunflower, we expect 4.8 million hectares compared to 6.5 million hectares last year. And for soybeans, we see an increase of acreage -- we expect 1.5 million hectares under soybean this year compared to 1.2 million hectares last year," he said.

Further challenges

Sourcing inputs is a big challenge right now, said Slaston.

"Luckily, with the increase in prices of fertilizers, our farmers bought fertilizers earlier so there is not a big lack. With seeds as well, luckily seed companies were able to arrange logistics and supply seeds," said Slaston.

"The most difficult situation that was and is, is with fuel—diesel fuel," he added.

Roughly two-thirds of Ukrainian diesel supplies were coming from Belarus and some from Russia and those supplies stopped with the war. Russia also attacked the fuel storages in Ukraine, and damaged the only refinery factory, which stopped production, making Ukraine totally dependent on imports from Europe, said Slaston.

"We had some stocks but the active need in army and for planting campaign, the consumption grew, and the logistics also can't handle the volume we need," he added.

"So, in some cases the farmers can't seed because of lack of fuel, because of that, we would have at least two weeks delay in finishing seeding," he added.

Owing to disruptions during planting, the yield of crops is also likely to suffer.

"Farmers didn't make deep cultivation in order to save fuel and to have it for seeding. Poor preparation will also affect yield which we'll see late summer," Slaston said, adding that probably Ukrainian spring crops can see like a 10% drop in yield because of lower level of technology used.

Next season, exports

For the next season, for application in late autumn and in spring, fertilizer availability will be a big problem, said Slaston.

Another problem would be financing, he added.

"Without getting finances for this crop, farmers won't be able to plant the next crop. That will be a very big challenging situation for the next season, that's for sure," Slaston said. Suggestions have been made to the government to buy the grains from farmers and provide them credit and keep the grains as collateral, he added.

Exports from Ukrainian ports have been hampered severely after Russian invasion of the country.

Even though Ukraine was able to export some quantities of grains, the country is far behind the usual pace of exports from seaports, Slaston said. "Plan A is to invoke Ukrainian sea ports. Blockade of Ukrainian sea ports is the main cause for such rise in grain prices, because Ukraine can't supply grains and oilseeds and vegetable oils. If we were able to supply these, these concerns around global hunger would be much lower," he said.

Ukraine is the fourth-largest producer and exporter of corn globally, representing 16% of 2021-22 marketing year's total global corn exports and also a top supplier of sunflower oil and wheat.