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How will the coronavirus affect the Ukrainian agricultural sector?

Read about the economic situation in the world and what Ukrainian farmers should be prepared for.

Perhaps the Chinese coronavirus pandemic has become the biggest challenge for the global economy since the 2008 economic crisis. The whole world community has somehow experienced a decline in GDP, a fall of oil prices up to 31% (the greatest fall over the last 30 years), the collapse of the stock markets...

On the backdrop of this economic downturn, prices for agricultural products have also dropped significantly. And since Ukraine is a commodity state, our economy depends on fluctuations in world commodity prices. According to GrandTrade, the purchase price of sunflower in Ukraine last week has already fallen by 800–1000 UAH/t and now it makes 9400–9800 UAH/t. The purchase prices for sunflower oil also decreased.

Last week, shares of all leading Ukrainian agro-holdings fell from 4 to 28%. The situation is the same in the world market.

“Shares of Ukrainian companies have fallen more than half a billion dollars on world exchanges. Capitalization on Ukrainian agrarian companies located on the western stock exchanges has decreased, — said the president of the UCAB Alex Lissitsa. — It is difficult to predict the situation in the coming weeks, months”.

One such risk is that the Ukrainian agrarian sector faced the problem of a significant decline in exports to the EU and the Far East, as almost all of them impose a strict quarantine regime. It is the Asian and European markets that have been one of the key venues for Ukrainian agricultural exports for the last few years. Now they are most affected by the pandemic. Andriy Yarmak, an economist at The Food and Agriculture Organization, points out in his Telegram channel:

"China and India provide about 16-18% of Ukraine's agricultural exports. They buy mostly oil, grists, and grain from Ukraine. The spread of the virus can lead to logistics problems and a decline in imports, although imports are the least affected by these basic products”.

In addition to the problems with the products export, the number of deliveries of imported goods to Ukraine (PPT, fertilizers, sowing material and agricultural machinery), which Ukrainian agrarians were waiting for, planning a spring sowing campaign, is significantly reduced.

“We import a lot of agricultural chemistry from China. I do not know how we will import seeds and machinery this year. I do not rule out that there will be a negative impact on consumers as well”, — states Alex Lissitsa.

Due to the imposition of a strict quarantine regime in Ukraine and a significant reduction of border crossings, there may be significant delays in the delivery of raw materials and goods and, as a consequence, numerous non-compliance with the terms of the agreements between enterprises and customers.

In general, in the Ukrainian agro-sector we can observe a global tendency for a significant decrease in consumer demand and trade because in extreme conditions of the pandemic people want to spend as little as possible resources (who knows what will happen next!). However, experts predict that the significant increase in prices in the agricultural sector is a very unlikely scenario, because companies will still need to sell their products, and they simply will not be able to raise prices in order not to lose demand for them.