Ukraine’s agriculture and food production not shielded from war, warns agribusiness chief

5 months ago 31

The question of how to support the Ukrainian agrifood sector amid Russia’s war remains unanswered after last week’s Ukraine Recovery Conference, the president of the Ukrainian Agribusiness Club (UCAB) told Euractiv in an interview.

While the situation with the Ukrainian agrifood sector is becoming “more promising,” UCAB’s president, Alex Lissitsa, said the country needs to create a more effective business ecosystem and increase human capital to ensure food production.

Apart from Ukrainian companies, UCAB members also include international companies, including major ones like Danone, Pepsico, and Bayer.

International leaders – such as European Commission President Ursula von der Leyen, Ukraine’s President Volodymyr Zelenskyy, and German Chancellor Olaf Scholz – and business representatives met in Berlin on 11-12 June to discuss how to support Kyiv’s recovery and reconstruction.

While agriculture was a topic of discussion, Lissitsa said the question of how to attract private investment in agriculture during the war “was not answered”.

Ukraine’s agrifood sector has faced many challenges since the Russian invasion began in 2022, including the destruction of farms and agricultural equipment, increased production costs, labour shortages, and landmine contamination.

A study by the Kyiv School of Economics and the World Bank found that damages and losses to the Ukrainian agriculture sector from the start of the war amounted to around €75 billion.

Total reconstruction and recovery needs over the next 10 years are estimated at €52 billion.

Lissitsa said agrifood businesses were struggling to provide the necessary guarantees to access financial instruments.

“Most agriculture companies in Ukraine have lost their assets – or [they] are worth nothing.”

According to him, the current requirements for loans and other financial tools make it even more difficult for small and medium-sized companies to finance their operations.

Labour shortage

A recent report by the humanitarian charity Mercy Corps found that a shortage of labour, along with unreliable electricity, was one of the main problems facing small farms in Ukraine.

Lissitsa pointed to a “huge deficit” of human capital, especially in rural areas, and said it was more difficult for workers in smaller farms to be exempted from being sent to the front.

Last year, Ukraine introduced a law exempting workers in “critical industries” – including agriculture – from mobilisation, but the exemption did not apply to everyone employed in farming.

Initially, only farms with more than 1,000 hectares and employing at least 50 people were exempted. The law was later amended to include farms between 500 and 1,000 hectares and with at least 20 employees.

Eyes on exports

Despite the challenges ahead, Lissitsa said Ukraine’s agrifood sector is becoming more attractive thanks to the normalisation of export routes.

Last year, Russia’s unilateral withdrawal from the UN-brokered deal to ensure food trade routes in the Black Sea last year shook Kyiv’s exports.

But Ukraine’s renewed control of the Black Sea and new insurance coverage schemes have enabled Kyiv to resume shipping.

Earlier this year, the country’s exports through the Black Sea corridor surpassed the levels achieved under the UN initiative, according to the European Parliament’s research service.

“We [now] have the opportunity to export via the Odesa port – the largest in the Black Sea – [which] means that the logistics costs are not as high as last year,” said Lissitsa.

Land routes through EU member states also offer a more positive picture today, after protests on Ukraine’s border with Poland over trade liberalisation ended in April.

However, Ukrainian agrifood companies remain wary.

Lissitsa said that, while cargoes can now cross the Polish border “without any problem”, businesses feel they cannot take this for granted and would rather choose export routes.

In his view, countries such as Hungary and Romania “are more predictable” in the long term.

[Edited by Angelo Di Mambro and Zoran Radosavljevic]