Economic

Will there be bread on the table: how war and agricultural risks affect the price

Grain is more than just an agricultural crop. For Ukraine, it has become a survival strategy, a currency of influence, a means for economic and political maneuvering on the world stage. For the third year in a row, Ukrainian farmers are trying to keep their harvest afloat under the sights of rockets, in conditions of mined fields, shortage of fertilizers and adverse weather conditions. The issue of bread supply is not just a yield statistic, but a critical point that can determine the future course of the country’s economic and social stability.

Today, bread is more than a product on the table. This is economic stability, national security, leverage in negotiations, as well as hope for millions of people who depend on Ukrainian exports. According to the UN, today more than 282 million people in 59 countries of the world face the problem of hunger. For them, Ukrainian grain is a chance for survival. But the reality is that our ability to feed ourselves and the world is at risk. The question is not only how much we can export, but whether there will be enough bread for the Ukrainians themselves in 2024, when weather conditions and the military situation are working against us.

War and harvest

Full-scale war, occupation of part of the territories, mined fields and blockade of ports – all this creates conditions in which other countries would have collapsed long ago. But not Ukraine. We sow under explosions, harvest at gunpoint, export through mined roads. Despite the war, Ukraine continues to be the breadbasket of Europe, contributing to global food security.

Let’s take a look at the statistics: according to the State Statistics Service, in 2021 the harvest of grain and oil crops amounted to 109 million tons, in 2022 the harvest of grain crops in 2022 was estimated at about 53.9 million tons, in 2023 the gross harvest of grain and leguminous crops was 59 .77 million tons. Of these, 21.63 million tons (+4.3%) of wheat were collected, 5.5 million tons of barley (-2%), and 31.03 million tons of corn (+18%). The Prime Minister of Ukraine Denys Shmyhal reported that in 2024, during the third harvest of the full-scale war, a total of only 28.5 million tons of grain was collected — 21.7 million tons of wheat, 5.5 million tons of barley, and almost 44 million tons exported through the Black Sea. But what will happen next? Each new year of the war increases the impact on the agricultural sector, and how long will we be able to withstand such an onslaught?

Today, the agricultural sector of Ukraine is working at the limit of possibilities. The war continues to dictate its cruel rules: a large part of the agricultural land ended up either in the war zone or in the temporarily occupied territories. Currently, farmers can cultivate only 80% of the available area, leaving about 7 million hectares uncultivated. These lands are temporarily unavailable, and it is not known how long it will take to return them to cultivation after de-occupation and demining. The war also forces farmers to give up part of their land for the construction of fortifications, a necessity dictated by the country’s security needs. Every year, there are about 400,000 hectares on the front line, which used to yield crops, but now they are dangerous zones where neither machinery nor people can enter.

Today, Ukrainian farmers work in extremely dangerous conditions. The fields, which were a source of crops just a few years ago, have now turned into real minefields. Each trip of a tractor to a sown field can end in tragedy — mined territories take lives even after deoccupation. Since the start of the war, dozens of farmers have been killed or seriously injured trying to cultivate the land and harvest crops. An explosive device left by an enemy becomes a deadly threat that is difficult to predict.

Especially dangerous are the so-called “surprises” in the form of mine traps, which are often left in unexpected places: on dirt roads, in fields among crops, on the outskirts of villages. An additional risk is insufficient demining of de-occupied territories. Despite the work of sappers, the areas of agricultural land that remain potentially dangerous are still significant. In such conditions, every farmer is a real hero, because he risks his life every day, working in the fields to ensure the harvest and food security of the country.

In addition, the personnel issue remains a key challenge for the agricultural sector. In the conditions of war, the Armed Forces of Ukraine need people no less than the agricultural sector. Tractor drivers, machinists, engineers – these specialists are equally necessary both for harvesting and for the defense of the country. The gap between the demand for labor in the agricultural sector and at the front creates an acute problem. In order to somehow retain qualified workers, the government decided to automatically extend the reservation of farmers for three months without submitting any documents. In the future, farmers will have reservations for 12 months instead of six, as it was before. This will allow companies to keep at least part of their team. The general rate of reservation is currently up to 50%, but agricultural enterprises can apply to increase the number of reserved specialists in certain specialties. However, this is extremely insufficient to ensure the full functioning of the agricultural sector in conditions of constant mobilization.

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The situation was also complicated by weather conditions, the drought became a real test for Ukrainian fields. The summer of 2024 turned out to be one of the hottest in the last decade, with little rain. In such conditions, farmers tried to save every ear of corn.

In addition to the deadly danger in the fields, farmers also face a number of other challenges, one of the key of which is the problem with logistics. Due to the war, the transport infrastructure was damaged, which significantly complicates the delivery of fertilizers and plant protection products in the right amount and at the right time. The loss of control over ports and the destruction of railways forces agricultural producers to seek alternative delivery routes, which significantly increases costs and leads to delays in supply.

But, even when logistical difficulties can be overcome, farmers face a shortage of fertilizers. A significant part of this resource was previously produced in territories that are now temporarily occupied or damaged as a result of hostilities. High prices for imported fertilizers and limited delivery options force farmers to economize. This became noticeable even last year, when the shortage of fertilizers negatively affected yields, especially in regions with good moisture conditions, such as Kharkiv and Poltava regions.

However, fertilizers are not the only problem. Equally important is the timely use of plant protection products. Where herbicides and other protective measures were used in a timely manner, yields were significantly higher than in neglected fields where weeds overran the crops. Even if fertilizers are applied in sufficient quantity, a field overgrown with weeds will not produce the expected harvest.

Against the background of all these difficulties, the agricultural sector is trying to survive. In the context of war and economic crisis, farmers are still interested in new technologies and innovations, but due to logistical problems and financial difficulties, the main focus has shifted to maintaining profitability. Today, agrarian business is forced to choose between optimizing costs and maintaining production volumes. And this dilemma becomes especially acute against the background of the lack of adequate support from the state.

This year’s crop has already shown how important it is to follow an integrated approach to growing cereals, taking into account all factors – from fertilizers and plant protection to moisture. But when there is a lack of both fertilizers and opportunities to deliver them on time, and the weather is not favorable, the harvest becomes a victim of circumstances over which farmers have no influence.

The impact of crop failure on the economy: will we have anything left to eat?

Ukrainian grain is a matter not only of the economy, but also of national security. While the world struggles with food crises, our country continues to feed millions of people abroad. Food has become the main item of Ukrainian exports, which according to Dragon Capital accounts for 60% of all exports. According to the State Customs Service, in just six months of 2024, Ukraine exported food products worth 12.4 billion dollars. For comparison: chemical industry products – 5.9 billion dollars, fuel and energy products – 4.3 billion dollars, metals and their products – 2.1 billion dollars, mineral products – 1.8 billion dollars. This shows that agricultural products have become not just important, but strategic for the state. We feed millions of people overseas every year, and that helps keep our economy afloat. However, there is a dark side: the domestic market becomes dependent on world prices. We can make money from exports, but will we have anything left to eat?

Before the war, Ukraine was one of the leading exporters of grain in the world, supplying food to dozens of countries. Foreign exchange earnings from the export of agricultural products made up a significant part of the budget, and financial stability was based on them. However, due to the war and crop failure, the situation worsened significantly. In addition, there were problems with the export of grain, which were aggravated by a difficult logistical situation. Blocked ports, destroyed infrastructure and high transport costs force farmers to look for alternative ways to export products. This requires additional costs and time, which reduces the competitiveness of Ukrainian grain on the world market.

Now, losses in the agricultural sector can have a negative impact on the entire economic chain, starting with producers and ending with public finances. A drop in export volumes means not only a decrease in farmers’ incomes, but also a decrease in the inflow of currency, which limits the state’s ability to finance social programs, defense and other critically important areas.

The 2024 crop failure will have far-reaching consequences not only for the agricultural sector, but also for the country’s economy in general. Experts of the Economic Strategy Center have already recorded an increase in inflation to 7.5% in August, compared to the same period last year, when the harvest was much better. This indicator shows how important the agricultural sector is for the stability of the national economy. In 2021, before the outbreak of full-scale war, the grain and oil crop harvest was a record 109 million tons, but today we are not even reaching half of that volume.

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Despite this, the provision of domestic food demand remains under control. According to experts’ estimates, even with a significant reduction in the harvest, 20–40 million tons of grain will be enough to feed the Ukrainian population, which has also decreased due to the war. However, the main impact is felt on foreign markets, because a significant decrease in export volumes leads to a reduction in foreign exchange earnings. And this directly affects the hryvnia exchange rate, which becomes vulnerable to external economic shocks.

Does bread become more expensive?

Bread is one of the most important products on our table, but its price has now become significantly heavier for the wallets of Ukrainians. The increase in the cost of bakery products is the result of the influence of several factors at once, which put pressure on the production processes and the final cost of the product. First of all, the significant increase in the cost of electricity and frequent blackouts lead to significant losses for the bakery industry.

In the summer of this year, problems with the supply of electricity significantly complicated the production of bread. Every power outage stops the lines, and restarting them is not only difficult, but also an expensive process. Generators are an alternative, but their use increases the cost of bread production by 4-5 times. More expensive electricity automatically increases the cost of production, and therefore prices for consumers. If earlier bread production could be conducted stably, now we have to work in conditions of a permanent crisis.

However, this is not the only factor that affects the price of bread. Prices for the main raw materials of the production process have increased significantly. For example, purchase prices for grade 2 wheat increased by 52.9% to UAH 8,718 per ton. Grade 3 wheat also rose significantly in price — by 41.6%, to 8,427 hryvnias per ton. Rye prices rose by 57.3%, reaching 5,800 hryvnias per ton. This situation is a consequence of global trends — crop failure, drought in Europe, the United States and other regions have caused a decrease in the volume of supply on world markets. While demand for food wheat remains consistently high, prices continue to rise.

In the domestic market, the increase in the price of bread is also caused by inflation, which reached 7.5% in August. This inevitably affected the pricing policy of bakery manufacturers. Since the beginning of 2024, the price of bread has increased by 14%, and according to forecasts, prices will continue to rise by 2-3% each month. The main reason for this is the increase in the cost of raw materials and energy resources, without which it is impossible to ensure stable production.

Another factor affecting pricing is exchange rate fluctuations. A significant part of technical equipment and materials for bakery factories is purchased abroad, and therefore, any strengthening of the dollar leads to an increase in the cost of the final product. In addition, in the event of an increase in oil prices, excise duties will also increase, which will further increase logistics costs. This, in turn, will be reflected in the final price of bread on store shelves.

Today, the main challenge for the bakery industry remains the balancing between production costs and the final price. After all, on the one hand, enterprises cannot sell bread at a price lower than the cost price, and on the other hand, the Ukrainian consumer is not ready to pay much more for the usual product. As a result, bakers are forced to look for compromise solutions: reduce production, change the assortment or raise prices gradually, so as not to lose customers.

According to forecasts of the Institute of Agrarian Economics, wheat prices will remain relatively stable until the end of 2024, fluctuating within 9,000-9,500 hryvnias per ton for grade 2 wheat, 8,500-9,100 hryvnias per ton for grade 3 wheat, and up to 8,000 hryvnias for fodder wheat. However, taking into account the situation on world markets and the constant growth of energy costs, it is not necessary to expect a decrease in bread prices.

Thus, bread prices in Ukraine are rising under the pressure of both internal problems and global trends.

The war changed not only borders, but also our ideas about what “daily bread” means. For Ukrainian farmers, each new harvest season is a test on the edge of survival. While farmers are risking their lives to go out into mined fields to harvest crops, we face a different reality — bread prices continue to rise, becoming a symbol of economic and social hardship.

It would seem that bread is a basic product, but today it has become an indicator of global challenges. Rising electricity costs, fertilizer shortages, logistical challenges and inflation make producing each loaf a real economic feat. The cost of bread is more than the numbers on the price tag, it is a marker of our ability to withstand the crisis that affected not only Ukraine, but the whole world. In this context, bread is transformed from an everyday product into a symbol of our resilience and ability to persevere even in the most difficult times. And while the war continues, each new loaf becomes not just a product, but part of the great struggle for our future.

Oksana Ishchenko

 

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