Ukraine was looking to increase grain exports to world markets when Russia launched an assault
For centuries, Ukraine has been known as Europe’s food basket. But the importance of its contributions to the global food market came under the spotlight in the aftermath of Russia’s military campaign.
Ukraine, the second-largest country in Europe (Russia is the largest), is a major exporter of grains and cereals, including corn.
As Russian shelling and airstrikes damaged roads and cut off Black Sea ports, shipment of Ukrainian wheat was disrupted, leading to an immediate hike in the price of both wheat and flour.
Flatbread, made from flour, is a staple for countries ranging from Egypt and Jordan to Pakistan. Ukraine alone accounts for nearly nine percent of the world’s wheat supply, and disruption in exports has already jacked up prices.
Inflation was already causing headaches for policymakers before Russian troops crossed over into Ukraine on February 24.
As economies opened up after two years of pandemic-related lockdowns, problems with the global supply chains have provoked increased demand, inflating prices across the board
Global food prices are now at their highest since 1974 when adjusted for inflation, says the Food and Agricultural Organisation.
The black prize
While dozens of agrarian economies have vast irrigation systems, few rival Ukraine’s agricultural produce.
The country of 40 million is the world's largest exporter of sunflower oil and a major supplier of corn, barley and rye, among other grains. It consistently ranks as one of the largest grain exporters.
What’s special about Ukraine is that it produces more than it needs to meet domestic demand, leaving a surplus of goods that can be sold on the international market.
In fact, in 2019, Ukraine overtook Russia to become the largest grain exporter when it shipped close to 50 million tons to other countries.
At the heart of Ukraine’s agriculture is its highly fertile soil. Nearly a quarter of the world's most fertile soil, known as Chernozem, is located in Ukraine.
Chernozem is black soil rich in organic matter called ‘humus,’ which is made up of decomposed plants. More than 65 percent of arable land in Ukraine is composed of Chernozem deposits, making it ideal for farming.
Ukraine's surface area under cultivation is vast — so vast, that, at 32 million hectares, it's larger than Italy.
Ukraine has the capacity to produce a lot more grain if modern technology, finances and practices are used to supplement its nutrient-rich soil.
But soil erosion is damaging Ukraine’s arable land. Every year around 500 million tons of soil are eroded mainly due to poor agricultural practices such as large-scale till farming.
Climate change is also impacting “highly productive areas of the country, such as the Steppe area in the south, which currently produces 50 percent of the grain for Ukraine,” the World Bank says.
Despite sitting on vast fertile soil deposits, the productivity of Ukrainian farm output in terms of yield per hectare is lower than that of other countries.
Ukraine’s potential was hamstrung for years by lack of investments in modern technology due to landowners not having access to finance.
Trade in agricultural land was banned in 2001 because of concerns that rich countries and large corporations would scoop up the precious farmlands.
While farmers could lease their holdings, they couldn’t use them as collateral to borrow the money they needed to buy farming tools, like tractors, from banks.
“Limited access to finance, including bank loans, has long been a barrier for small and medium-sized agricultural producers, who produce more than 50 percent of Ukraine's total agricultural output,” a World Bank report said.
Roman Leshchenko, Ukraine’s former agriculture minister, said that the moratorium on land sales became a means for corrupt officials to make money by illegally allotting farm plots to developers.
“Ukrainians have not been able to fully capitalise on these agricultural riches during the thirty years since the country gained independence,” he wrote.
President Volodymyr Zelenskyy lifted the moratorium just last year, hoping that the reforms would help shore up economic growth and attract foreign investment within a few years.
But the conflict has now upended those plans.