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Production
Estimates and Crop Assessment Division |
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Production
Estimates and Crop Assessment Division |
May 25, 2004
Analysts from USDA's Foreign Agricultural Service (FAS) and National Agricultural Statistical Service (NASS) traveled through southern and central Ukraine during April to examine winter grain conditions and to meet with farmers, local agricultural officials, and independent analysts to assess 2004/05 grain production prospects. Field observations and interviews confirmed reports of localized damage to winter grains in southern Ukraine caused by a brief cold-weather episode in early April, but overall losses, including the April damage, is estimated to be significantly below normal. Crop conditions as of late May are generally favorable, and yield prospects about average.
The USDA May estimate for 2004/05 Ukraine grain production is 33.0 million tons (against 20.2 million in 2003/04), including 15.0 (3.6) million wheat, 9.5 (6.9) million barley, 5.0 (6.9) million corn, 1.2 (0.6) million rye, 0.8 (0.9) million oats, 0.3 (0.4) million millet, and 1.1 (1.0) million pulses and miscellaneous grains. Wheat area is estimated at 5.9 (2.5) million hectares, which is slightly above the average of the past ten years. Barley area is estimated at 4.5 (4.6) million, and corn area at 1.6 (2.0) million. Yields for major grains are forecast within 5 percent of the average of the five years. excluding last year's disastrous harvest. (Current USDA estimates of global crop production are available at PS&D Online.)
Despite a 20-percent decrease in sown area, Ukraine‘s harvested winter grain area for 2004/05 is forecast to increase substantially from last year, when severe winter weather and persistent ice crusting during February and March destroyed nearly two-thirds of planted area. Sown area for 2004/05 dropped to 6.9 million hectares (from 8.6 million in 2003/04), including 5.5 (6.7) million hectares of wheat. According to a report from the U.S. agricultural attaché in Kiev, the reduction in planted area is attributed to several factors: dry conditions during the fall sowing season, a shortage of planting seeds following the disastrous wheat harvest of 2003, and a delay in the harvest of sunflowers and corn which interfered with winter grain planting. With farmers still reeling from last season’s staggering winterkill losses, the planted area of rye, the most cold-resistant winter grain, increased by 40 percent to nearly 0.8 million hectares. Meanwhile, the planted area of barley, which is the least cold-tolerant winter grain and is grown only in extreme southern Ukraine, fell by 25 percent to 0.5 million hectares.
According to officials of the State Statistical Committee in Kherson oblast, the frosts of April 3 and April 4 destroyed 40,000 hectares of winter grains, nearly 12 percent of sown area, compared to only 4,000 hectares of winterkill prior to the cold snap. In Crimea, a reported 50,000 hectares of winter grains, or roughly 11 percent of sown area, were killed by the April frost. Yield potential on some surviving fields was reduced, although damage varied widely. Some fields suffered yield reduction of 50 percent, some escaped damage altogether. (According to the Kherson officials, the Apri1 cold actually caused more damage to recently-emerged spring grains than to winter grains. Over 41,000 hectares, or 17 percent of the spring grains sown in Kherson oblast by April 2, were destroyed.) Despite the considerable amount of localized damage in Ukraine’s two southernmost oblasts, overall winter-grain losses in Ukraine, including the April damage, is forecast at no more than 5 percent of sown area.
Beneficial precipitation in early May reversed a month-long drying trend in southern and eastern Ukraine and reduced the threat of drought in the prime wheat production region. Subsurface soil moisture is adequate throughout Ukraine. Growth-stage models indicate that winter wheat development as of May 20 was ahead of last year, which was unseasonably cool during April, but slightly behind other recent years. Mid-May crop conditions in eastern and southern Ukraine, as indicated by NOAA/AVHRR satellite imagery, are considerably better than last year – which was a disaster – but not as good as in 2002, when winter wheat yields were above-average and wheat output exceeded 20 million tons.
In order to partially compensate grain farmers for financial losses suffered as a result of the record-low 2003 wheat harvest, the Government of Ukraine authorized a relief program that provided farmers with $74 million in disaster payments for the 2003/04 crop and an additional $68 million in subsidies for the planting of 2004/05 winter grains. According to the U.S. attaché report, the disaster payments amounted to roughly $13 per hectare (which compensated for about 30 percent of production-cost losses) and the planting subsidies to roughly $10 per hectare.
According to data from the Ministry of Agrarian Policy, mineral fertilizer consumption in 2003 increased by only 5 percent from the previous year, to slightly over 0.4 million tons. Meanwhile, fertilizer production in 2003 reached 2.5 million tons. In an effort to boost fertilizer use by Ukrainian farmers in 2004, the State allocated $26 million to compensate farmers for roughly 20 percent of the cost of nitrogen fertilizer. The program, however, has not been as successful as policymakers had hoped. Fertilizer prices have increased by 30 percent over the prices set by the State in January 2004 (for sales to farmers). Manufacturers are refusing to sell to farmers at the fixed domestic prices, since prices are higher for the foreign market and material can be sold in larger quantities.
The government has allocated roughly $10 million to subsidize crop insurance premiums in 2004. Crop insurance is available in Ukraine but unpopular due to high cost and a lack of confidence on the part of the farmers. The mistrust stems in part from controversy resulting from the huge winterkill losses suffered during the winter of 2002-03: according to some farmers, insurance companies refused to adequately compensate farmers for 2003 crop losses, claiming that the losses were the result of ice crusting, not frost, and not covered by insurance.
The farm credit situation has not improved over the past year. Only one-third to one-half of Ukrainian farms have access to commercial credit, and banks seldom grant loans to small farms. Interest rates on commercial loans currently stand at around 28 percent, slightly higher than a year ago. The government estimates farmers' annual financing needs at nearly $2 billion, while only about $0.6 billion is currently available via commercial bank loans. The shortfall is due in part to restrictions on using land as collateral, which makes it difficult for farmers to obtain long-term loans to finance large-scale capital improvements or purchase new machinery. A farmer can use other farm assets as collateral – machinery or buildings, for example – but the value of all “movable or non-movable assets” to be used for collateral must be verified by a notary, who charges a fee based on the assessed value. For small commercial loans, the fees for notarization and registration, combined with other incidental fees, can considerably drive up the total cost. Furthermore, alternative sources of short-term loans are drying up. Under one form of advance financing that has gained popularity in recent years, a grain-trading company provides a short-term loan to a farmer for the purchase of seed, pesticides, and fertilizer. In exchange, the farmer agrees to sell the output (wheat or sunflowerseed, for example) to the company at harvest, and the interest and the cost of the inputs are deducted from the payment to the farmer. According to local observers, investors have become increasingly reluctant to enter into these agreements, citing budget constraints and broken contracts.
