It resembles the heat of hell in a leap marketing year. For example, the air temperature at which corn begins to burn is some +35–40 ℃. If the process lasts for more than two weeks, then consider that a significant part of the crop has simply disappeared right on the field and you will not see any money from sales — just ashes.
An abnormal season
“At soil temperatures of 68–70 ℃, even watering will not save the plant. Nothing grows under such conditions. No grain crop is able to withstand such abuse.” This is one of the first assessments of the heat wave by the Ukrainian Hydrometeorological Center.
And although the heat has finally subsided, the same meteorologists say that a new wave of abnormal weather could hit Ukraine as early as August.
A drop in temperature in late July and early August somewhat eased the weather conditions, but they remained unfavorable for the formation of late crops.
The top exports are corn, sunflower and soybeans.
Wheat and rapeseed slipped between the degrees. They have already been harvested. There is more than 20 million tons of wheat, but its quality is very poor, and the pace of exports suggests that there may be issues with flour and bread on the domestic market in the fall.
According to the Ukrhydrometeorological Center, the possible range of reduction in the harvest of late crops, which form the basis of the country’s foreign exchange earnings, is 30%.
The cautious Ministry of Agriculture (there is no choice here: it is either liquidated or it head is forced to exist in the status of acting minister) believes that losses of late crops can be up to 15%. It promises more substantive statements in the fall, when the harvest is in the barn.
Traders also agree that the corn and sunflower harvests are deteriorating significantly. The latest forecast for corn is 23.4 million tons (a few million fewer compared to last year). The potential sunflower harvest has been cut by more than a million to 12.8–13 million tons.
Those who have been working in the sector for a long time and have been monitoring the local and global markets year after year are the most correct in their assessment of the situation. This group agreed that the problems with the late harvest are uneven. After all, everyone was affected, even though in different ways.
According to the Ukrainian Hydrometeorological Center, the absolute maximum air temperature of the second decade of July in the western, northern and most central and southern regions, as well as in some areas of the eastern regions, was reached or exceeded by 1–3°C over the period of observation since 1951.
Is there a way out? Can it rain when there is not a cloud in the sky? In any case, it’s time to learn how to manage soil moisture. Interestingly, Ukrainian agricultural enterprises have taken different paths to realizing the need to manage soil moisture reserves.
One option is irrigation. However, there are also problems here: water shortages, water has to be paid for, and electricity has to be paid for. And then the electricity is cut off because of the circumstances in which Ukraine exists. There are also legal hurdles.
One way or another, this year’s heat wave has once again confirmed that the issue of agricultural grain volumes is directly dependent on the weather.
Minus 20–30%
Farmers are very conservative about the prospects for this year’s late harvest (most likely, somewhere deep down, they are counting on the potential of seeds or technology, or simply on the heavenly office) and are waiting for the average yield or breakeven point. However, they honestly admit that a 20 percent reduction in the planned figures is unavoidable. For corn, for sunflower, for soybeans.
In particular, the Kirovohrad region is expected to see a 30% drop in late crop yields. Agricultural scientists have recorded that it has rained once in 90 days (since April 21).
Rumor has it that soybeans in Vinnytsia region have lost a third of their potential.
Chernihiv region says it will be minus 20-30%, but it is ready to talk about it when it harvests.
The corn "leader" - Poltava region - is concerned not only about late crops. In general, there is a harvest. But it was during grain filling and development that the wheat did not reach its full potential due to a lack of moisture and high temperatures.
The higher the prices
Remember that the smaller the harvest, the higher the prices. It was the heat that ensured them.
On the one hand, the hot summer allowed consumers to enjoy cheap watermelons. On the other hand, paradoxically, the heat pushed up prices, for example, for cucumbers on the local market.
While prices for vegetables, which should theoretically be as affordable as possible during the season, sometimes do not please individual consumers, farmers, large and small, are holding their breath and waiting.
Farmers are holding back grain amid fields with cracks due to water shortages. Prices are coming back to life because they don’t need optimal soil moisture reserves to grow, as opposed to corn.
Currently, corn is trading at 7,400 UAH/ton (EXW), while in July the average was 6,700. In November 2023 (when the supply was on the rise during harvesting), it was difficult to sell for more than 4,000 UAH/ton.
The price range for sunflower of the new harvest is not yet clear, but demand prices are rising. As of the beginning of August, the following prices were announced: 18,500–20,000 UAH/ton (CPT).
Prices are likely to continue to rise. To what extent? It also depends on our neighbors because, for example, Europe is also affected.
Farmers expect further price and income growth, as the next season depends on the financial component.
The neighbors have also seen losses
Analysts have downgraded yield forecasts for almost all crops in the EU. In particular, France said that the wheat harvest would be the worst in 40 years and 25% lower than the previous year. This year’s sunflower and corn yield could be the worst since 2012 in Bulgaria.
The potential of the corn harvest is evaporating before our eyes. The European Commission has lowered its estimates for corn to 60 million tons. Some EU corn producers have reported losses and are already waiting for financial support from the European purse.
In general, Ukraine’s export outlook appears solid, even if corn is included in the list of so-called “sensitive products” under the EU-Ukraine agreement on liberalized food trade. Even if the “emergency brake” option for corn is activated, exporters should not have any problems, as the import duty is zero. Europe needs fodder.
Do farmers have any chances to have hryvnia or dollar profit in the third year of the great war? Yes. But the earnings of a single farm/company directly depend on how much is invested in a single hectare. Whether the fields were burned or not. What technologies are used. Details make all the difference.
How prices will behave is a particularly challenging issue. The question is whether farmers will earn enough to live on, to secure the next season, to support their families at the frontline and to pay taxes to the budget. It’s hard to give a definite answer. So far, despite the heat, trends are encouraging for farmers. Moreover, producers are trying to dictate prices amid growing demand from buyers.
Only one thing is beyond doubt: prices will rise. Export prices, which provide foreign currency to farmers, traders and the state budget, will depend on the situation on world markets. Local prices will hinge on the strength of competition between traders and food producers.
Prices for consumer goods are already growing. In particular, bread has started to “look up.” Although the latter is the slowest to rise in price in the grain-flour-bread chain, bakers say that in just a month or two, price tags will add 20–30%. Against the backdrop of disappointing talk about the harvest and competition for raw materials, sunflower oil is also starting to see a price rise.
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Agricultural output in Ukraine is changing significantly not only because of the war, but also because of climate change. This is something we should finally become aware of. The topic of irrigation will increasingly be heard in the comments of officials and successful cases of farm management.
We have to get used to weather anomalies and learn to work in extreme conditions. Otherwise, earnings will be hard to get. To have a successful agricultural business, one needs to be an agronomist, a scientist, a trader, follow innovations in the world of technology, be able to take risks, but in a thoughtful and competent way. One needs to constantly experiment and look for their own algorithm of how to win against all the negative circumstances.