Support to rebuild devastated agriculture sector flows as fighting rages
By Patrick Thomas and Alistair MacDonald
April 4, 2023
The Wall Street Journal
Foreign countries and some of the world’s largest agriculture companies are donating or lending hundreds of millions of dollars to Ukrainian farmers, marking an early push by Kyiv’s allies to rebuild the country even as the war shows little sign of ending soon.
Ukraine’s farming industry has been hit hard by Russia’s invasion. Equipment has been destroyed, land has been expropriated and mined and export routes choked off. Financing is hard to come by, and some of the industry’s most basic imports, such as fertilizer, are in short supply.
In response, Western nations and companies are pouring in aid. For Western allies, the funding represents a small down payment on what experts think will be hundreds of billions of dollars worth of reconstruction aid required over years.
For many Western companies, the help could bolster crucial partners struggling during the war. It also could preserve or strengthen these companies’ reputations with local farmers and their position in the country, which is an important agricultural exporter, analysts said.
The government and commercial assistance “will give a possibility for Ukraine to move in the correct direction,” said Mykola Solskyi, Ukraine’s minister of agrarian policy and food. He said for the sector to fully recover it will need the equivalent of a farming Marshall Plan, a reference to the aid program that helped rebuild Europe after World War II.
Any postwar reconstruction of Ukraine is set to be expensive. An assessment in March by the World Bank, European Commission and others estimated the cost of reconstruction at around $411 billion based on damage over the course of a year beginning with the start of the invasion on Feb. 24, 2022.
Before the war, agriculture was responsible for 10% of the country’s gross domestic product, 40% of its exports and 14% of its jobs. The sector also has significant international importance, given that it produces a large share of the world’s grains and sunflower oil exports. When Russia invaded, prices for corn, wheat and sunflower oil rose, adding to global inflation.
Seed giants such as Bayer AG and Corteva Inc. say they plan to invest in the country over the next decade to help rebuild Ukraine’s agricultural system. Bayer has said it was investing some $38 million in a seed plant in the country. Corteva said it intended to increase corn-seed production in the region by 30% over the next five years.
The seed companies also have stepped in to help supply farmers with products for this year’s harvest. Bayer said it provided equipment to remove mines from farmers’ fields, and that it has donated about 40,000 bags of corn and vegetable seed, worth about $2 million.
Grain merchants including Cargill Inc., Archer Daniels Midland Co. and Bunge Ltd. have said they intended to keep shipping crops from the country. Buying farmers’ grain and exporting it is a way to get them cash for their next crop, said Gary McGuigan, head of global trade at ADM.
Some of the grain companies have said they hoped to expand their operations and infrastructure in the region when stability returns. “Our focus is, let’s make sure that the world gets fed and that these products get to where they’re needed and that the Ukrainian farmers are able to get cash for their products,” said Cargill’s chairman, Dave MacLennan. “We’re going to continue to do business in the Ukraine as long as we can.”
Pesticide and crop-seed maker Syngenta Group began buying farmers’ grain and transporting it to ports to give farmers the cash needed to buy the company’s supplies, according to people familiar with the matter. Buying and selling grain from farmers is a departure from Syngenta’s usual business of supplying farmers but part of its plan to keep the agriculture sector moving. Mr. Solskyi, the food minister, said that his department was regularly in contact with international grain-trading houses with meetings at least once every two weeks, where issues such as logistics and taxes are discussed with these companies’ local chief executives.
Farmers say they have a long list of needs, including chemicals and fertilizers, but they say they also need funding. With increased costs such on logistics and fuel, many farmers saw little in the way of profit over the last season. This has stripped them of the capital needed to fund planting for this season.
Agriculture executives say they expect this year’s harvest in Ukraine to be down roughly 30% from a typical year. Ukrainian officials have said they expected its farmers to harvest up to 15% less grain this year than last. “What is of paramount importance is to improve the liquidity of Ukrainian farmers, the liquidity is very low,” Mr. Solskyi said.
Foreign banks, including Credit Agricole SA of France and Austria’s Raiffeisen Bank International AG have taken part in a government plan that has lent more than 5,000 farmers up to 90 million hryvnias, about $2.43 million.
Kees Huizinga, who farms wheat and other crops and raises livestock in central Ukraine, took out a loan with Raiffeisen and a Greek bank. “Farmers just don’t have enough money,” he said.
Among countries providing aid, Japan distributed sunflower and corn seeds to around 400 smallholder farmers in Kharkiv. Canada spent $50 million on building temporary grain storage, after Russia blocked Black Sea ports where Ukrainian produce is typically left for export, and sponsored a dairy processing plant in Western Ukraine.
The European Union has provided €50 million, or about $54 million, in funding for farmers to buy seeds and other supplies while suspending tariffs and quotas for agricultural products coming into the trading bloc.
The European Bank for Reconstruction and Development has provided more than €240 million to the country’s agribusiness sector, which includes all parts of the farming and supply chain, and guarantees part of €130 million euros worth of lending to the industry from commercial banks. The EBRD has committed to putting €3 billion into Ukraine.