The war in Iran has led to an increase in fertilizer prices for Ukrainian farmers. According to agronews.ua, the cost of diesel fuel has almost doubled, they say.
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Reuters agency writes that farmers received a price blow at the most inconvenient moment – at the beginning of the sowing season. However, the worst-case scenario could be a shortage of fuel during the harvest campaign.
Despite the four-year war with Russia, Ukraine remains a key producer of grains, oilseeds, and vegetable oils in the world. Kyiv exports products to 150 countries, which is less than about 190 countries before the full-scale invasion by the Kremlin in February 2022.
The geographical distribution of supplies has changed, as shipments to Asia, Oceania, and the Middle East have decreased, while exports to Europe have increased. Analysts note that Russia has already taken a share of the Ukrainian market – especially when it comes to wheat.
The risk for Kyiv lies in the fact that the conflict in the Middle East continues to increase Moscow’s economic advantage. As a major producer of oil and gas, Russia can benefit from high energy prices, and its farmers have cheap domestic supplies of fertilizers and diesel fuel, which Ukraine has to import.
Last year, agricultural exports brought Kyiv over $22 billion, accounting for more than half of total export earnings. This is a vital source of hard currency and taxes for the country.
During the aggressor’s invasion, farmers face a catastrophic shortage of labor, as well as problems with logistics and energy supply. Russian drone and missile strikes have also destroyed Ukrainian oil refineries, making the country dependent on imported diesel fuel from Europe, necessary for agricultural machinery and military use.
According to forecasts, high fuel and fertilizer prices will persist for at least three months, as months will be needed to restore supplies after the current disruptions – even if the fragile US-Iran ceasefire is observed.
Farmers say their production costs will increase by at least 10-15%. If a quick resolution to the conflict in the Middle East is not achieved, they could rise by 60%.
High fertilizer prices due to a shortage of natural gas used in the production of nitrogen fertilizers are not the main problem. In Ukraine, it is practically impossible to buy fuel in advance – suppliers avoid accumulating large stocks due to attacks on Ukrainian fuel depots.
Major market players predict a 5-10% decrease in agricultural production in Ukraine this season, which will affect the lack of foreign exchange earnings. At the same time, in the long-term perspective, rising food prices worldwide will help maintain income from Ukrainian exports.