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What The War In Ukraine Means For U.S. Agriculture

Every day the war in Ukraine reaches new, disturbing heights and demands attention for its horrific crimes against humanity and its threat to international peace, security, and safety. But if the nature of this conflict is not enough to capture our sympathy, the war has reached a place where it refuses to be ignored: at our dinner tables.

Touted as the “breadbasket of Europe”, Ukraine boasts rich, dark soil and sprawling fields of farmland that are prime for growing grains, among a range of other lucrative crops. Together, Ukraine and Russia account for nearly one-third of the world’s wheat supply.  Ukraine itself exported more than $27 billion in agricultural products in 2021, including billions of dollars each in corn, sunflower seed, rapeseed, barley, and sunflower meal, in addition to wheat. A considerable portion of the land that makes these crops possible occupies Ukraine’s Eastern regions; the very areas most prone to Russian attacks. As troops encroach and the impending dangers multiply, farmers and their employees scatter to safety and leave these farmlands unattended.
Ukrainian farmers who do resume work in the fields now have a shifted focus. Farmlands devoted to export crops now serve the singular purpose of feeding Ukraine’s own people. The corn and rapeseed that once monopolized the land for exporting purposes are replaced with buckwheat, peas, and other crops designed specifically to supply and sustain Ukrainian citizens and the troops fighting for their lives. But these emergency crops are not without complications of their own. As the war overshadows every realm of Ukrainian life and creates shortages and deficits of all variations, farmers face a scant supply of fuel, fertilizer, and other necessities. Not to mention, the logistical risks of farming in a warzone or recent warzone are plentiful. Ukrainian farmers report the need to hire military professionals to screen their fields for unexploded ordnance before they can spread fertilizer and get to work.

Ukraine will no doubt experience a steep plummet in its usual harvests and a total overhaul of its global trading abilities, but the exact damage to Ukraine’s economy and the global market at large is impossible to calculate. Such is the nature of war.

Yet on our side of the Atlantic, we already feel the effects. The United States is considered a breadbasket of its own, with endless stretches of productive farmland, so we don’t necessarily rely on Russia or Ukraine’s wheat supply the way many European countries do. We rely on our own. But that’s where our problem lies.

Many of the raw components necessary for farm chemicals like fertilizer and pesticides originate in the Black Sea regions of Russia and Ukraine. Russia, in fact, is the chief world supplier of nitrogen, and a key supplier of potassium and phosphate, all three of which combine to create fertilizer. And Russia and Ukraine together export 28% of the world’s nitrogen-based fertilizers. But as war strains the land, the lifecycle of Ukraine and Russia’s typical crops is disrupted. And what crops do grow likely won’t see beyond the borders of their own territory, thanks to the United States’ strict sanctions on Russian exports. And as a retaliatory answer to the Western sanctions, Russia announced a ban of agricultural (among other) exports to countries who have “committed unfriendly actions” against the Russian Federation. The United States is a key player on that list. The ban, as of now, is effective until the end of this year, but experts predict it’ll last well into 2023 and perhaps beyond.

American farmers now worry about their Autumn planting plans. Agriculture economists predict an overall “12% increase in fertilizer expenses, a 10% increase in interest expense, and a 7% increase in animal purchase expense” by the end of 2022.  There are few facets of farming, if any, that aren’t adversely impacted by the growing conflict in Europe. One farmer noted the outrageous spike in prices for the herbicide Roundup. Wayde Hudlow, a dryland wheat farmer in Oregon, reports that Roundup costs climbed from $15 to $17 a gallon to a sky-high $60 or $70 per gallon. Bayer, the company that produces Roundup, attributes this hike to “delays in the import of raw materials, competition for packing and packaging materials, port congestions, [and] container shortages” as well as a “high demand for transportation” which includes the truck drivers who distribute Roundup to retail establishments.

Roundup is far from the only brand experiencing disruptions in production. Supply-chain issues across all industries persist among the rising global tension. Many companies who were just beginning to recoup their losses from the Covid-19 shutdowns now face the uniquely new challenges created by the Russian invasion of Ukraine. The prices of nearly all the world’s most popular raw materials teeter at all-time highs, and energy prices are no different. All the operating costs of our country’s farms, from fuel to fertilizer to tractor parts, are bloated to epic proportions.

You’ve probably already noticed this trend reflected in your grocery bill.  Everything from bread and bagels to cereals and potato chips have noticed a 4-5% jump in cost. Many farmers fear for their ability to recoup operating costs and stay afloat, much less to turn some type of profit.

As we have seen in the past, these hard times won’t last, but persevering is our best and only option. The American people rely on the Agricultural industry each and every day, so now is not the time to worry about what is to come. As a company that wouldn’t exist without agriculturalists, Farm Plus Financial is here to assist. We provide farm operating lines of credit in addition to our wide variety of loan products. Operating lines of credit can be utilized in times of low cash flow, to get you to harvest or sale time. Think of them as a safety net for operational expenses and other purchases throughout the term that are backed by your property. Call us now at 866-929-5585 or apply online to see how Farm Plus Financial can help you today.

 

 

This Post Has 2 Comments

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