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At the heart of Eastern Europe, Ukraine plays a pivotal role in global food security with its vast farmlands and abundant agricultural resources. In recent years, Ukraine has faced not only geopolitical challenges but also the trials of war, which have undoubtedly had a profound impact on its agricultural economy and agrochemical market.
Against this backdrop, we have produced this special Ukraine Market Feature, published in our latest publication "Market Overview 2024", aiming to delve into the current situation, challenges, and future of Ukrainian agriculture and agrochemical regulation. At the same time, Ukrainian agricultural enterprises and experts are demonstrating extraordinary adaptability and determination, seeking new opportunities for development amidst turmoil.
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In this article, we can learn how Ukraine's leading agrochemical company, Ukravit, is seeking new opportunities in the global market and contributing to the sustainable development of agriculture in Ukraine and the world. The content and data of the article mainly come from the keynote speech given by Vitalii Ilchenko, President of Ukravit, at the 2024 China Pesticide Exporting Workshop held in Hangzhou, China, in July 2024.
Vitalii Ilchenko, President of Ukravit, Ukraine
Current status of Ukraine’s agricultural economy: Hit heavily but recovering resiliently
In early 2022, Ukraine’s economy began to show signs of recovery from the impacts of the pandemic, with solid growth attracting a wave of investors. Infrastructure projects were advancing smoothly, and the living standards of the people steadily improved. The prices of crops and agricultural products in Ukraine surged, and the export market performed robustly, leading to significant economic benefits for farmers.
However, the outbreak of the Russia-Ukraine conflict has dealt a severe blow to farms and farmers. Livestock owners have struggled to sell their products due to the war, even having to give them away for free, which has led to a significant drop in income. Since 2022, prices for Ukrainian wheat and other agricultural products have been on the decline, resulting in minimal profits that have sometimes dipped to zero. By 2023, wheat and corn prices were around US$150 per ton, well below the average levels.
The war has also severely disrupted the import and export trade of agricultural and agrochemical products, with logistics involving land, rail, and ports suffering significant setbacks. Ukraine previously depended on importing a large volume of goods from the EU. Still, this extensive flow of products has become increasingly challenging, negatively impacting both the supply of Ukrainian goods and European consumers.
The war has severely damaged many power plants, leading to a strained electricity supply. The labor force is also under pressure, as many individuals have enlisted to defend the country, resulting in numerous casualties. This influx of enlistment has left farms and businesses facing a significant workforce shortage, even impacting the harvesting process. Despite these challenges, Ukraine is slowly regaining its vitality, with agricultural enterprises and commercial activities beginning to recover. Miners are even returning to the fields during their breaks to help with farming, which has eased the labor shortage.
In this broader context, companies must explore new avenues for survival and growth. For example, some large-scale farmers have begun investing in the construction of river ports in anticipation of eventually restoring product exports and sales. The global agrochemical market is also facing significant challenges. Although some facilities were destroyed earlier, Ukraine’s seaports are gradually recovering, and we are working hard to rebuild and restore them. Despite the slow pace of recovery, there are indications that product prices are starting to rebound.
Total planting area of crops continues to decline, while soybeans are expected to see an increase
In 2021, the total planting area of crops in Ukraine reached 30.55 million hectares. Ukraine is the largest producer of sunflower oil in the world, with the area dedicated to this crop covering 6.62 million hectares in 2021. Other major crops include wheat, corn, and soybeans, along with a variety of different crops (see Figure 1).
Figure 1. Crops Planted in Ukraine in 2021
In 2023, the total planting area of crops decreased to 22.4 million hectares. However, the area dedicated to soybeans increased, while those for sunflowers and corn were relatively stable. In contrast, the area for wheat experienced a significant decline (Figure 2). Crops like wheat require robust logistics and transportation infrastructure; unfortunately, the impact of the war has disrupted these systems, leading to a steep rise in agricultural product costs.
Figure 2. Crops Planted in Ukraine in 2023
Entering 2024, the landscape of the agricultural sector continues to evolve. Projections suggest that the total planting area of crops may decline further, particularly for wheat, corn, and sunflowers, which could see additional reductions. However, the soybean planting area is expected to see growth, reflecting strong market demand and developmental potential for this crop.
Scale of crop protection market is shrinking, with companies patiently awaiting to return to the market
The usage patterns of crop protection products in Ukraine are undergoing a significant transformation. Currently, the crop protection market is rapidly shrinking as farmers are compelled to cut back on these products due to the dual pressures of income constraints and rising costs. Additionally, exports of fertilizer products to the European Union have faced obstacles that have adversely affected sales and profits for fertilizers produced in Ukraine.
In this challenging environment, Ukrainian farmers urgently need to adapt their cultivation practices. Despite these changes, the crop protection market in Ukraine still experienced growth in 2022, primarily driven by rising product prices, a trend that began before the war broke out. Although there was a slight decline in the market from 2022 to 2023, it was not significant. Specifically, the usage of pesticides in Ukraine fell slightly from 77.9 million kilograms in 2021 to 75.5 million kilograms in 2023. Nevertheless, the market value in 2023 still reached $1.28 billion (Figure 3).
Figure 3. Pesticide Use and Market Value in Ukraine (2021-2023)
In this context, Ukravit shines as a beacon of resilience, being the only company that has continued to experience business growth during the war and the pandemic. While many large international firms chose to close their offices in Ukraine, Ukravit remained committed to supporting farmers by supplying pesticides across various regions of the country. This dedication has enabled the company to achieve remarkable results despite the ongoing war.
Currently, the pesticide market in Ukraine is dominated primarily by brands of multinationals and local enterprises. Among these, DEFENDA leads the market, having been applied on over 100,000 hectares of leasehold land and other sales, and boasting a wide-reaching registration and sales network throughout Ukraine. Bayer follows closely in second place, with Ukravit holding the third position (Figure 4).
Figure 4. Top 10 Pesticide Brands in the Ukrainian Market
Since the onset of 2024, the Ukrainian market has been witnessing a gradual increase in the market share of various companies. Many of them are biding their time and strategizing for future opportunities, anticipating that the specter of war will fade and allow them to re-enter the Ukrainian market.
Outlook for development of Ukrainian agriculture remains promising
Ukrainian agriculture plays a vital role in the EU market, serving as a critical grain supplier for several EU countries. While exports currently face challenges, many companies are beginning to focus on future strategic planning, exploring sustainable development paths, and seeking more innovative investment opportunities.
Overall, the outlook for Ukrainian agriculture remains promising, especially with significant potential for crop yield growth. From 2022 to 2026, the average yield of grains in Ukraine is expected to reach 3.88 tons per hectare, with projections rising to 4.44 tons per hectare from 2026 to 2030 (Figure 5). Historically, wheat yields in Ukraine have reached as high as 13 tons per hectare, while corn yields could also hit 15 tons per hectare. However, due to farmers’ difficulties in obtaining corresponding returns on investment, their enthusiasm for increasing investments in crops has been low. Over the past two years, Ukrainian farmers have had to limit their use of pesticides and fertilizers to protect their crops. Once the war ends, they will be able to fully utilize these agricultural inputs, thereby increasing yields and welcoming a new era of agricultural productivity.
Figure 5. Grain Production Forecast for Ukraine
In 2021, Ukraine exported 64.1 million tons of agricultural products, generating an export value of $35.4 billion. However, by 2023, these figures had declined, with export volumes dropping to 56.5 million tons and export values falling to $21.9 billion. Logistics challenges and rising costs have led to lower prices for Ukrainian agricultural products, prompting many companies to explore domestic processing opportunities within Ukraine. For instance, some companies have invested in domestic sunflower processing projects, successfully recouping their costs and starting to turn a profit.
Additionally, due to the EU frequently imposing restrictions on the import of grains and processed products due to detected pesticide residues, Ukrainian grain processors have gained a competitive edge in export markets by effectively managing pesticide residue levels.
Currently, the demand for products like bioethanol is steadily increasing in the EU market. Ukraine has demonstrated strong performance in the ethanol and biofuel sectors, with numerous companies starting to convert corn into fuel ethanol and diesel for export to the EU. Additionally, the domestic market in Ukraine is leveraging sunflower seeds to produce biofuels and ethanol. Over the past two years, Ukraine has exported substantial quantities of sunflower products to EU countries. At present, there are up to ten processing plants in the design phase in Ukraine. Under favorable conditions, these plants are anticipated to be completed within the next one to three years, primarily focusing on fuel ethanol production. Given the balance of raw materials, modern technological capabilities, and global market demand for agricultural raw material processing, it is expected that at least 30 such plants will need to be established to support Ukraine’s deep processing market.
Ukrainian farmers are determined to protect their firms and businesses and avoid relocation due to the war. These farm owners are actively enhancing their processing and storage technologies in hopes of maintaining trade with the EU. Ukravit is dedicated to supporting these farmers in securing more bank financing. For instance, the company is now able to facilitate five-year interest-free loans from banks, enabling farmers to invest in processing technologies or other agricultural advancements to achieve sustainable agricultural development.
Ukravit actively fosters international cooperation and investment to build a sustainable future
The partnership between Ukravit and Chinese companies has flourished over the past 20 years. Throughout this period, China’s pesticide industry has experienced significant transformations, and industry players have achieved impressive growth. Currently, Ukravit imports around $40 million worth of goods from China each year, highlighting the strong cooperative relationship between the two sides. Ukravit has also forged robust partnerships with companies in India and other countries. We have a diverse network of partners worldwide, allowing us to conduct business not only in Ukraine but also in Uzbekistan, Moldova, Georgia, Armenia, and Ethiopia. This expansion not only broadens our business opportunities but also enables us to source critical active ingredients and raw materials more efficiently. This globalization strategy lays a solid foundation for our business development and opens up endless possibilities for future growth.
Looking ahead, Ukravit is dedicated to advancing a series of ambitious projects and will continue to ramp up investments. The company is planning to establish a state-of-the-art factory focused on the production of synthetic active ingredients and formulations to enhance the supply chain. This factory project has received full support from relevant governmental authorities, including land acquisition and necessary permits, and is progressing smoothly. Furthermore, Ukravit benefits from insurance protection provided by relevant governmental institutions and the EU, which safeguards our investments and minimizes risks.
Ukravit is not only committed to continuous business growth but also to offering farmers a diverse range of products that meet their expectations for efficient and environmentally friendly agricultural solutions. Our vision extends beyond the domestic market; we aspire to expand our reach into international markets such as the EU, the U.S., and beyond, allowing Ukravit’s brands and products to gain global exposure.
Through this kind of collaboration, we can collectively create a more prosperous and sustainable future.
This article was originally published in AgroPages magazine 2024 Market Insight. Download to read more.
If you also want to share your professional knowledge and insights through AgroPages, please feel free to contact Mickey Shan at mickey@agropages.com
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