Russia’s invasion of Ukraine has led to an estimated $23 billion in indirect losses due to production decreases, logistics disruptions, and lower prices for exports.
That is according to a report, Agricultural War Losses Review Ukraine. Rapid Loss Assessment, prepared the Center for Food Research and Land Use at KSE Agrocenter, in association with the Ministry of Agrarian Policy and Food of Ukraine.
Last week, Agriland reported on the damage toll to Ukrainian agriculture caused by the ongoing war there.
After three months, this damage was estimated to have reached $4.3 billion.
While the reported damage relates to the destruction of tangible assets and inventories, the losses referred to in this article estimate the foregone revenue due to lower quantities of goods produced, and additional costs that farmers and food producers bear because of the war.
The foregone revenue is the difference between the actual revenues and the revenues that could have been realised if Ukraine had not been invaded by Russia.
“Estimating losses is essential not only for understanding the magnitude of the downfall in the sector but for assessing the recovery needs as well,” said an expert at the KSE Agrocenter, Roman Neyter.
“A substantial share of the foregone revenue was needed to cover the cost of the sowing campaign for crop producers or feed for livestock.
“Without a partial compensation for losses, farmers in the regions that suffered from the war would be unable to restart their production,” he said.
Indirect losses – a little more detail
Indirect crop losses due to lower output are estimated to cost in the region of $9.6 billion.
The most significant drop in the estimated 2022 harvest is for wheat, at 33%; sunflower, at 32%; and barley, at 31% since a substantial share of these crops is produced in the areas directly affected by the war.
Compared to the last year, the corn harvest is expected to drop by 18%.
According to the estimates, the harvest for other annual crops for 2022 is expected to be 22% lower than 2021’s harvest, resulting in another $3.3 billion of losses.
The total losses for the livestock sector are estimated at $682 million.
Livestock losses are not comparable to crop production losses, according to the analysis.
For crop production, the monetary value of losses is based on one year as you can replant and get a new harvest from annual crops within a year.
However, a fall in livestock numbers leads to lower production for multiple years since recovering the livestock production will take longer.
Perennial crop losses due to a lower output is estimated to cost $89 million.
An estimated average time needed for replanted gardens to start bearing fruits is five years, according to the analysis.
So, the losses caused by five years of lower perennial output are estimated at $222.4 million.
Exports supply shock
Another consequences of the Russian invasion is a decrease in the farm-gate price for export-oriented commodities.
Because of the port blockade and the limited opportunities to export through other modes of transport, Ukraine suffers from a domestic supply shock.
This has led to almost a 30% domestic price decrease.
The combined value of losses for the top-four export-oriented crops – wheat, corn, barley and sunflower – is $11.9 billion.
Losses due do logistics
Supply disruptions also led to an increase in agricultural input prices, in particular for fertiliser and fuel.
Fertiliser costs have increased by 37% since the Russian invasion.
The estimated increase of 39c/L of diesel has also led to additional losses for Ukrainian farmers.
Losses due to higher production costs are estimated to be $859 million.