News Alert: Mercy Corps Calls for Indefinite Extension of Grain Deal as Ukrainian Farmers Suffer Devastating Economic Losses

July 14, 2023

2.5 million tonnes of grain at risk of rotting in silos while Ukrainian farmers miss out on an entire harvest season

KYIV - While wrangling continues over a fourth extension to the Black Sea Grain Initiative, set to expire on 17th July, grain is rotting in warehouses in Ukraine while a global food crisis continues. The inability to reach a long-term agreement is dealing a heavy economic blow to the already beleaguered Ukrainian farming industry, and continued volatility to world food prices. Ukraine’s industrial-scale farmers need a long-term deal to secure exports by sea, and smallholder farmers need the access and security guarantees afforded by a new long-term deal in order to export grain at all. 

An extension is particularly critical as harvest season begins in earnest this month. Even with the deal in place, exports have experienced a significant reduction. Available data for June showed a 52% drop in exports this year due to obstacles implementing the agreement, including inspection delays and blocked ships. A long-term, stable deal would help mitigate these implementation challenges, allowing both large-scale industrial farms and smallholders to export their product without delays. 

The destruction of the Khakovka Dam on 6 June that devastated Kherson and flooded much of neighbouring Mykolaiv has only deepened the crisis. Previously these two regions provided agricultural products throughout the country, and together contributed approximately 4.6% of Ukraine’s GDP, producing grain, sunflower, and vegetable crops. The damage to the region’s irrigation systems is catastrophic, and repairs are slowed by active shelling. Three of the four major irrigation pipelines that serve the area are completely non-functional due to the decreased water level. According to the Ministry of Agrarian Policy and Food, 94% of irrigation systems in Khersonska oblast, 74% in Zaporizka oblast, and 30% in the Dnipropetrovska oblast have been rendered useless. 

Mercy Corps’ Ukraine Response Director, Cara Buck, says: 

“The Black Sea Grain Initiative’s renewal is critical to continue easing global food insecurity, but it’s clear a year into the deal that not nearly enough grain is getting out of Ukraine. In Ukraine many farmers simply can’t access seaports to move their produce to the global market and are further hampered in the aftermath of the Kakhovka dam’s destruction. Industrial farmers are getting some grain out - but not enough - and smallholder farmers are exporting nothing at all.”

“The economic knock-on effects of this inability to sell grain is severe. Our partners in Kherson are telling us that very few farmers have seeded their crops, there is scarcity of food for farm animals, and the agricultural supplies available in the market are very expensive. With banks not able to lend farmers cash, what little is harvested is sold locally at a loss, or rots in silos unable to export.”

“While better than the collapse of the agreement, yet another short-term renewal just sets up trouble for the future as they are forced back to the table to negotiate again and again. Even if the deal doesn’t unravel, the impact of a major reduction in exports will be economically disastrous for Ukrainian farmers, as well as global food supplies and food prices."
 

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