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FAS: Crop Prospects & Credit Lines Unaffected by Unrest in Ukraine

13:44PM Mar 13, 2014

USDA's Foreign Agriculture Service (FAS) in a Commodity Intelligence Report indicated that crop prospects and credit lines have not been impeded by unrest in Ukraine or political tensions with Russia regarding Crimea. FAS reports, "Ukraine's winter crops and spring-sowing campaign remain generally favorable. The country’s wheat crop is already in the ground, and the availability of most inputs for spring sowing (including fuel, fertilizer, seed and credit) has not been interrupted."

Access to standard sources of ag credit for Ukraine agriculture enterprises has not been affected, according to FAS. "The interest rates charged by Ukrainian banks are high (over 20%), so instead of borrowing from banks, agricultural producers in most cases either rely on their own resources or sign forward-sale contracts with grain trading companies in exchange for inputs. Producers can purchase seed and plant-protection chemicals from large importers on credit," the agency details.

One area that is being affected by the situation import prices. These have been on the rise due to the decline in the exchange rate for the Ukrainian hryvna. This, in turn, could affect the purchase of some key ag inputs, such as hybrid seed and plant protection chemicals, FAS notes. Imports of hybrid seed have been a major driver of the "steady and significant increase" in corn and sunflowerseed yields in Ukraine.

However, FAS reports that "Typically about 65% percent of corn and sunflower hybrid seed for the spring planting season is imported by the end of March, and seed companies report that the majority of seed for this year's spring crops has already been imported."

"Chemical companies have not yet reported a significant decrease in the importation of products to date, but prices are being adjusted to reflect the exchange rate fluctuation," FAS continues.

Regarding Crimea, specifically, wheat is the major crop in the region with average production around 800,000 MT, roughly 5% of total Ukrainian output. Production of corn, sunseed and soybean is "minimal" in this region."

"Crimea is arguably more important as a producer of meat than of grains. Poultry production is Crimea's largest industry, and the territory accounts for 6.5% percent of Ukraine's total poultry output, along with 3.1% of the beef and 2.5% of the pork," FAS explains.