Iran conflict triggers hike in costs of Ukrainian farmers - association
MOSCOW. March 11 (Interfax) - The situation in the Middle East is having a negative impact on the Ukrainian agricultural sector, simultaneously increasing production costs and prompting demand for produce to shrink, Ukrainian media said citing the Ukrainian Agribusiness Club (UCAB).
The most notable impact has been on fuel and fertilizer costs, as well as the cost of maritime logistics, it said.
Fuel accounts for 9%-12% of crop production costs, and the current increase in diesel fuel prices alone makes farmers spend an additional UAH 1,100 per hectare of corn, given a standard fuel consumption rate of 55 liters per hectare.
In the mineral fertilizer segment, a sharp increase in prices for nitrogenous compounds has been recorded due to more expensive natural gas and the blocking of port exports.
"The biggest price increase was for urea, which jumped 34% compared to January to UAH 39,000 per tonne. This will force farmers either to spend 27% more on fertilizers, up to UAH 9,000 per hectare, or to reduce application rates, which will reduce yields," UCAB said.
Ship freight costs have already increased by $4 per tonne, making Ukrainian produce less competitive; in particular, the profitability of corn could decline by 12%, it said.
At the same time, demand has been affected, as the blockage of the Strait of Hormuz has virtually halted exports to the UAE, Qatar, Bahrain, and Kuwait.
"These four countries import annually some 5 million tonnes of grain in aggregate. The lack of demand on their part is putting pressure on prices within the market," it said.
Media said specialists from the electronic grain exchange share UCAB's concerns.
According to their data, nitrogen fertilizer prices in Ukraine grew rapidly over the first week of March, the average price of UAN rising by some UAH 1,000 per tonne and that of urea by almost UAH 1,500 per tonne.
"If the fighting drags on, fertilizer prices will continue to rise, dramatically affecting the profitability of growing crops, as they account for 40%-50% of the cost of grain," electronic grain exchange specialists said.
According to Rabobank analysts, Middle Eastern countries account for 44% of global urea and 27% ammonia supplies.
As reported, the cost of the 2026 sowing campaign for Ukrainian farmers would increase by some 15% compared to last year to around UAH 700 billion ($17 billion). According to the Ukrainian Agri Council (UAC), the main factors behind the growing costs are higher prices for fuel (by 10%-15%) and mineral fertilizers (by 20%), as well as for crop protection products and seeds.
Weather conditions have delayed the start of the spring fieldwork in some regions of Ukraine by around two weeks, while sowing in southern regions is already well underway. Experts anticipate that growing production costs could lead to a 3%-5% increase in food prices.
