Ukrainian Agrochemical Market: Manufacturers struggling to resume production under gunfire, multinationals aim to sell pesticides without registration

Countries in the northern hemisphere are entering the spring season, but a peace agreement between Russia and Ukraine has not been reached. The war has brought great trauma to the people and economy of Ukraine, where millions of refugees have fled the country. Economic development has, therefore, stagnated, and arable area has decreased. As Russia and Ukraine are both important agrochemical markets, AgroPages recently tried to contact enterprises in the two countries to learn about the situations of the two markets during war.

To read the previous article, pleas click on: Dialogue with Russian agrochemical enterprises: Accelerating the process of capacity expansion, adjuvant supply chain may be rebuilt

We experienced certain difficulties in contacting Ukrainian agrochemical companies, as employees of many companies had to leave their homeland, and some of their facilities have been destroyed. We were shocked at the photos sent by the interviewees and felt deep sorrow to see the destruction. What is worse, however, is when we tried to contact a large local agrochemical distributor, we were told by its crop production head that he was fighting in a warzone. 

Borys Todorov, CEO of ALFA Smart Agro (ALFA), one of the largest agrochemical companies in Ukraine, took the time to answer questions from AgroPages. Todorov explained the current operation status of the company, which is basically the same for all local agrochemical enterprises. Even under such a harsh environment, ALFA is still trying its best to ensure supplies to farmers. In addition, Todorov talked about some dynamic changes in the Ukrainian agrochemical market, such as the expected reduction in the use of fungicides, multinationals’ lobbying the government to allow the sale of pesticides without registration, and so on. This information may help us monitor market development and adjust to business strategies as necessary.

Warehouses seriously damaged, agrochemical companies still trying their best to continue agrochemical production 

The war started on February 24, 2022, and has impacted the agri- and agrochemical business significantly. ALFA stopped production for almost two weeks, but the war impacted local supplies, causing difficulties with supplies of bottles, labels, and other components for production.

ALFA has an extensive crop protection product warehousing network. One of the distribution centers of ALFA in central Ukraine was damaged by a missile attack (photos in below provided by Todorov, as attached, revealing part of the damage). ALFA is completing the process of stock relocation to safer areas and the calculation of losses. 

“Our top priority is to restart production because we need to supply goods for Ukrainian farmers in time. Now, our production site is fully operational, but we still experience delays due to frequent curfew restrictions, which often last several consecutive days,” Todorov said.

ALFA’s employees worked in all regions of Ukraine, but many had to move to safer regions or abroad, while others are in places where fighting has been happening, with some even working in occupied regions. ALFA Smart Agro is taking care of its employees by paying 100% of their salary in February, even though almost no commercial operations were possible during this period. 

The company is now decentralized, and its employees are working remotely. Each team member is doing their part to ensure production and supply and support farmers under current conditions. “Our goal is to maintain a professional team, to deliver professional production and customer support,” Todorov stressed.

Agricultural arable area decreasing, farm product exports blocked 

In March, Roman Leshchenko, Ukrainian Minister of Agriculture at that time, said Ukraine's spring arable land area might be halved in 2022, down to some seven million hectares. Todorov predicts that arable area will be at least 65% to 70% of the area sowed in 2021. Due to the war, some regions are occupied, while some are under attack. The situation is changing on a day-to-day basis. Farmers are waiting for the opportunity to start the sowing campaign. 

On April 2, the Ukrainian Ministry of Agriculture upgraded its prediction for the spring sowing in 2022. In a statement, the ministry predicts a spring sowing area of 13.40 million hectares this year, covering corn, grain, sugar beet and sunflower, which is 3.50 million less than in 2021. If the estimation is correct, the impact on Ukrainian agriculture will be smaller than earlier expected.

At present, the main challenge is the fact that Black Sea ports are blocked, so agricultural traders must use railway transport instead of seaports, limiting Ukraine’s exports over the next three months. Agricultural traders will continue to look for a railway or transit route to and from a Romania port, but logistical capacity will still be limited and cost more. Therefore, farmers cannot sell their goods in stock. Ukraine has lost $1.5 billion of exports in a month, because the exportation of grains and other commodities has stopped.

Fungicide use to decrease, multinationals appealing for sale of pesticides without registration

Currently, pesticide prices are stable, but demand is low, and it is not clear which crops farmers will sow. Logistical costs also increased about between two to four times depending on the region of delivery. Under this circumstance, farmers will optimize crop technology and focus only on their major and most important operations, which could lead to less fungicide applications.

Farmers are faced with many farming-related difficulties. Banks have currently stopped offering trade loans and credits to farmers, therefore, there are not enough financial resources on the market to ensure the sowing campaign will go smoothly. The government also announced a special program to help local farmers, which if  implemented quickly enough, could be incredibly helpful in ensuring agri-input supply and payments.

On March 12, the Minister of Agrarian Policy and Food of Ukraine said that Ukrainian government decided to suspend exports of all types of fertilizers, covering nitrogen, phosphorous and potassium fertilizers, as well as compound fertilizers. The government explained that this move aims to maintain balanced supplies from the domestic market and support the recovery of agricultural production during wartime, to prevent a food crisis in Ukraine and the entire world. 

“One more limiting factor is the supply of fuel for farmers, and sowing area might be limited if farmers do not have ready access to fuel. This bad situation got even worse after missile attacks on tank farms in Lviv and Rivne in Western Ukraine,” Todorov said.

“We often receive information that farmers, and even agroholdings, face difficulties with getting seeds, fertilizers and fuel, meaning that resources will be limited, and decisions will be made on a case-by-case basis,” he added, noting that multinational companies are lobbying for changes to legislation on pesticides to obtain the right to sell products without registration in Ukraine, which will lead to increased market share in the country.

Thousands of tons of pesticides from China are getting stuck in Turkish ports 

International logistics processes are currently very complicated because all seaports in Ukraine have been closed since  February 24. Most goods shipped to Ukraine are now in Turkey, Romania, and Poland. The situation is especially difficult regarding goods in Turkey because requirements for the logistics of pesticides differ significantly from Ukraine and in the EU. “According to our estimates, about 4, 5 to 6,000 tons of pesticides going to Ukraine from China are stuck in Turkish ports. It takes a lot of time from all parties involved, suppliers, customers, and shipping lines, to agree and approve shipments to be received in a place that us different from the initial port of delivery, Odesa. This could further affect the supply of pesticides to Ukraine because most of these goods are intended for the spring season and most of them will be late for the spring season application,” Todorov stated.

Business risks in Ukraine are currently considerable, but as market resources are limited and Ukrainian companies have no access to banks’ financial resources, Todorov hopes that suppliers can be flexible in adjusting contractual conditions to the current situation, which will mean offering some form of payment postponement until the Ukrainian internal market becomes active, and farmers can find a solution for the issues of exports and bank loans.

Todorov finally stressed that ALFA Smart Agro will continue to run its operations in Ukraine, stating, “We are confident that we can deliver products needed by farmers, and can quickly adjust our business model to the new conditions.”