How can we tap agrarian reserves?

The Group of Twenty (G20) countries may call an unscheduled session in late August to discuss a steep hike in grain prices on the world market. The initiative comes from France which held the G20 presidency last year. The grain price rise was caused by unfavorable weather conditions, such as a protracted drought in the US and the Mediterranean countries. So experts seriously fear that this can make the main exporters restrict the export of grain to foreign markets, which will increase risks to worldwide food security.

The natural factor has boosted prices on world markets by an average 25-30 percent in various sectors of agrarian production over the past few years. For example, due to bad weather conditions, the expected grain crop in Russia has been reduced to 70-75 million tons, which has automatically affected the world grain prices, bringing them up by 17 percent in June.

Torrential rains in Brazil and the delayed monsoon season in India have reduced the world’s expectations for a “sweet” crop, which resulted in a record jump in the prices of sugar, a UN Food and Agriculture Organization (FAO) report says.

The US Department for Agriculture forecasts that bad weather will bring down the harvest of maize by 16 percent to 10.91 billion bushels. This news from the world’s largest exporter of this crop caused maize prices skyrocket to 8.3075 dollars a bushel at the Chicago Exchange, which is an all-time absolute high.

Higher prices of maize have in turn pushed soybean prices up by 64 percent since mid-June. The price of rice, the harvest of which may be impaired by the delayed of rain season in India, so far remains almost unchanged. But this may also go up because there is a risk that consumption may focus on this crop.

All these factors are warning about the increased risk of a worldwide food crisis, as was the case in 2007-08. Those years saw hunger riots in more than 30 countries, while the number of the undernourished rose to a billion in 2009. “There is a potential for a situation to develop like we had back in 2007-08”, the BBC quotes FAO’s Senior Economist Abdolreza Abbassian as saying.

To minimize this risk, FAO has already called on the US government to stop making ethanol (for bio-fuel) out of grain. Under the US law, 40 percent of the total grain harvest is used for these purposes. Besides, should the G20 convene in August, it will most likely also discuss the restriction of agrarian exports by major exporting countries.

Ukraine looks very attractive against the backdrop of the worldwide food shortage trend, even though this year’s harvests will be slightly lower than last year. In 2012 Ukraine is expected to reap about 58 million tons of grain, with the domestic consumption demand being 28 million tons, Ukraine’s Prime Minister Mykola Azarov forecasts. Moreover, according to Azarov, top-class bread grain accounts for 90 percent of the harvest.

A good harvest of potatoes is also expected. “The potato-growing area is 1.4 million hectares in 2012, which is the last year’s level. Weather conditions in northern and central regions, where it is mostly grown, can be said to be satisfactory. This makes us expect the production of about 23 million tons of potatoes (on the basis of information from the regions), while domestic consumption is 6 million tons,” says Oleksandr Sen, Deputy Minister for Agrarian Policies and Food.

Experts say it is not yet clear how the drought will affect the harvest of late-year crops, including sugar beet and maize. But even now it is obvious that Ukraine can meet its domestic demand in the majority of agrarian crops and also have a considerable surplus of farm produce which should be rationally disposed of.

What can be done with it? Now that the prices of agrarian products in the world are steeply rising, the answer is obvious – to earn as much as possible and capture new sale markets for national producers. This opens up new export horizons for Ukraine, which allows it to show the world its agricultural potential and attract billions-worth investments to this sector.