Ukraine has lost nearly one-third of its cropping land to war, Origin Enterprises said, as it highlighted concerns for Romania’s sowings of 2023 crops, and a slide in UK farmers’ purchases of high-priced fertilisers.
The feed-to-agronomy group, reporting that the war in the country was “having a profound impact on agriculture”, said that “30% of arable land is estimated to be in either Russian-occupied regions or unsafe areas”, despite this month’s territorial gains by Ukrainian troops.
Noting too that this year’s Ukrainian agricultural production “is forecast to be 35% down from 2021 levels”, Origin Enterprises highlighted the impact of declining performance on farm finances.
“With the area under agricultural production declining, so too has farmer liquidity.”
The comments come as Ukraine’s farmers are in the early stages of winter wheat sowings, which Agriculture Minister Mykola Solsky has forecast could amount to only 3.8m hectares this year, with Barva Invest consultancy estimating a figure of 3.4m hectares.
That compares with 6.5m hectares seeded last autumn, although of which only 4.6m hectares of that area harvested remained in Ukraine-controlled territory – a loss equivalent to 29%.
Mr Solsky estimated Ukraine’s winter rapeseed sowings for 2023 holding steady with year-ago levels, with oilseeds soybeans and sunflowers also favoured in spring sowings, in favour of corn.
‘Challenging for autumn planting’
Origin Enterprises – which has cut back its Ukrainian operations in response to a “sharp reduction in activity levels in Ukraine since the start of the war” – raised a question mark over 2023 crop prospects in Romania too, thanks to persistent dryness.
“Dry conditions are challenging for autumn seed planting,” the group said, noting that for 2022 crops currently being harvested “dry conditions across the country have resulted in a reduced yield potential of up to 20%”.
Furthermore, the group noted a test to farm sentiment in Poland too, where it also has operations, from increasing costs of the likes of fertilisers and seed.
“While farm sentiment has remained generally positive, it is being impacted by input price inflation which may influence on-farm decisions” over the next year.
‘Higher intensity of crop input spend’
In fact, the group reported a 6.9% growth in fertiliser sales volumes at its Polish and Romanian operations for the year to the end of July, helping lift eastern European sales by 11.1% to E461.8m despite the setback to its Ukrainian business.
Eastern European operating profits for the year eased by 5.3% to E14.8m.
However, in the core Ireland and UK division, operating profits jumped by 140% to E94.5m, on revenues up 54% at E1.61bn, as strong crop prices and “favourable” growing conditions for 2022-harvested crops encouraged “a higher intensity of crop input spend by farmers”.
Thanks to the largely benign weather and “good establishment” of this year’s UK crops, which have achieved “strong yields and quality”, its Agrii agronomy chain enjoyed a “positive trading environment”.
‘Exceptional price volatility’
Nonetheless, Origin noted that its improved Ireland and UK performance came against a backdrop of an “underlying volume reduction” in input sales, in the face of higher fertiliser prices.
“While raw material price inflation was the primary driver of revenue growth, it negatively impacted fertiliser volumes,” which tumbled by 23% in the year to the end of July.
“The war in Ukraine and ongoing global energy and supply disruptions have resulted in exceptional price volatility for feed and fertiliser raw materials,” said Sean Coyle, Origin’s chief executive.
UK prices of imported ammonium nitrate stood at £830 per tonne as of August, up 156% year on year, according to the AHDB bureau.
Potash prices stood at £770 a tonne, up 96% from August 2021, with diammonium phosphate values up 85% at £1,048 per tonne.
Origin Enterprises reported group earnings of E79.80m for the year to July, double those of a year before, on revenues up 41% at E2.34bn.
Broker Shore Capital, restating a “buy” rating on Origin shares, said that the group’s “strong operating performance and strategic process provides [it] with a solid foundation to meet its strategic and financial targets.
“We believe Origin represents a long-term opportunity given is a market leader/well positioned across its end markets, has strong routes to market with long-standing consumer relationships”.
Origin Enterprises shares stood 7.2% higher at E3.67 in morning deals in Dublin, rebounding from a six-month closing low to the last session.