Thursday, 27 March 2014

The end of the beginning or the beginning of the end for Ukraine?

Over the course of a couple of weeks Ukraine went from having a functioning if not deeply corrupt administration to the government ordering the devastating use of live ammunition in Kiev to the President fleeing the country and a new interim government issuing a warrant for his arrest.

Russia thought this was a good time to invade Crimea and through a hastily organised referendum held at the barrel of a gun annexed the peninsular before anyone could figure out what was going on.

The US and EU then issued sanctions targeted at specific Russian individuals and their assets and Russia responded in kind.

Russian troops have massed on the border in preparation to invade further in to mainland Ukrainian sovereign territory.

Tomorrow the former President of Ukraine will give a press conference in Rostov-on-Don, Russia, to complain about how ethnic Russians in Ukraine are under attack from fascists thereby giving Putin the legal framework to order the invasion of mainland Ukraine.

The International Monetary Fund announced today they would draw up a deal for assistance worth $14-18bn to Ukraine over the next two years but only if they remove the subsidy on gas which will not go down well with voters.

On the ground the police are starting to become visible once again, but there are checkpoints manned by the police or military or more worryingly armed guys dressed in black with no insignia and tank movements in the east are making a mess of the already pretty poor roads.

Not much has changed for us on a practical level, shops still open with plenty of food, kids still go to the play park, sun keeps shining but I can’t help feeling that our time in Ukraine is going to be over at least for some time.

In my opinion if the new interim government can follow through the massive task it has set itself of ridding Ukraine of institutional corruption and if Russia will leave Ukraine alone then Ukraine might just might start punching on the global economy somewhere near its true potential.  That is a couple of big ifs.

Spring planting is underway with 1.5 million hectares of spring barley and 100,000 ha of spring wheat in the ground.  Sunflower planting in the south of the country has just started with 47,000 ha of the predicted 4.7 million hectares sown and 63,000 ha of an estimated 370,000 ha sugar beet.

Nitrogen fertiliser has started to go on to the overwintered crops but the question is how much?

A 20% drop in commodity prices just before 2013 harvest means many businesses are short of working capital.  The political unrest has made credit for seeds, chemicals and fuel harder to secure and when you do it is more expensive.  Fluctuations in the exchange rate have in effect increased the cost of inputs by 30%.  There is precious little inward investment as everyone is waiting to see how the situation plays out before risking funds in country.

All in all there’s not much cash to go farming with so I am expecting plantings to be down this year and what is planted receiving less fertiliser with a corresponding drop in yield.

To give some light at the end of the tunnel prices might go up by harvest but the access routes to export markets might just end up being under the control of Russia.

Sometimes its darkest just before dawn or just before it goes pitch black, let’s hope it’s the former.