Russia-Ukraine Tensions Impacting the Ukrainian Sugar Industry

Sugar Beet
Supply Chain Management
Ukraine is one of the few countries that grows sugar beets for the sole purpose of processing into sugar. The country produces sugar beets across the country, with the majority of the production concentrated in Donetsk, Zaporizhzhya, Kyiv, Luhansk, Mikolayiv, Sumy, Kharkiv, Kherson, and Chernihiv. With the current and past military activities, including unexploded munitions, minefields, etc., sugar beet production for MY 2022–23 is projected to record a YoY decline of 23%. This is likely to impact the processed sugar industry by reducing the total volume of processed sugar in the country. It is likely that lower stocks will reduce the volume of exports from the country and negatively impact the industry.

According to data from the State Statistic Service of Ukraine (SSSU) and USDA, the sugar beet production for the marketing year September 2021–August 2022 was projected to be at 10.8 million mt, which is a YoY increase of 31%. The higher production projections came as an increase in area under production and higher yields in the year 2021. However, since February 2022, Ukraine has been under a military invasion by Russia, which has impacted their agriculture production area, making land unsuitable for cultivation. The USDA estimates that production areas in nine regions may have been impacted by Russian aggression, including Donetsk, Zaporizhzhya, Kyiv, Luhansk, Mikolayiv, Sumy, Kharkiv, Kherson, and Chernihiv. This means that at least some of the sugar beet production areas might not be good for planting in the upcoming MY 2022–23 due to current and past military activities, including unexploded munitions, minefields, etc.

The lower availability of planting area is likely to impact the sugar production figures for the upcoming MY as farmers report damage to their farms, making normal operations impossible in these regions. FAS Kyiv forecasts that in MY 2022-23 production area for sugar beets will be at 181 thousand ha, a 19% decrease compared to the previous MY. The forecasted decrease in production area will predominantly be the result of the Russian military invasion of Ukraine. Given this, FAS Kyiv forecasts the MY 2022-23 sugar beet production volume at 8.4 million mt, a 23% decrease compared to the previous year. Furthermore, there is a concern among sugar beet growers (especially small and medium-sized farmers) about the ability of processing facilities to purchase their crop. Sugar production for MY 2022-23 is forecasted at 1.1 million mt, a YoY decrease of 23%.

In Ukraine, Sugar beets are not used for alcohol production and are fully utilised for sugar production. The country exports processed sugar as a vehicle for removing excess sugar production from the domestic market, thereby preventing an accumulation of stocks. The major destinations for Ukraine’s sugar exports are the EU, Uzbekistan, Armenia, Azerbaijan, and Tajikistan. The outlook for Ukrainian honey exports for MY 2022–23 remains bleak with limited production and stocks in the domestic market. Furthermore, the military invasion by Russia has impacted the Ukrainian transport infrastructure and blocked access to all ports both in the Black Sea and the Sea of Azov, resulting in limited trade. Based on the estimates of the USDA, sugar exports from Ukraine will record a YoY decline of 50% in MY 2022–23 due to ongoing tensions. 

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