March 11, 2015

Soaring interest rates in Ukraine have make borrowing so costly that growers are not able to produce crops, and the country is likely to see the largest decline in its corn harvest since 2005.

Ukraine is the world’s third largest corn shipping country after the U.S. and Brazil. Over the past five years the country has tripled its corn output and shipments from its most recent harvest are expected by the U.S. Department of Agriculture (USDA) to be 18 million tons, up from 5.1 million tons in 2009. However, the country’s corn production this season is forecast to fall by 19% to 23 million tons according to the Macquarie Group Ltd in London.

After the Ukrainian government raised interest rates to the highest in the world at 30%, the country’s corn farmers, which usually require credit to cover approximately half of each year’s productions costs, are not able to purchase the imported fertilizers and pesticides needed, and are opting for cheaper, lower-yielding seeds. Banks are unwilling to grant loans, and government loan subsidies are not enough to make a difference.

The country’s wheat crop will be less affected because it was planted in the fall of 2014, prior to the escalation of conflict with Russian separatists and economic fallout. Wheat output is expected to fall by 11% to 22 million tons, and total overall grain output, including corn, wheat and barley is forecast to fall by 10% to 55 million tons according to UkrAgroConsult.

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