Ukraine turmoil threatens farmers and global markets

It is no longer the weather that most concerns Leonid Gensitsky. Like many of his fellow farmers in Ukraine, the biggest threat to his crops these days comes from the severe cash crunch wrought by months of political crisis. With prices for petrol, equipment and seeds all soaring, daily life for Ukrainian farmers has become a real struggle -- with knock-on effects not just for the local economy but for markets across the globe. Ukraine's vast swathe of "black earth" is among the most fertile regions on the planet, making the country the world's third biggest producer of maize and sixth for wheat, according to the International Grains Council. But months of political turmoil and a bloody rebellion that erupted in the east early last month have left many farmers in dire straits, unable to tap loans and invest in the usual way. "My problem is that I don't have any money in my bank account. I haven't got anything left aside," said Gensitsky, who runs a 300-hectare (740-acre) farm in Oleksandrivka, a village to the west of Slavyansk, the epicentre of the violence. That leaves him at the mercy of the elements, with no fall-back option if bad weather or outbreaks of disease hit his crops. "Before, I had no problem buying petrol, but that is no longer the case. Now, life is difficult. I have to minutely calculate every expenditure," he said. Like many others, he has been forced to plant less maize, a crop which requires expensive anti-disease treatments. And it's not just money worries that are preoccupying the farmers, either. "I know a farmer who had some of his cattle stolen by armed men in masks," said Gensitsky. "What guarantee do I have that the same thing won't happen to my crops?" "Many farmers are being throttled financially. Many rely on credit, but the interest rates at the moment are often as high 25 percent," said Grigory Bukhanchov, a cereal farmer and head of the farmers' association in Oleksandrivka. - Falling harvests - The tumultuous events of the past few months have created a banking and financial crisis for a country already in recession, making it all but impossible for many farmers to take out loans.   "The current uncertainty is turning people away from investing," said Bukhanchov. "We know that a number of farmers are saving money by buying local seeds, and particularly fertiliser, rather than importing from abroad -- and that will lead to lower yields," said Edward de Saint-Denis of French brokerage Plantureux, which specialises in agriculture. Ukraine's maize production is expected to drop to 23.3 million tonnes, down 18 percent on the last harvest, according to monitoring agency Agritel. Wheat is forecast to drop 16 percent to 18.3 million tonnes. "Ukraine is a major factor for global wheat and maize markets, and even if exports are not affected for the moment, the fear is that a civil war hinders purchases for the new season," said de Saint-Denis. Analysts say increased maize production in other countries -- particularly China -- is likely to keep global prices down. But wheat may be a different story, with prices having already jumped 30 percent since February, in large part driven by tensions between Ukraine and Russia. On the ground, farmers wait anxiously, watching not just weather forecasts but political events to see how their precarious finances will bear out. "For now, I still have enough," said Gensitsky. "But I don't know how long it will last."