End of the year. What should be noted for the next season and we show our acreage breakdown on slide number seven, is because of the export bottlenecks and the bulkiest export crop is corn, we made a decision to reduce acreage on the corn from 59 to 38 thousand hectares. We increased our acreage for wheat and we increased our acreage for oilseed crops such as soybeans and sunflower seeds because these can be processed domestically. On the soybean side, obviously, we crush it at our own plant. There was a recent change in the market environment since the Ukrainian government introduced licensing for wheat exports. Previously, there was a ban.
Now, we are allowed to apply for license and export both corn and wheat, the most important crop commodities in Ukraine. However, the export bottleneck means that overland routes capacity is only currently a quarter of what used to be through the seaports in Odesa, Mykolaiv and other smaller ports in Ukraine. Going to the sugar production side. Sugar sales volumes were lower because some of our industrial clients either stopped production or had to reduce it. For example, Coca-Cola plant in Kyiv region was severely damaged in the first month of the war. However, we are now focusing on retail sales of our products.
Here, we can see significant demand because sugar is a commodity which can be kept in storage for a longer period of time. Because of the logistical problems to deliver certain food products across Ukraine, it is easier to transport and distribute for humanitarian purposes. Again, lower sales and a lower margin, but quite decent volumes. If we are turning overall to the situation in the market, we can see that the new planted area under sugar beet is down by almost one-fifth. This is probably reflective of the amount of people who unfortunately had to temporarily leave Ukraine.
The domestic demand could be lower while the situation continues. Of course, in these circumstances, the prices are still significantly raised. The domestic prices for sugar in Ukraine are higher than international ones, and that is favorable for our PNL. We faced a sugar export ban from Ukraine in March, but that was lifted by the Ukrainian government. Recently, the EU announced its intention to remove all trade barriers and quotas for imports from Ukraine, including sugar. We hope that this decision will come into force very soon, and we will be able to increase our sales, including exports.
On soybean side, we had to temporarily suspend operations of our crusher during the first several weeks of the war. Then we restarted productions when we found a way to ensure safety of our operations and of our personnel. We can see quite good results on the margin side. The reason is because domestic demand for our soybean products is probably higher than before the war because livestock producers in Ukraine lack sunflower meal supply from sunflower seeds crushers which had to stop their operations.
Therefore, there is a higher domestic demand for soybean meal, which is our co-product in the soybean crushing side. Very briefly on the cattle farming, prices, revenues, and margin are doing quite nicely, despite the situation. This is because there is a big push by the Ukrainian government and all large scale Ukrainian businesses to continue business and earn revenues and tax revenues for the Ukrainian state. Our industrial consumers of milk, such as Yagotynske, Lustdorf, continue to produce dairy products for Ukraine. Our raw milk that is produced by our farms is in high demand. We can see that our profitability even looks better compared to the first quarter of last year.
We would like to say that, despite the current environment, we operate business as normal. Of course, this is not true. We are doing most what we can in the current situation, and we hope for the resolution on the seaport side so that we can have certainty with our grain exports. Which is something shared by the market in general and by the global community which demands Ukrainian grain to be released into the global market to calm down the global inflation and food security concerns. Something we always also show in all our communication with investors and analysts alike, we have a humanitarian project.
Because of our operations are located across Ukraine, we are able to deliver humanitarian aid directly to the most affected areas by military hostilities. If you have anyone who can become a partner, provide such assistance to Ukrainians in kind or via financial means, please do contact us. We will never get tired of doing charity work on top of our day-to-day business operations. With this, I would like to turn the floor to the Q&As. It would be helpful if you send us questions into the chat box because we know that some lines can be quite noisy. I don't see any yet, but if
Yes.
Yes. Hello.
Hello, this is Paul.
Right. There was a quite lively debate on this topic at the grain conference taking place today actually in Switzerland. The Ukrainian government, the Ukrainian side, pointed out a range of numbers. Some market participants count the total Ukrainian grain storage capacity at 50 million tons, but some believe it is 65. It all depends or whether the storage capacity is stationary, well-equipped with all handling, drying and other services, or this is just a floor storage with less conditions for longer storage. Also, there is a range which the market was voicing today, which storage capacities are within the occupied areas, and the number also ranges from 7-12 million tons out of 50-65.
If we are talking about Astarta, we have invested heavily in our storage network, and this is more than 550,000 tons. We also have capacity to store some grain in so-called sealed sleeves or bags. This is the storage technique which is very widely used in South America, whereby treated corn can be stored in this long plastic bags, not in ordinary silage facilities. For us, we believe that we are fully self-sufficient for the grain storage. We pointed out today that our acreage under corn, which is much bulkier than wheat, will be lower.
We need less capacity for corn, and some of corn harvest will be stored in these sleeved bags.
If I correctly understand, there should be no problem with storing the upcoming harvest when it's collected until the next year, correct?
According to our traders, if grain is properly treated, wheat can be stored for several years. Corn can be stored for two seasons. The only problematic crop is sunflower seeds, which is 12 months. From this point of view, Ukraine does not have much of a problem of storing grain stocks. Of course, sunflower seeds and crushing activity needs to be at a larger scale to not waste sunflower seed harvest.
Okay, it's not about the storage capacity, it's more about the sunflower seeds that needs to be crushed within 12 months, correct?
Yes, correct. Grain, there is no problem with storing grain. There is problem with storing oil seeds. This is mainly about sunflower seeds, because soybeans are crushed immediately, domestically.
Mm-hmm.
Mm-hmm.
That's perfect. Could you please remind us what's the current export capacity of Ukraine in terms of the grain export through the western border? You've mentioned during the last conference call that it was 0.5 million tons compared to 5.7 million tons in the pre-war period. What's the current export capacity, and when do you expect it to be increased? We're speaking only about the western border railroads and roads.
This is still a big question mark. According to the Ukrainian Railways, the first two weeks of May, they were able to transport one million tons of grain, and this is only two-thirds of potential capacity. One should bear in mind that grain volumes is only up to 15% of the total rail cargo crossing the border. The rest of the cargo is coal, iron ore, and metals exported to historical clients, to Europe from Ukraine. To increase volumes of grain exports, there will be a bigger push to increase the share of agricultural produce in the total freight, but this is a highly political issue, so we do not know how it will be resolved.
Also, Ukrainian railways believe that even at current share of agricultural produce, it can be increased by one-third if on the EU side, there is more urgency and communication between the two sides to reach a higher capacity. With regards to the road transport, this is still work in progress, and it is very difficult to estimate what the capacity could be, because neither on the Ukrainian side or European side, there is any monopoly. Ukrzaliznytsia is a rail monopoly operating in Ukraine. It is much more centralized, and can plan its activities with a higher precision. On the road truck side, there are various standards which are different between the border states.
For example, there are ecological standards for the trucks and, in Romania, these ecological standards were for Ukrainian truck drivers were accepted lower than in Poland. We know that the Ukrainian government is talking to the governments of all four countries with which Ukraine borders, so that there is a lower ecological standard and higher capacity for the road transportation. There is no public estimate of the maximum capacity that we have come across yet.
If I may clarify, first two weeks of May, one million tons of grain has been exported through the western border. This is two-thirds of the export capacity through the railroads as far as the crops are concerned. In fact, that's only half of the entire export capacity because the other half is for the metals. Correct? Because this would mean that-
I don't.
Because if in the first two weeks, Ukraine managed to export one million tons of grain, by proportion, that would mean that within a month, you should be able to export two million tons, and that's only two-thirds of the railroad export capacity. That's correct, right?
Again, 15% of the rail cargo is related to agricultural produce.
Mm-hmm.
It can be increased by one-third just by being more efficient between more efficient communication between the railways on two sides. This is what we understand the message from Ukrzaliznytsia at the moment.
Okay. In total, per month, you can export at this stage two million tons of grain, if in the first two weeks, one million ton was exported. This two million tons can be increased further by one-third, if the efficiency gains come.
This is not a question to us. I'm sorry. This is a question to Ukrzaliznytsia.
Okay. Okay, cool. My last question is regarding your financing. Until when have you secured your financing? In terms of your liquidity position, how confident do you feel? Are you considering any measures aimed at boosting your liquidity as Kernel has done recently by selling one-fourth of its land bank?
I will start replying, and then I will also ask if our CFO would like to add. We have a very healthy balance sheet, so we don't need to divest any assets to tackle any problems on the balance sheet. Also, if you look at our disclosure note in the financial statement for the first quarter, we stated that we have secured financing for the second quarter and partially some financing for the third quarter. Maybe Mr. Hlotko can add to this.
Astarta demonstrated strong liquidity in this very difficult environment. I would say that we probably one of the few Ukrainian companies in this situation who received immediately support from local and western banks in the amount we needed. We have cushion of liquidity at the moment from banks' limits. However, at the moment, we don't use them because it's not needed. We build it for the stress scenario, as you asked, what will be in case if logistics will not allow export. We are preparing for this scenario as well. So far, we're quite sure that we will be able to mitigate visible risks which appears from this part of the business. Right. Thank you.
Perfect. Thank you. That's all from my side.
I've just opened the chat box. There is, well, several questions, four questions from one gentleman. The first one, could you comment on the risk if grain exports by sea were difficult longer than until autumn 2022? Market sources say that then Ukraine will have to deal with a limited amount of storage space. What does it look like for you? Do you have enough warehouses to accommodate for currently stored grains and harvest? I think we actually replied to this question. We have large storage capacity, which we previously built, and we were planning to use it for our in-house stocks as well as for third-party stocks. But it is ample storage. With reduced acreage under corn, we feel comfortable.
Additionally, specifically for corn, we will be purchasing sealed bags in which corn can be stored outside stationary storage for more than 12 months. Second question, what is your ability to finance working capital if grain exports by sea are not possible if in the fall you need additional working capital to finance the sugar campaign? I think Mr. Glotki has just answered this question. In the soybean oil production segment, I understand that currently it is not possible to export the oil overseas. It is possible to export oil same transit route with rail systems by rail. Unfortunately, Ukrzaliznytsia is still finding out how to increase this tank capacity.
The amount of oil, sunflower oil, and soybean oil leaving Ukraine in the last month was very low, but they are looking at increasing the oil passage along with grains. How does the refund of overpaid VAT on exported products look currently? VAT reimbursement? I will pass this question to Mr. Glotky, please.
Yeah. Since the beginning of the war, VAT was not refunded. However, at the moment, there is a draft of the law in the parliament, which foresee that it will be restored in June, and it's waiting for the signature of the president. We will see how it will happen. At least, there is expectation that it will be renewed.
Next question: What is the price inflation for the seeds for the next season, especially for sugar beet and corn? We are talking about general input inflation, and this is for all inputs, seeds, pesticides, fuel, fertilizers. Seeds is something that, Ukraine, actually is very well supplied, at least for the spring planting, which is close to finishing in Ukraine. The biggest concern on the input side is not about the seeds but about fuel. Next from Martin: Sugar export, is it logistically possible as of now to export sugar from Ukraine? Is there any demand for Ukrainian sugar abroad, given relatively high cost of production in 2021 campaign? Again, Ukraine never had sugar exports into the EU without import quotas, and any free trade.
This will be a new environment for us, and we hope that it will be favorable for Ukraine. Logistics is the same, but truck transportation is probably easier for sugar than by rail. We have to see how the prices develop. This question is not practically relevant yet, but we hope that in couple weeks' time there will be free trade with the EU, and we will do all our calculations. Grain export, was Astarta able to sell any grain volume since start of the invasion? Yes, of course. We are able to sell our grain. March was a logistical shock month for everyone.
Also the Ukrainian government in a not very helpful way introduced bans and then licenses, so the market is only starting to get on its feet in April. We believe that in the next couple months we have higher volumes of sales of grain. Sunflower, could you please clarify, as I might have not catch that earlier, whether sunflower can be crushed in your soybean facility? No, we don't have a multi-seed crusher. Ours is mono-seed, soybeans only. We only crush soybeans and sunflowers that we grow can be crushed by third parties. That would be on commercial purchase arrangement or we can try to do tolling processing for us.
This is something which is subject to calculations for the new harvest. Next from Natalia: Could you please comment on volumes of crop sold exported to date in April/May? Natalia, to be honest, I would rather hope that we have firm numbers in the second quarter. Once we announce them, we will have firm numbers. It's not very productive to comment on something which is work in progress, and we're in the middle of May. Have you already considered contracting gas for sugar refining season in the fall? Yes, of course. We typically start contracting gas in advance. This is a time when we are doing it already.
We also would like to point out that one of our sugar mills is running on coal rather than gas. We are in a relatively safe position. How much transport capacity by truck can be utilized today, next few months to transport grains? We are still in the discovery process. As I mentioned, certain standards for drivers need to be lowered by all border countries of Ukraine, which is Hungary, Slovakia, Poland, and Romania, for their drivers to enter. Or for transit through other countries. This is on Euro standards, this is on tachograph standards, also on weight standards, because trucks are about road safety.
Here, the situation is resolving on a slower pace than with rail. What is your view expectation when the Odesa port will be reopened for grain transport? This is obviously a very big question. What we hear publicly that Ukrainian government is talking to United Nations and other countries trying to find a solution for some humanitarian escort of grains out of Ukrainian ports. The amount of grain currently stuck in seaports is more than four million tons, which is a big amount of grain for the global trade. Question is whether politically anything can be agreed with the blocking side.
also the question, if there is a political agreement to do escort of grain exports out of Odesa, whether how long the demining process takes place because the area around ports has been mined by both sides, Ukrainian and Russian, and that may take some time. Are you considering any CapEx needs? We put all development CapEx projects on hold very naturally in current environment. Our CapEx is mostly maintenance related, which is crucial for our operations. You can see in our first quarter results these are very modest. We highlighted during our previous calls that CapEx in the agricultural area was mainly replacement of the agricultural machinery. That was a five-year program, and it's not massive.
Our soybean crusher is a new plant which doesn't require much maintenance, CapEx. In the sugar production, we also spent quite significant CapEx in the past years on upgrading our operations. Cattle farming is not capital intensive, so the chunky CapEx that we previously planned was related to our development projects such as soybean concentrate plant. We had to put it on hold for obvious reasons. Currently, our CapEx is very small, and in the first quarter 2022, it's even negative given that we sold small assets in the first quarter. Another question from Martin. In the export logistics chain via land borders, how the split of additional cost looks like between farmers and traders?
How large is this additional cost? To be honest, I would not give some, you know, different numbers because question is whether this is a transit to Constanta, and then it goes to the Asian market, or we found consumers and off-takers in the Spanish market for corn, for example, or in the Netherlands. This is something that will be better reflected in the second quarter results. You will see our S&D costs on the agricultural side and this will be something verifiable. At the moment, we don't have, you know, an entire picture.
With the current export rail capacity in place, how much cash burn do you estimate to incur per month, roughly excluding working capital swings? To be honest, I don't understand the question. I think excluding working capital swings is not very good approach, because Astarta's operations are all seasonal. For soybean crush and milk, both sugar and agricultural operations are highly seasonal, so working capital swings are very significant. Yeah. Trying to exclude working capital swings is like excluding our two major business segments out of calculation. I don't think this exercise is useful. Are your current exports enough to cover your fixed costs today?
You can see from the first quarter results. We will see how we finish the second quarter. We are still in the middle of the second quarter. Let's just live through the next six weeks, please. Unless Mr. Hlotko would like to add anything to this.
Yeah, we have, as we mentioned last investment call that we completely cover our fixed costs by our local sales from sugar and milk. From point of view of this perspective, we have enough liquidity from local sales.
Well, thank you very much everyone for your questions. I can see that the chat box is now complete. If you have any additional questions, please feel free to drop us an email and we will arrange for a separate call or answer in writing. Thank you very much again, and have a nice afternoon. Bye-bye.