Ever since Ukraine was invaded by Russia on Feb. 22, 2022, it has been engaged in a fight for survival. At the same time, its grain producers and traders have been tackling massive logistical problems, with their main export route through the Black Sea blocked or difficult.
With high transport costs, grain producers are losing money. But traders, shippers and the military are making more routes available, and Ukraine will continue to fulfill its role as one of the world’s most important food suppliers.
Speaking from Kyiv in a telephone interview with World Grain, Nikolay Gorbachov, president of the Ukrainian Grain Association, stressed that Ukraine continues to export grain by alternative routes such as the new grain corridor.
Russia initially blockaded the Black Sea, preventing Ukraine from shipping grain through its ports. Then, the Black Sea Grain Initiative, a deal involving the United Nations and Turkey, as well as Ukraine and Russia, entered into force on July 22, 2022, guaranteeing security for vessels carrying grains and oilseeds. However, Russia withdrew from the agreement on July 17 of this year, claiming that the series of demands it had issued had not been met. It meant that river transport into the Romanian Port of Constanța, with transfer there into sea-going vessels, has become the main route for Ukrainian grain exports. Now Ukraine has set up a new route out of the Port of Odesa in which ships proceed into the waters of NATO members Romania, Bulgaria and Turkey and out toward the Mediterranean Sea.
Referring to exports as a whole, Gorbachov, who spoke to World Grain during the final week of October, said, “I hope we will achieve in this month the same as we had in the previous month — about 3.5 million tonnes. Additionally, we continue to load through the Black Sea ports, Odesa ports, and I hope in this month we will achieve about 1.5 million tonnes there.”
With the expansion of the new sea route, he estimated that Ukraine will have the potential to ship up to 3 million tonnes per month, “depending on the military situation.”
Ukraine also exports through the European Union, but the “solidarity lanes” organized by the 27 Member States have created friction with farmers’ groups in some of the EU countries nearest to Ukraine, notably Poland, Hungary, Slovakia, Bulgaria and Romania. They claim Ukrainian shipments have distorted their local market, although other parts of Europe, such as Spain, have found its maize useful to feed poultry.
In the run-up to Poland’s Oct. 15 election, its ruling right wing PiS (Law and Justice) party was keen to appease farming interests. The ploy failed with a more center-right group led by former EU Council President Donald Tusk getting enough votes to prevent PiS from forming a new government. At the other extreme, Bulgaria and Romania have stressed their solidarity and readiness to facilitate Ukrainian exports.
However, Gorbachov said that although the problem has caused much soul searching in Europe and attracted much media attention, it makes little difference to Ukraine since Poland is not — and never has been — an important market.
“I don’t expect the problem with Poland will be solved until the end of the year,” he said. “We will see what will happen when the new government starts.
“At the moment, we cannot export to Poland. But honestly, it’s not a Ukrainian market, and we didn’t expect that we would export to Poland big volume.”
He pointed to limited grain transshipment capacity at Poland’s ports on the Baltic Sea. Instead, the hope is for a continued increase in the volume of movement through the Black Sea ports.
Asked about the quality of Ukrainian wheat, Gorbachov explained that “generally the quality market is about 70% Russia,” which is concentrated on traditional markets in northern Africa.
“For the quality on the wheat, we have no problem,” he said. “At the moment it is a mass market 11.5% protein. We can continue to load.
“I do not see a problem because the biggest export product is corn and we expect to have a big crop this year. We expect about 27 million to 28 million tonnes. With our demand at something over 7 million tonnes, there’s potential for more than 20 million tonnes of corn exports.”
The International Grains Council (IGC), in its Oct. 19 Grain Market Report, released a forecast that was similar to Gorbachov’s prediction on the size of the maize crop.
“Facilitated by mostly dry weather, harvesting in Ukraine made steady progress, estimated at 22% complete,” the IGC said. “With farmers confirming good results to date, forecast production is maintained at 28.0 million tonnes (a 1% increase from the previous year).
“Amid ongoing logistical bottlenecks and seasonally tight availabilities, maize exports from Ukraine continued at a relatively sluggish pace in recent months. However, new crop supplies are now entering the export pipeline and, with ongoing efforts to expand export capacity, including the opening of new sea routes via a temporary humanitarian corridor, shipments are soon expected to accelerate.”
Its forecast for maize exports from Ukraine during the 2023-24 marketing year was 18 million tonnes, a figure unchanged from its previous report and down 38% from 2022-23 exports.
“Against the backdrop of high freight rates and ongoing security-related concerns, overall activity from deep seaports in Ukraine remained slow,” the IGC said. “In recent days, there were indications of new crop supplies being offered at around $160 fob.”
In an Oct. 24 report, the USDA attaché put 2023-24 exports of maize at 24.7 million tonnes, 8% down year-on-year. Giving a figure of around 37 million tonnes for total exports of all grains, the USDA said, “Ukraine is actively working on boosting its export and transshipment capacities, including attempting to boost the Port of Constanta transshipping capabilities, which would subsequently allow increased export traffic down the Danube River and out the Black Sea, rerouting some grain traffic to Lithuanian ports and ships resuming the use of Ukraine’s Black Sea Ports beginning in September and October 2023.”
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The USDA’s forecasts for Ukrainian exports of other grains in 2023-24 are 10.5 million tonnes for wheat, up 39% year-on-year, 1.7 million for barley, down 37%, and 170,000 tonnes of rye, up 9.4%.
Gorbachov emphasized that Ukraine is not competing with the other big grain exporter in the Black Sea region, Russia, which has a different set of priorities and markets for its crops.
“Russia exports mainly wheat, and for them the interesting market, of course, is mainly North Africa,” he said. “They are active on the Egyptian market and, of course, we compete with them on the Asian market.”
For example, the IGC reported that Russia sold 480,000 tonnes of wheat, including 300,000 of milling wheat to Egypt on Oct. 12, while Ukraine sold 500,000 to 1 million tonnes of maize to China on Sept. 28.
“We concentrate more on corn,” Gorbachov said. “That’s why for us it’s not a global problem at the moment.”
The biggest problem is the price of logistics, he said.
“It’s much higher than the price on normal routes to the Black Sea ports,” Gorbachov said.
In particular, he highlighted the extra cost of insurance for shipping.
“Of course, things are difficult, and it is our expectation that the exports for corn will be $150 ex farm,” he said. “And with the price of logistics at $100, we will need to achieve $250 on the world market. But unfortunately, the price is $215 to $220 fob Constanța.
“Our farmers are losing about $30 to $40 a tonne. What will happen? I don’t know. We have no such experience during our independence of the past 32 years. It’s an unprecedented situation.”
Small farmers will face difficulties but big agri holdings will survive because they have international support and they will continue to grow grain, he predicted.
“I think Ukraine will export grain and the international market price will not increase,” he said. “But if Ukraine does not export, of course, the price will go up. Ukraine is quite a big player. For example, all international trade is about half a billion tonnes of grain. Ukraine is about 10% to 15%, and without this volume the international price will go up.”
The results could be catastrophic, he warned.
“People around the world will see increase in price of food and most countries, even developed countries, will pay food inflation,” he said. “But in developing countries they will be hungry, and they will have shortages of food.”
The effects could include displaced populations and “a headache for politicians,” he added.
