Uncertainty is hanging over grain markets as the war in Ukraine continues. After experiencing sharp increases in the early months of the war, grain prices have returned to pre-war levels by the end of 2022. However, grain prices remain elevated as the market currently prices in a restrained flow of exports from the Black Sea. Although fortunate weather and a strong producer supply response have kept market prices from returning to early 2022 levels, tight supplies will mean greater price volatility. The Black Sea Grain Initiative -a deal allowing the safe passage of grain exports through Ukraine’s ports on the Black Sea - has been extended but uncertainty surrounding the length of the extension. It is feared that this ambiguity could keep the grain markets in turmoil.

As the volatility and uncertainty in the grain markets continue, Miller Magazine has engaged in an exclusive interview with Sergey Feofilov, Director General of UkrAgroConsult, the first Ukrainian consulting agency specializing in the agricultural sector of Ukraine and the Black Sea region. Underlining that the war in Ukraine promoted great changes in the regional grain flows affecting the global commodity trade, he said that grain exports from the Central and Eastern European countries are able potentially to fill the gap after Ukrainian exports have decreased for the next 2-5 years. In this regard, UkrAgroConsult is preparing to bring together grain suppliers and importers at EURO GRAIN HUB Exchange & Forum - to be held on April 26-28 in Bucharest, Romania. And he also hopes to welcome all market participants back to Kyiv soon for the traditional annual BLACK SEA GRAIN conference.

Here are Mr. Feofilov’s answers to Miller Magazine’s questions regarding recent developments in the grain markets:

As supposed by UkrAgroConsult, the grain deal was extended for 120 days, as stipulated in the agreement (automatically if the parties have no complaints). Russia had no objections to the extension, so according to the agreement signed in late July 2022, the deal was extended for another 120-day period. However, some uncertainties in the Russian position generate additional questions about the grain corridor activity. 

Queues cause downtime, which increases the cost of grain, oilseeds and vegetable oil for the end users. These queues might be shortened after increasing the effectiveness of the inspection procedures. 

For August 19 up to March 27, 849 vessels with 25.94 M mt of agricultural products were shipped within the grain corridor, incl.:

- 13 M mt of corn

- 7 M mt 

of wheat

- 1.3M mt of vegetable oils.

In 2023, amid the difficult economic situation in the country, the sowing costs increased rapidly by 45-50% compared to last year. At the same time, farmers’ incomes have declined, so the use of fertilizers may drop significantly due to hiking prices and finance deficit. 

The Ukrainian government and international donors launched a number of financial aid programs. Farmers can get 1 ton of ammonium sulfate under the USAID AGRO program to apply the fertilizers in spring.

Input suppliers, together with Ukrainian banks, are also offer farmers their own programs to deliver chemicals and fertilizer on credit at minimal interest for six months, i.e. until the start of the new harvest. 

Initially, after all seaport activity was stopped, commodities were exported only by land transport. Thanks to the lifting of import taxes on Ukrainian commodities, exports to the EU countries increased sharply. After the opening of the grain corridor, exports by sea recovered quickly. In October the shipment rates slowed down due to very slow vessel inspections by the Russian side and uncertainties of the grain deal prolongation in November. Another logistics disadvantage is current much less chances to export commodities (flour, beans and pulses, other niche cereals) by containers.

On the other hand, increasing volumes of commodities are exported thru Ukraine’s inland crossings at western borders with the EU countries. This promoted export infrastructure development of the country western regions.

The projected areas that fall under the definition of “requiring survey of explosive contamination and mine” can be accessed today at 2.6 M ha. It will take several years to clear completely the country of mines. The fields will also need to be leveled and reclaimed, soil fertility needs to be restored.

The share of exports by land continues to decline gradually and is now about 20% against 27-28% at the beginning of 2023. Shipments through the Danube ports increased significantly due to implemented dredging, the opening of new grain transshipment terminals in the ports. 

The war in Ukraine promoted great changes in the regional grain flows affecting the global commodity trade. Grain exports from the CEE countries (Bulgaria, Romania, Serbia, Moldova, and other) are able potentially to fill the gap after Ukrainian exports have decreased for the next 2-5 years.

Agriculture of the Central and Eastern European countries, including Romania, is becoming more and more important as grain and oilseed originating region and low risk supplier under conditions of uncertainties and logistics chain disruptions. This is in fact new position of this region, which is currently underestimated by the majority of the market players. 

In order to bring together suppliers and importers, help market operators curb global food inflation and strengthen Ukraine’s position in the world markets, a new regional communication platform was launched - EURO GRAIN HUB Exchange & Forum - to be held on April 26-28 in Marriott Grand Hotel, Bucharest, Romania. 

EURO GRAIN HUB Exchange & Forum will address the key ongoing agri market developments and deliver effective discussions and networking for all involved in the agricultural sector – from farmers, traders, input suppliers, animal and feed industry and stretching to logistics, storage, innovations, etc.

The logistics incredible rally also made the EURO GRAIN HUB Exchange & Forum team arrange a visit to Constanta port for the attendees of the event on April 26, 2023.

 

Our team believes the EURO GRAIN HUB Exchange & Forum may considerably encourage awareness of investors, traders and farmers about the necessity of the agri sector complex development in the Balkan and Central and Eastern European countries (incl. the Constanta ports facilities) to improve the supply chains and to identify for potential investors the highly promising returns in the regional logistics.

The agenda will cover such essential topics as the global and regional S&D for grains and oilseeds, re-routing of the supply chains, development of new effective logistic corridors, the future of Ukraine’s agricultural sector and plans for postwar recovery, investing in farming and processing, input markets, Mediterranean markets and North Africa and other issues.

I would like to wish everyone peace and success in own niche, resilient approach within changing markets and new productive ways of cooperation. 

Hope to welcome all market participants back to Kyiv soon for the traditional annual BLACK SEA GRAIN conference.