Ukrainian grain exports over Sept. 1-24 totalled 1.57 million metric tons, down sharply from the 3.21 million tons in the corresponding period last year, agriculture ministry data showed on 25 September, Reuters released. Traders and agricultural unions have said that the blocking of Black Sea ports and recent Russian attacks on Ukrainian ports on the Danube River are the main reasons for the reduced exports. The ministry data showed that Ukraine has exported a total of 6.2 million tons of grain so far in the 2023/24 July-June season, versus 7.5 million tons in the same period of the previous season.
Ukrainian grain is looking for exit. Although the European Commission lifted restrictions on the import of Ukrainian grain, Poland, Hungary and Slovakia expectedly introduced a unilateral ban. Slovakia banned the import of Ukrainian wheat, corn, rapeseed, and sunflower until the end of this year. And Hungary vetoed 24 products. Bulgarian parliament voted to lift the ban. According to the announcement on the government’s website, Romania is waiting for an action plan from the Ukrainian side regarding “effective export control and prevention of deformation of the grain market.” And already on its basis, appropriate measures will be taken.
UKRAINE’S GRAIN EXPORT BATTLE
Ukraine has such a plan. We are talking about the licensing of goods that will be exported to 5 neighboring states. They will have to undergo verification and approval by the Ministry of Economy. The Slovak government seems to have accepted this proposal and is ready to open its borders if such a system is effective. Ukrainian Agrarian Policy and Food Minister Mykola Solskyi and his Polish counterpart Robert Telus have discussed Ukraine’s grain exports issue, the Ukrainian government said. Such a scheme has been applying in the past quit successfully. The leaders also agreed that the Polish side would study Ukraine’s export plan and prepare its proposals. The next round of talks between the two sides is set to take place in the coming days.
Earlier in the day, Ukraine and Slovakia reached an arrangement on establishing a licensing system for Ukraine’s agricultural products instead of extending the latter’s export ban, Ukrinform reported. Ukrainian Prime Minister Denys Shmyhal said the country has submitted an action plan to the European Commission for controlling exports of four groups of agricultural produce to help prevent any market distortions in the EU member states neighboring Ukraine, IANS reported.
And Ukraine decided not to remain silent this time and filed a complaint with the World Trade Organization against Poland, Hungary, and Slovakia. But the farmers are not satisfied with this decision and went out to protest. Elections are coming and politicians use hot topic to manipulate. Meanwhile global prices to fall even after ban set.
Even after the import ban, Ukraine will have the opportunity to continue transporting goods across the EU border in transit mode. In this direction, some measures are being taken to facilitate this work to reduce downtime and make logistics cheaper.
Secondly, for the third week, Russia has been actively shelling the infrastructure of the Danube ports — one of the alternative routes that allowed the export of up to 3 million tons of grain per year. Hoping that she will stop attacking soon is like chasing yesterday. So, we have a situation where fewer and fewer companies want to buy our products through the Danube.
Thirdly, the limited logistical capabilities do not allow us to export the existing early grain harvest, and the late harvest is on the way, which, by the way, may be larger than last year’s.
CHALLENGES AND COSTS MOUNT AS DANUBE PORT EXPORTS PERSIST AMID RUSSIAN ATTACKS
Despite the Russian attack, exports through the Danube ports continue. Of course, with some problems. Grain traders say that they are forced to load grain onto wheeled barges due to the arrivals at the warehouses. However, this is not a panacea either, because it flies through parking lots. Add to this the kilometer-long queues at the Danube ports. A day of downtime is a dollar of cost per ton. Freight rates have also increased. As per Latifundists’s contributors, the freight rate from Izmail to Constanta remains at the level of 44€/t. For comparison: before the shelling, it was possible to charter a barge at least twice cheaper. There are also queues. There are 600 barges in the waiting area, the waiting time is 20 or more days. The increase in volumes is restrained by the congested port infrastructure in Constanta. The company has even moved its tug there to supply barges, but additional anchorages, cranes, etc. are needed. the transshipment process still slows down. There is a shortage of cranes and anchorages for marine vessels. According to his information, more than 700,000 tons of agricultural products are delivered to the Romanian port by barge caravans every month. If Constanza allows the development of raid transshipment, the annuals are ready to increase volumes by another 500,000 tons. Dan Dolghin, director of the Comvex terminal (Romania), said during the Trend and Hedge Club that transshipment in Constanta can be increased by 25%, but there is not enough storage capacity for this. There are certain infrastructure improvements in Constanta: railway tracks have been repaired; grain storage capacity has increased. But no one is building new silos, because investors believe that after the victory in the war, the existing grain flows from Ukraine will disappear. Until the construction of these silos is finished, Ukraine will be able to export through its ports,” notes Dan Dolgin. He also confirmed that the cost of transshipment in Constanta is much higher for Ukrainian exporters than for Romanian ones. But this is explained by additional costs for cargo registration. According to him, even this surcharge gives a lower price for transshipment at the port of Constanta than what is currently available in Reni and Ismail.
It is already known that Poland is preparing to transfer veterinary control from the border to the ports. According to the Deputy Minister of Agrarian Policy and Food of Ukraine, Markiyan Dmytrasevich, Ukraine already have experience when agricultural production checks on the border with Poland were almost never carried out. At that time, it was possible to export 800,000 tons of grain per month across the Polish borders. In August, this figure was 500,000 tons.
Almost no veterinary control is carried out at the border with Hungary. Due to transitions with this country, Ukraine exports up to 500,000 tons per month (in August it was 300,000 tons).
As of September 17, the total average daily transfer of grain and processed products in the direction of the western border was 485 wagons per day. Ukrainian market participants told to Latifundist that rates for rail transportation in Ukraine and Europe have not changed much, but until January 2024 there is a significant shortage of free trains in Europe. It is known that the Ukrainian side has reached an agreement with Moldova regarding discounts for railway transportation on its territory.
Bulgaria is looking for a scheme for the rapid transportation of grain by trains to Greek ports. Prime Minister Nikolai Denkov stated that it is possible to load grain into Bulgarian trains at the border with Romania, transport it through Romanian and Bulgarian territories and unload it in Greece. Although Bulgaria itself has two ports of its own - Varna and Burgas. The latter has a storage capacity of 120,000 tons. It is also known that about 100,000 tons of Ukrainian corn and wheat were exported through the Croatian port of Rijeka per year. Grain is brought here by trains through Hungary. Croatia also has the ports of Split and Zadar. However, all three are less deep-water, have small storage capacity and are more expensive to bring here than, for example, to Montenegro.
The leader in the transfer of grain by rail across the western borders is Romania. As Valery Tkachov, deputy director of the commercial department of Ukrzaliznytsia, told Trend and Hedge Club, about 115 wagons with grain are transferred only through Romanian connections (although last year there were 200). For example, Poland transmits only 91 wagons on four joints, Slovakia - 76, and Hungary - about 90. But the Romanian-Moldavian connections are involved in only 44%. For example, 120 wagons can be transferred along Vadul-Syret, but only 78 are transferred: from the border, trains move very slowly to Constanta and are slowly unloaded there, because on their way they meet European cargo flows.
Valery Tkachev says that there is a way out of the situation: for this, it is necessary to increase the absorption of grain cargo overload in the port of Constanta. Does not stop trying to return the “grain corridor” of the UN. He even conducts secret negotiations with Russia. In turn, Ukraine does not hope for any grain corridor and under daily missile and drone attacks has developed its own alternative temporary corridor, through which few vessels have already left the ports of Great Odesa and successfully reached the ports of their destination. So now the alternative corridor works for both exit and entry. And according to the latest information, operators are now conducting active negotiations with shipowners regarding the fixing of large-sized vessels in the direction of Odessa ports. Situation is very similar to what we observed in the beginning of Corridor: some brave captains have to show that the rout is safe.
FARMERS NAVIGATE LIMITED STORAGE AND MARKET UNCERTAINTY
Lower exports pace means bigger stocks. Grain on stock is like frozen money. Could it mean that next campaign seeded areas will be lower again?
War-weary Ukrainian farmers are cutting down on winter crops. At the beginning of August, Bloomberg published an article with this title. The reasons are still the same — limited storage capacity and uncertainty about market prospects. Some experts assumed that 1.5 million hectares will not be sown with winter crops this year. However, the Ministry of Agrarian Policy recently reported that the area under winter crops is not expected to decrease, but on the contrary, they will even increase. According to the results of the ministry’s survey, in which more than 2,000 farmers took part, almost half (45%) do not plan to significantly reduce the sowing of winter crops, 38% will be able to increase the sown area, and only 14% will not sow winter crops at all. The Ministry of Agrarian Policy says that in 2023/2024, the sown area under winter crops may increase by 0.5 million hectares or by 8% compared to the previous season due to the expansion of the sown area under rapeseed. Under this culture, the area can increase by almost 40% — up to a record 1.9 million hectares.
Some agricultural holdings do not share the ministry’s optimism. It’s a long way to go. And not easy one, but Ukraine keep going.