Ukraine says it still has export options

Ukraine still has plenty of export capacity despite the demise of the Black Sea Grain Initiative, according to a leading Ukrainian farm organization.

Russia’s withdrawal from the pact means Ukraine will have to increasingly rely on its river ports, rail and truck to get grain to market, and there have been vast improvements in all three.

The country is pivoting to make more use of its ports along the Danube River to move product to Romanian territorial waters in the Black Sea, which is how grain was shipped before the grain deal was signed.

“In addition, there are rail routes for the delivery of Ukrainian agricultural products to the Black Sea and Baltic ports of Europe,” the Ukrainian Agrarian Council (UAC) said in a news release.

The good news is that inland transportation logistics have improved. Ukraine has the capacity to move one million tonnes of grain per month by rail and another 600,000 tonnes by road.

The Danube ports ship two million tonnes per month and could reach three million tonnes because of an agreement with Romania to increase the number of pilots on the Sulina Canal and to work around the clock starting in August.

“Thus, while in 2022, only two million tonnes of grain could be exported monthly via all three routes, now the land and the Danube can export about five million tonnes,” said the UAC.

SovEcon analyst Andrey Sizov agreed the shutdown of shipments out of Ukraine’s Odesa ports is not the “game changer” the media is suggesting.

“Ukraine can ship 40-plus million tonnes of grain via other routes, and that more or less matches their 2023-24 export potential,” he said in a tweet.

“The almost-forgotten Danube has been expanding rapidly since the start of the war. In recent weeks, for the first time, they loaded two Handysize ships.”

Sizov is worried about a potential Russian attack on Ukraine’s Danube terminals, although he thinks the chance of that is low.

“The Kremlin clearly doesn’t want to mess with NATO, and Romania is very close,” he said.

Ukraine could also level more attacks on the Crimean bridge, disrupting Russian shipments from its Azov or Novorossiysk ports.

“If something big happens here, we could see a rally similar to Feb/Mar 2022,” Sizov tweeted.

“Russia has almost 50 million tonnes of wheat to ship.”

But other analysts are taking out the eraser for the export column on Ukraine’s supply and demand balance sheets.

MarketsFarm analyst Bruce Burnett said there is limited opportunity for the country to ship grain through other channels.

The European Union has banned imports of Ukrainian wheat, corn, rapeseed and sunflower to Bulgaria, Hungary, Poland, Romania and Slovakia through Sept. 15, 2023.

Those five EU countries recently released a joint statement saying they intend to extend the ban until the end of the year.

Burnett believes the United States Department of Agriculture will have to drop its 11 million tonne Ukrainian wheat export forecast by two to three million tonnes.

“If we get into a real missile-flying thing, it might knock out all their abilities to export,” he said during a market outlook presentation at the Ag in Motion show in Langham, Sask., held July 18-20.

Ukraine has the capacity to store 44 million tonnes of grain. There are nine million tonnes of carryover from last year, so there is plenty of room if exports falter.

The UAC acknowledged that the ports on the Danube River can’t match the volumes of grain moved by the country’s Black Sea ports.

For example, the Kydonia vessel left the Port of Chornomorsk on June 3 with 76,000 tonnes of corn heading to China.

Two weeks later, the Blue Gate vessel departed the Port of Reni on the Danube with a record 15,000 tonnes of the crop.

“One sea vessel is equal to five river vessels,” said the UAC.

That means it is far more expensive for exporters to ship grain by river, rail and road.

“The inability to make a profit from exports has direct consequences for the future of the agricultural market as it means a lack of funds for fertilizers, seeds, equipment and labour costs for next season,” UAC chair Andriy Dykun said in the news release.

The UAC said it is still “theoretically possible” to ship some of its grain through its Black Sea ports.

It could be accomplished with the help of Turkey, a NATO member that maintains diplomatic relations with both Ukraine and Russia.

“Together, the countries can create alternative routes for vessel traffic so that it goes as close to the shore as possible and provide escort for ships with mine sweepers,” said Dykun.

That happened before the war when Russia began training in the Black Sea and Azov Sea.

A lot will depend on rates insurers charge vessel owners to do business in Ukraine’s territorial waters.

The Ukrainian government recently provided a guarantee fund of about US$500 million for ship owners if their vessels are damaged while in Ukraine’s territorial sea.

The last vessel left the Port of Odessa on July 16, but ships stopped arriving in the port in June, about one month before the deal expired.

Ukraine has shipped out 32.9 million tonnes of grain through the Black Sea Grain Initiative since it was launched on Aug. 1, 2022.

That total includes 17 million tonnes of corn, nine million tonnes of wheat and one million tonnes of canola.

The top three importing countries are China at eight million tonnes, Spain with six million tonnes and Turkey buying 3.2 million tonnes.

Tags: Black Sea, rail, Market, vessels, river ports, Danube River, Ukraine, Black Sea Grain Initiative, Russia, grain deal, export, truck, grain, Romania