Urgent solutions sought for wheat exports from Ukraine

Ukraine has an estimated 25 to 30 million tons of grain in urgent need of moving as the next harvest approaches this year.

European Commission President Ursula von der Leyen said in late May that wheat exports from Ukraine fell to between 200,000 and 1 million tons per month, compared to the 5 million tons of wheat exported by sea before the war began could .

So far, Ukraine has established two export routes through Poland and Romania as its own ports have been closed since Russia invaded in late February.

The port of Constanta in Romania has a storage capacity of 1.5 million tons and has the fastest grain handling terminal in the EU. Constanta port authorities have reported that by the end of June 616,000 tons of Ukrainian grain will have been shipped through the port.

However, the pace and price of Ukrainian grain passing through Romanian ports is problematic due to several logistical challenges. Grain transit to Romania involves transporting it by rail to ports on the Danube and loading cargo onto barges for passage to the port of Constanta.

Transporting Ukraine’s agricultural products by rail to ports in Romania is costly and time-consuming. The railway border crossings have limited capacity for rail wheel exchange, as the Ukrainian 1,520 mm gauge rail connects to Russia rather than Romania, where the railways are 1,435 mm gauge.

Daejin Lee, senior shipping analyst at S&P Global Market Intelligence, commented, “The grain export volume from Ukraine during the Black Sea grain harvest season beginning in the third quarter will be quite limited and global grain shortages, particularly wheat, are expected to continue in the near future Future. This supply chain issue will remain the biggest upside risk to food inflation in the coming months.”

“Considering the large quantities of grain that need to be exported from Ukraine and the lack of storage space for grain, many countries in Europe and beyond have been discussing solutions to take Ukrainian grain out of the country,” reads a new dry cargo report from brokers BRS explained.

Odessa-based Black Sea consultancy Informall BG pointed out that a significant part of Ukraine’s grain is expected to continue to flow towards Polish and Lithuanian ports on the Baltic Sea, as well as Constanta. However, their terminal capacity is also limited, especially during the harvest season.

The Bulgarian port of Varna has re-emerged as one of the potential gateways for Ukrainian agricultural exporters, but Informall argued that compared to Constanta, Varna is only accessible by land and to handle similar volumes as the Romanian port would need to receive over 4,400 loaded trucks in the same period or at least 1,660 rail cars.

“Despite Varna’s proximity to Ukraine, the land corridor connecting both countries is underdeveloped, which poses serious logistical challenges for exporters willing to transport a significant amount of grain through the port,” Informall BG pointed out.

This week, the US announced its intention to help build temporary silos on Ukraine’s borders, including Poland. With little storage space left for the next harvest in Ukraine from the end of July, new silos can ensure higher storage capacity and facilitate logistical transfer from trucks to silos and then take them to the ocean to be exported across Europe and the rest of Europe become the world.

The United Nations has held talks with Russia, and separately with Turkey, to try and strike a deal aimed at restoring safe grain exports across the Black Sea. However, given the dangers of shipping in the war-torn waters off Ukraine, BRS warns that the cost of insurance for any vessel navigating the Black Sea shipping lanes would likely be very high.

In terms of wheat news, it looks like the drop in export volumes from Argentina will add to the global wheat shortages already being felt in global markets.

“It now appears that Argentina’s chance to fill the gap left by Ukraine is slipping, as the export ratio has been cut by 31% and the 2022/23 wheat harvest is likely to be the worst in 12 years,” commented Niels Rasmussen, Chief Shipping Analyst at BIMCO.

Argentina was the sixth largest exporter of wheat in 2021, accounting for 7.2% of global export volume. In the first four months of 2022, the country exported 9.5 million tons of wheat from the record 2021/22 crop.

In March 2022, the Argentine government set a wheat export quota of 10 million tons for the 2022/23 marketing year to stabilize domestic prices and fight double-digit inflation.

“At best, Argentina’s exports for the 2022/23 marketing season will therefore fall by 6.4 million tons. At worst, delays in wheat planting due to drought, particularly in the Northeast, raise doubts as to whether the full export quota will be met,” Rasmussen said.

About admin

Check Also

Further TCAT service cuts this week due to bus maintenance bottlenecks

Tompkins Consolidated Area Transit (TCAT) said earlier this month that “a maintenance backlog on buses …