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A worker loads a truck with grain at a terminal during barley harvesting in Odesa region, as Russia's attack on Ukraine continues, Ukraine June 23, 2022. Photo REUTERS/Igor Tkachenko

A worker loads a truck with grain at a terminal during barley harvesting in Odesa region, as Russia's attack on Ukraine continues, Ukraine June 23, 2022. REUTERS/Igor Tkachenko

Third Of Ukraine Crop Exports Wiped Out After Black Sea Block

Bloomberg
Total Views: 2579
August 19, 2023

By Áine Quinn and Olesia Safronova

Aug 19, 2023 (Bloomberg) –The Kremlin’s efforts to paralyze Ukrainian food shipments are succeeding, with a third of the country’s crop exports wiped out since its Black Sea ports were effectively blocked last month. 

The drop marks a significant setback for Ukraine’s economy and global food security, even with a €1-billion push by the European Union to build out alternative routes since the start of Russia’s invasion. The US this week said it’s working with European partners to keep grain exports flowing, relying on rivers like the Danube and other avenues after sea passage has become unsafe.

“The key question is the river ports,” said Evghenia Sleptsova, senior economist at Oxford Economics. But ramping up volumes through those could prove difficult “now Russia started bombing Izmail and Reni,” two ports along the Danube which were attacked earlier this week.

Ukraine was only able to export 3.2 million tons of grains, vegetable oils and meals in the four weeks through August 15, down from 4.4 and 4.8 million tons in May and June when the Black Sea deal was still in place, according to estimates from analyst UkrAgroConsult. Crop stockpiles are now expected to swell through next year as better-than-expected harvests face fewer routes to market. 

Even in wartime, Ukraine is still an important grain exporter globally, and the Black Sea deal that Russia quit on July 17 helped calm global prices and maintain flows to consumers. Russia’s own grain trade is benefitting from Ukraine’s weakness. Its crop exports are booming, and are expected to make up nearly a quarter of global wheat trade in the 2023-24 season.

Ukrainian President Volodymyr Zelenskiy said that within a month after the grain deal broke down there have already been seven attacks on ports with drones and missiles, signaling how challenging it has been to find reliable workarounds.

There are also logistical hurdles: It takes four times as long for some cargoes to get to the Danube now compared to a month ago because of traffic jams, according to Alex Lissitsa, member of the board of Ukrainian Agribusiness Club.

The delays and smaller shipment volumes are also leading to higher transport costs. Olena Vorona, operational director at the supplier Agrotrade Group, said her company completely reoriented flows to Danube ports and railways even before the grain deal collapsed, but transport costs are up to 50% higher.

“In many regions, farmers will most likely think about reducing the sowing of winter cereals, because the prices offered by the market do not cover the costs,” said Lissitsa.

Meanwhile, Ukraine’s railroad operator said that waiting times at border crossings toward European countries are currently about 5-6 days. Its chief, Yevhen Lyashchenko, told Bloomberg it’s preparing for rail exports to increase.

That might not be enough to stave off a broader slowdown, though. Ukraine’s grain and oilseed exports could fall by a quarter in the second half of the year compared to the first half, according to Oxford Economics’ Sleptsova.

“That would be a drag of 3% on Ukraine’s gross domestic product in the second half of the year,” she said.

–With assistance from Megan Durisin and Irina Vilcu.

© 2023 Bloomberg L.P.Share

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