Sector News

Ukraine may lose $6 b in grain exports amid Russian port seizures

April 9, 2022
Food & Drink

Ukraine could suffer around $6 billion in lost revenues with its exports of wheat and maize taking a blow from Russian forces laying siege to the country’s ports on the Black Sea, newswire Reuters reports. The country’s plans to ship around 20 million tonnes of the cereal grains have run aground, with the consignments estimated to be valued at $300/tonne. Ukraine is the fourth-largest exporter of wheat in the world.

According to data from stablemate publication Crop Science Market Data and Analysis, Ukraine’s wheat exports for the 2020/21 season surged by 30% to hit 17 million tonnes, with the rally being driven by Mediterranean markets in Europe and North Africa, besides the Middle East. While shipments are generally low during this time of the year, uncertainties surrounding the conflict’s future have birthed bearish sentiments. Prospects have been further dampened by reports of around 100 foreign-flagged vessels being stuck across Ukrainian ports, including the strategically important facility at Odessa, in the southern part of the country.

The situation has drawn a strong response from the country’s grain traders, who anticipate “losing” export opportunities to uncertainties presented by the war. Chairman of the Ukrainian Grain Association, Mykola Gorbachev, notes that the inventory cannot to be routed through the nation’s railway network, which has just a tenth of the marine ports’ pre-war handling capacity at 600,000 tonnes per month. He also observes that growers could refrain from sowing during the current season, prompted by fears that their harvest could go unsold amid a prolonged conflict, besides concerns over safety.

Industry observers anticipate the trend sustaining itself over the medium term, subject to resolution of the conflict and Ukraine bouncing back from losses to its agricultural infrastructure.

Supply chain ordeals
The war has mostly annihilated the supply chain for critical agricultural inputs such as crop protection products and fertilisers, leaving growers on a fragile footing and crippling their ability to continue with sowing activities for the upcoming season. Furthermore, an acute shortage of power and fuel has disabled the deployment of farm machinery to undertake routine tasks.

The UN World Food Programme (WFP) has already sounded an alarm over damages caused to the supply chain, observing that it is “falling apart”, with insecurity among drivers exacerbating the situation.

However, communications from the Ukrainian authorities seem to suggest that the country is unlikely to face immediate food shortages and has sufficient stock to meet domestic demand. There are also possibilities of the country treating the unshipped export inventory as a buffer in case it runs out of supplies amid the ongoing turmoil.

Foreboding times
Earlier this month, the European Commission warned that Russia’s hostilities against Ukraine would cast a shadow over the EU’s agri-food sector, adding that the conflict had effectively drawn a closure to the global trade in wheat, barley, maize and sunflower seeds in which Russia and Ukraine are significant stakeholders. However, it observes that the EU’s sanctions against Russia were “fully and entirely justified”, even though the calls could act as major disincentives to trade.

MEPs have backed the punitive measures taken against Russia by the Commission, recognising that EU agri-food products need to pay part of the price for these measures.

However, political wrangling has started in the bloc over its Farm to Fork and Sustainability strategies as it assesses the impacts of the war on food security. Major voices in the Commission and in the European Parliament are insisting on a reassessment of the twin strategies of the Green Plan, including the halving of pesticide use over the next eight years.

by Akashpratim Mukhopadhyay


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