Grain exports from Ukraine are slowly accelerating. But a month after the relevant agreement between Russia, Ukraine and the UN, the market does not seem to have been restored.
About 30 ships have departed from Ukraine’s largest ports on the Black Sea since July 22. On that day, an agreement was signed in Istanbul, brokered by the UN and Turkey, with the aim of re-allowing grain exports from Ukraine that had been suspended due to the war with Russia. One of the first ships to sail was chartered by the UN to deliver 23,000 tons of grain to Ethiopia. So far more than 600,000 tonnes of grain have left Ukraine’s ports, according to authorities. The plans are ambitious and speak of 100 ships per month. However, something like this seems to be taking too long.
Most of the ships that sailed in the first weeks after the deal had been blocked for months and the market is still very nervous as the course of the war is unpredictable. Pavlo Martisev of the Kyiv School of Economics estimates that “thanks to the Istanbul agreement, more than five billion dollars of foreign exchange could flow into war-torn Ukraine and the country’s farmers.”
Shipping companies hesitate
However, things are not simple and the cost of transportation in wartime is very high, estimates Genendy Ivanov, managing director of the logistics company BPG Shipping. The expert on maritime freight transport is sure that the longer the agreement works without obstacles, the more shipping companies will dare to go to Ukraine.
Genendy Ivanov explains: “Chartering a ship to export grain from Ukraine costs about $10,000 a day more than you would pay in neighboring Romania, for example. Extensive security checks in Istanbul also mean shipping companies charge the Ukrainian customers an additional seven to nine days. It was a condition set by the Russians in the negotiations. Every ship would have to be searched by the Turkish military, both on the way to Ukraine and on the way back, in order to prevent any arms delivery.
What will happen to the millions of tons of grain?
This cost leads to lower prices for Ukrainian farmers. It is a competitive advantage for the main competitor in grain markets: Russia, although risk premiums for Russian ports have also increased since the outbreak of war.
According to expert estimates, about 18 million tons of grain are still in Ukrainian warehouses. Things are getting tight, especially for corn farmers. “The new harvest will take place in September-October and if exports are not accelerated immediately, there will be a lack of storage facilities for about 10 million tons of corn,” warns Pavlo Martisev and calls for international support, for example in the form of cheap loans, especially for smaller businesses.
Eugen Thyssen
Edited by: Maria Rigoutsou
Source: Deutsche Welle
Source: Capital
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