Bloomberg writers Megan Durisin, Kateryna Choursina and Aine Quinn reported yesterday that, "Oleksandr Klepach’s fields in southern Ukraine would normally be teeming with shoots of wheat and rapeseed in spring.…
Black Sea Export Deal Shows Early Progress, But Risks Remain
Jared Malsin reported in today’s Wall Street Journal that, “An international agreement to restore Ukraine’s Black Sea grain exports is showing early progress, with 18 ships moving to and from ports in Odessa nearly six months after Russia’s invasion bottled up a chunk of the world’s agricultural products.
“On Saturday, the grain initiative passed a key milestone when the first inbound ship to arrive in Ukraine under the agreement safely departed Odessa after loading 12,000 tons of corn bound for Turkey. Before the ship’s departure, all of the other outbound ships leaving Odessa had been vessels that were stranded in Ukraine when Russia attacked in February.
“The ships’ departure has proved the agreement can work and provided hope for further food exports from Ukraine, which supplied about 10% of the world’s wheat before the war. The country’s inability to sell its grain has hurt its wartime economy and raised fears of a global food crisis in poor countries.”
Nonetheless, the Journal article noted that, “But the future of the deal remains uncertain. Russian missiles struck the Port of Odessa hours after officials signed the agreement in late July, highlighting the risk that the war could still disrupt vital grain shipments.”
Malsin pointed out that,
Ships carrying some 438,331 metric tons of corn, wheat, soybeans, sunflower oil and other products have left Ukraine since the signing of the agreement, according to the U.N.
“The 18 ships that sailed under the initiative this month are nowhere near a goal of about 100 ships a month set by the Ukrainian government. U.N. officials say the aim is for Ukraine to resume its prewar level of exports of five million metric tons of grain a month. Officials say they are still accelerating shipments to restore a prewar level.”
On Friday, Financial Times writers Emiko Terazono, Samer Al-Atrush and Roman Olearchyk reported that, “The UN’s aim is to ease the global food crisis by bringing prices down through increasing Ukrainian supplies. The country is the world’s fifth-largest exporter of wheat and a leading supplier of corn and sunflower oil. It accounts for 80 per cent of Lebanon’s wheat imports and is a leading supplier for countries in Africa and the Middle East.
“Grain prices, including for corn and wheat, have now fallen to prewar levels, partly in anticipation of increased supplies from Ukraine.”
And in its monthly Grain: World Markets and Trade report Friday, the USDA’s Foreign Agricultural Service (FAS) indicated that, “On July 22, 2022, delegations from Ukraine, Turkey, Russia, and the United Nations signed an agreement to provide safe passage for grains from select Ukrainian ports (Odesa, Chornomorsk, Pyvdenny), offering a potential corridor for movement of Ukrainian grain through the Black Sea. This is welcome news for global importers as the expansion of Ukraine’s export capacity for corn, barley, and wheat may ease the pressure of high global commodity prices. The benefits for Ukraine are numerous, not least of which is the stimulation of the economy and influx of funds. For Ukrainian producers and exporters, the ability to ship stored grain at the ports that would otherwise be sitting idle, based on the current pace of exports, is significant. Few grain silos in Ukraine are equipped with the aeration systems essential for long-term storage, putting farmers and exporters at risk of losing a significant share of their commodities, and in turn, the capital required for planting next season. While there is cautious optimism about the deal, several roadblocks exist, namely continuing conflict in and around port infrastructure (including transshipment silos), the demining of ports and routes, and persistent high logistical costs related to freight and insurance rates.
FAS added that, “Grain exports from Ukraine in the past have been highly seasonal with the largest volumes shipped just after harvest. Barley exports are robust between July and September, and wheat exports are largest between August and November. Corn volumes peak between November and May. Russia’s invasion of Ukraine has constrained grain exports this year, leaving larger-than-normal supplies in storage. While exports via land have helped to alleviate the strain on storage capacity, production from the current wheat and barley crops and upcoming corn crop are expected to far exceed domestic consumption needs in a highly export-dependent country. Despite the aforementioned roadblocks to the success of the Black Sea grain corridor, this potential relief valve for Ukrainian grain supplies comes at a timely moment, as exports historically pick up substantially over the next several months. As of this publication, about a dozen ships have left Ukrainian ports, primarily loaded with corn.
USDA raised its 2022/23 forecasts for Ukraine corn exports 3.5 million tons to 12.5 million and Ukraine wheat exports 1.0 million tons to 11.0 million this month, in part reflecting expectations of improved export opportunities with the agreement.
Meanwhile, New York Times writers Marc Santora and Jason Horowitz reported in Saturday’s paper that, “[On] Friday, a U.N.-chartered bulk carrier, the Brave Commander, arrived in Ukraine to carry 23,000 metric tons of grain to famine-stricken parts of the Horn of Africa, the first to that region since the Russian invasion halted food exports six months ago. António Guterres, the secretary general of the United Nations, which brokered a deal last month between Ukraine and Russia allowing grain shipments, has called it ‘a beacon of relief.'”
And yesterday, New York Times writer Michael Schwirtz reported that, “Sailors in blue and orange coveralls milled around on the deck of the freighter Brave Commander on Sunday as a series of chutes and conveyors loaded the ship’s cargo bay with 23,000 metric tons of wheat bound for Africa.
“The Brave Commander, a Lebanese-flagged freighter, was scheduled to depart later in the day from Pivdennyi, one of Ukraine’s largest ports on the Black Sea, near Odesa. It is the first ship specially chartered by the World Food Program as part of an effort to direct much-needed grain to countries affected most by food shortages caused by Russia’s invasion of Ukraine.
“This shipment will eventually make its way to Ethiopia, which is on ‘the edge of famine,’ according to Marianne Ward of the World Food Program, a United Nations agency.”