Ukraine companies put grain trade on hold as focus shifts to exporting stocks
Moving existing stocks out of the country despite logistical challenges becomes priority
The ongoing conflict in Ukraine means the country’s domestic traders have had to put on hold further active purchases from the domestic market, especially for new crop production, and are focusing instead on moving existing stocks out of the country, trade sources have told Fastmarkets Agriculture.
The shift in focus means traders are attempting to clear their own stocks through rail connections and southern ports like Reni, ahead of the arrival of another potentially sizable crop and before originating supply from any other traders.
Sources said the challenges of the current logistical situation meant traders were reluctant to take a risk and buy forward until current stocks were emptied.
Many companies have their own fields, silos, and even own transshipment facilities in Ukraine, so they have to consider where to move their own stocks of grain first before taking any additional volumes from the market.
“We are also on hold for originating inland. We try to get the cargoes that we have in Niko and Odesa to Reni/Ismail. There we are buying,” one trader said.
“We have to move out our stocks first, [and we] have a huge amount left here. Technically the origination is open, but the amounts are very thin so far,” an analyst said.
Another trader said international help could be required to clear volumes, but even with UN assistance, it was unsure how safe that route would be.
“We have been having some high-level discussions. The theory is they will look to organize safe passage for vessels under the UN flag. The problem is they cannot guarantee human safe passage,” he said.
Looking for alternative logistical solutions to boost grain exports
Some of the companies are first trying to develop logistical solutions before returning to active trading.
“At the moment, everyone is working very hard to work out supply chains. We are looking into new logistical routes and building temporary storage. Once we resolve these issues, we will be able to re-engage in buying; our goal is to be set up by the new crop,” a third trader said.
The Russian navy has effectively blocked Ukraine’s key deep seaports in the Black Sea since Russia invaded Ukraine on February 24, reducing potential export points to only three small, shallow-water ports and the rail borders.
This has led to a massive drop in export potential per month, from around 6-7 million tonnes of grains in pre-war times to only around 1-1.2 million tonnes now, while at the same time leaving a huge stock of grains in the country.
A bumper crop expected in less than two months puts additional pressure on already tight logistics.
Earlier this month, the European Commission presented its plan to improve the flow of exports from Ukraine by organizing “solidarity lanes.”
“20 million tonnes of grains have to leave Ukraine in less than three months using the EU infrastructure,” Commissioner for Transport Adina Vălean said at the time.
“This is a gigantesque challenge, so it is essential to coordinate and optimize the logistic chains, put in place new routes, and avoid, as much as possible, the bottlenecks.”
Ukraine supplies some 10% of the world’s wheat, 13% of barley, 15% of corn, and over half of its sunflower oil.
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