Trucks or railcars? Who will bring grain to the ports in 2023

UkrAgroConsult

Article author:

Maksym Kharchenko

Freight Market Analyst

In 2023, agricultural logistics remains in the focus of attention in Ukraine. Exporters are looking for new corridors for the export of grain. This has caused a significant price increase in all links of the logistics chain – from land transportation tariffs to sea freight rates. According to trade sources, spot freight rates for railcars and trucks have dropped by 50% since January amid reduced exports.

UkrAgroConsult estimates Ukraine’s export potential from February until the end of this marketing year (June 2023) at 22-24 M mt of grains, oilseeds, and vegetable oils and meals. Domestic stocks are gradually shrinking, therefore demand for logistics services will fall considerably from April, which corresponds to the historical seasonal trend in agricultural logistics.

According to UkrAgroConsult’s forecasts, the country’s export potential in the next 2023/24 marketing year will lower by another 25-30%. Next year’s grain exports are expected to total 30 M mt. In our opinion, this will lead to stiffer competition between the transportation modes for grain delivery to the ports and western borders and, consequently, further reduce logistics costs and their share in export prices.

Ukrzaliznytsia (Ukrainian Railways Company) is already starting to introduce a number of measures for cutting railway tariffs. According to the company’s administration, the total cost of grain transportation in Ukrzaliznytsia’s railcars for a 655-710 km distance in February is as follows:

• towards the ports – $32.3 per mt
• towards the western border crossings – $52.2 per mt

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Tags: logistics, rail transportation