Ukrainian export optimism based on ports reopening

UkrAgroConsult believes Ukraine’s grain and oilseed exports could be much higher than the United States Department of Agriculture forecasts.

“Export potential is serious and supported by unusually high ending stocks,” company grain market analyst Maryna Marynych said in a webinar.

She forecasts as much as 31.5 million tonnes of corn and 16 million tonnes of wheat could leave the country in 2022-23 compared to the USDA’s estimates of 10 million tonnes for each crop.

The USDA estimate assumes that Ukraine’s Black Sea ports will remain blocked for the entire crop year, while UkrAgrConsult is hopeful that at least some key ports will reopen.

The firm forecasts 2.6 million tonnes of rapeseed exports, which would be almost identical to the 2.68 million tonnes shipped in the crop year that just ended.

“We are confident that Ukraine will be able to export rapeseed in full, even with closed ports because there is a great demand for this crop in the European Union and it is the first crop to be harvested,” said Marynych.

The besieged country could export a record 6.3 million tonnes of sunflower oil compared to the USDA’s far more conservative forecast of 3.6 million tonnes.

UkrAgroConsult’s optimistic scenario hinges on the success of ongoing talks between Ukraine, Russia, Turkey and the United Nations aimed at reopening some of the country’s Black Sea ports to help address growing food security concerns in developing countries.

Maksym Kharchenko, UkrAgroConsult’s freight analyst, said the ports that would likely reopen if the talks were successful are Chornomorsk, Pivdennyl and Odesa.

Those three ports shipped out 35 million tonnes of grains and oilseeds in 2019-20 or more than four million tonnes per month. They handled 57 percent of last year’s total exports by sea.

Ukraine’s current monthly exports amount to one million tonnes by rail, 300,000 tonnes by truck and another one million tonnes by three small ports located on the Danube River.

If the three Black Sea ports reopened the total monthly volume would jump to five to six million tonnes, which would be a huge help. The ports would not likely resume operations until September at the earliest.

Insurance rates on the few vessels moving through the Danube amount to up to 10 percent of the total cost of the goods on board.

Kharchenko said grain storage is another big concern. An estimated seven million tonnes or 14 percent of the country’s total elevator capacity is in Russian-controlled territory.

Ukraine has a total of 50 million tonnes of storage capacity, five million tonnes of which is located at the country’s ports.

There is enough capacity to store the wheat and barley crops, which are starting to be harvested.

Capacity constraints will start to emerge with the sunflower harvest in September and the situation could become critical by the end of the corn harvest in December.

UkrAgroConsult is forecasting a 10 to 15 million tonne shortage. About half of that could be dealt with through grain bags and other containment systems, although bags are in short supply.

Kharchenko thinks the storage issues could force farmers to shy away from planting winter wheat this fall unless the exports start flowing.

Strides have been made to ship more grain by rail and truck across Ukraine’s western border but there are issues with differing sizes of rail gauge in Poland that has resulted in more than 10,000 rail cars stuck at the border, as well as extreme port congestion in Romania.

Marynych said this year’s pea crop has been particularly affected by the war because much of it is grown in the Zaporizhzhia oblast, which is in the heart of the conflict.

She is forecasting 250,000 tonnes of production, which is less than half of last year’s output. Exports are projected to fall to 245,000 tonnes from 335,000 tonnes in 2021-22.

Ukraine also produces kidney beans, chickpeas and lentils. Production of all three crops is expected to fall but exports will rise due to large carryout supplies. However, the country is not a significant player in any of those markets.

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