Despite the regular movement of ships to and from its ports, reduced freight rates and more affordable insurance, Ukraine’s grain exports fell by a third year to date compared to the same period last year.

Since the beginning of the new marketing season on July 1, Ukraine has exported 7.8mn tonnes of grain and leguminous crops year to date, which is 3.73mn tonnes, or 32.3%, less than in the same period last year. 

The decline comes despite Kyiv’s increasing control over the seas off its Black Sea ports that has allowed seaborne exports to resume.

Ukraine’s grain exports tumbled in the first three weeks of September, falling to 1.57mn tonnes of grain, down from 3.21mn tonnes the previous year in the same period.

Ukraine’s overall grain exports for the 2023-24 marketing year, which began on July 1, is 6.2mn tonnes as of the end of September, down from 7.5mn during the same period the previous season, Reuters reported. The total so far this season includes 3mn tonnes of wheat, 2.5mn tonnes of corn and 590,000 tonnes of barley.

Ukraine can export limited volumes through small river ports on the Danube and via its western land border with the European Union. Ukraine is expected to harvest 79mn tonnes of grain and oilseed in 2023, with 2023/24 exportable surplus totals of about 50mn tonnes. (chart) Ukraine’s Prime Minister Denys Shmyhal said last week that cash-strapped Ukraine will export three quarters of all the grain it produces in the current marketing season.

During Russia’s naval blockage, Ukrainian grain exports transiting through Romania have grown to 60%, according to Romanian President Klaus Iohannis speaking in Bucharest on October 10.

The decline in grain exports comes as Kyiv has largely regained control over its Black Sea ports, despite Russia’s naval blockade. Ukraine has made use of US supplied long range missiles to threaten Russia’s Black Sea fleet, which has withdrawn much of its navy from its Crimean bases after several ships were damaged in rocket attacks in September. Remarkably, Russia has been put on its back foot in the battle for the Black Sea by an opponent that doesn’t have a navy.

A steady stream of ships continues to transport grain and metals from Ukraine, even after the establishment of a new shipping corridor in the Black Sea, supported by the UN and Turkey.

As of September 16, 32 ships have arrived at Ukrainian ports with a total capacity of about 1.4mn tonnes. Although this volume is comparable to what the corridor handled during its initial month of operation, it is only a third of its peak efficiency.

Ukraine established a temporary seaborne route from the Odesa ports after Russia withdrew from the Black Sea Grain Initiative that was suspended on July 17. Initially, ship owners were cautious due to threats from Russia, which said it would regard vessels bound for Ukraine as potentially carrying weapons. In one incident, a Russian warship fired across the bow of a Palau-flagged grain ship in the south-western Black Sea on August 13. While the number of vessels has increased, the risks persist.

This month Kyiv has put forth proposals for the launch of a sea corridor to export grain at full capacity. Dmytro Kuleba, Ukraine's Minister of Foreign Affairs, expressed confidence that the operation of such a maritime corridor without Russian involvement is feasible. However, he stressed the importance of the EU's collaboration in ensuring the safety of this route.

Kuleba said during a joint press conference with EU High Representative Josep Borrell in Kyiv that Ukraine and the EU must work together to guarantee the security of this corridor, ultimately seeking to prevent the Russian Federation from exploiting the global market with the threat of famine or high grain prices.

Ukraine’s Agricultural Ministry said as of October 4 that 153,000 tonnes of grain were exported in the first three days of October 2023, compared with 297,000 tonnes a year ago. The ministry gave no explanation for the fall.

In September, Ukraine managed to export approximately 50,000 tonnes of grain and other goods by sea. However, challenges also persist in maximising exports through non-sea routes. The transit of Ukrainian agricultural products through the western border currently operates at only 25% of its potential, according to the authorities. Delays are primarily attributed to time-consuming customs inspections of road and rail transport.

In addition, Poland imposed a ban on Ukrainian grain transiting its territory in April after traders dumped cheap, poor-quality grain and crashed the local market in April. The European Commission expanded and extended the ban until September 15 ahead of crucial elections in Poland on October 15 that were won by the opposition leader by Donald Tusk. As agriculture plays such an important role in Poland’s economy, when the EC ban expired, Poland, Hungary and Slovakia chose to unilaterally extend it. Negotiations between Kyiv and Warsaw to find a work-around are ongoing, but the Polish grain market remains depressed by the glut of Ukrainian grain.

Ukraine has yet to resume exports of wheat, corn, sunflower and rapeseed to five EU member countries covered by the EC ban. Kyiv has retaliated by banning its sugar exports to these countries, which are all heavily dependent on Ukrainian supplies.

To expedite the transit of grain, Ukraine has initiated collaborations with neighbouring countries. A "green corridor" agreement is being discussed with Poland and Lithuania to facilitate the transit of Ukrainian grain through Poland to Lithuania's port of Klaipeda, a prominent Baltic Sea port. The agreement involves the transfer of veterinary, sanitary and phytosanitary control of agricultural cargo from the Ukrainian-Polish border to Klaipeda, effectively streamlining the process and designed to prevent Ukraine’s grain being sold to traders in the transit countries.

Additionally, President Volodymyr Zelenskiy announced the creation of a new grain corridor through Moldova and Romania. This initiative aims to enhance regional co-operation and bolster economic development in the area, benefiting Ukraine, Moldova, Romania and the broader European region. The new grain corridor is expected to become operational in the near future.

Meanwhile, Russia enjoyed an all-time high record harvest of 153mn-155mn tonnes of grain last year and is on course to have a bumper harvest of an estimated 141mn tonnes this year. (chart)

Russia’s grain exports have soared as a result as Russia’s silos are full to bursting.

Russia will most likely retain first place in the world in terms of wheat exports, Russian President Vladimir Putin said at a meeting of the Council of CIS Leaders this month.

"Last year, as you know, there was a historically record harvest, 158mn tonnes; this year it will also be very large, over 130mn [tonnes]," said Putin, adding: "This means that our export potential remains very large. Russia will most likely retain first place in the world in terms of wheat exports… Our grain exports, like last year, will reach at least 50-60mn tonnes.”

According to Putin, grain exports from Russia in 2023 are expected to be at least 50-60mn tonnes, up from the pre-war average of around 45mn tonnes, and more than compensating for the fall in Ukraine’s exports.