Ukraine plots cautious return of grain exports as world watches

The first two weeks will be treated as a trial period, with no more than three vessels a day in each direction through new safe-passage corridors.
Image: Bloomberg

Ukraine laid out plans to cautiously ramp up grain exports as the first shipment since Russia’s invasion was hailed as an encouraging early step toward unblocking millions of tons of crops and easing global food prices.

The first two weeks will be treated as a trial period, with no more than three vessels a day in each direction through new safe-passage corridors established under the agreement with Russia, Turkey and the United Nations, Ukraine Infrastructure Minister Oleksandr Kubrakov told Bloomberg TV on Monday. If successful, exports could increase to as much as three million tons per month in four to six weeks’ time, he said.

Wheat, corn and soybeans futures tumbled in Chicago on Monday as traders reacted to the first shipment. Ukraine is one of the world’s most important suppliers of grains and oilseeds and the collapse in exports following Russia’s invasion jolted global agriculture markets, driving up prices and leaving importing nations scrambling to secure alternative supplies.

But while progress is encouraging, there is still a long road ahead before exports get anywhere near to pre-war levels. It took over a week from signing the deal before the first ship sailed and traders and shippers say there is little clarity on the process going forward.

Shipowners will have to secure insurance for vessels and cargo and recruit enough crew to operate the ships. And there are other risks — ships will need to navigate the mine-ridden seas through safe corridors and trust that Russia will keep its promises as part of the deal.

“It’s important for us to make it clear that this route is safe, and then we’ll start increasing the number of vessels,” Kubrakov said.

Standard operating procedures for the shipping corridors are close to being finalized and will be made public once they are agreed, a UN spokesperson told reporters at a briefing on Monday.

The first vessel to depart, a cargo ship loaded with about 26,000 tons of corn, is destined for Lebanon but will head first to Turkey under the the July agreement.

There were 16 other ships in the greater Odesa region waiting for their turn to sail, Kubrakov said earlier.

If the corridor is “even mildly successful,” corn exports could more than double from 9 million tons to 18-22 million tons per year, according to Michael Magdovitz, senior commodities analyst at Rabobank.

“To put the additional 9 million tons of corn exports in perspective, the US and EU have nearly lost that amount of grain in the recent heat wave.”

© 2022 Bloomberg

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