Ukraine warns grain exports will take ‘months’ to reach pre-war levels

Ukraine’s infrastructure minister has warned that it will take months before grain exports from Odessa and nearby ports reach pre-war levels and ease the global food crisis despite the easing of Russia’s blockade of the Black Sea.

Speaking after a ship left Monday to carry corn from Odessa to Lebanon – the first under a UN-brokered agreement between Russia and Ukraine last month – Oleksandr Kubrakov said he expected no more than five ships to leave in the next two weeks. Odessa, Chornomorsk and Bivdny.

Last August, 194 ships carrying grain left Ukrainian ports, including now-controlled Mariupol, according to London-based shipbroker Braemar. Previously Odessa, Chornomorsk, and Bevedenny handled about 60 percent of all Ukraine’s grain exports.

“The first two weeks will be a trial system, where we will have one ship, two, three ships, and after that we will receive the first ship, two, three ships coming inland,” Kubrakov said in an interview.

In one to one and a half [months]I hope that if everything goes as planned, the market will see that this mechanism is working, that insurance is available, that it is cheaper and that it will simplify the whole process.”

At least 16 ships trapped in Ukrainian ports with cargo and crew await authorities to test safe passage through naval mines – laid by both Russia and Ukraine – and the threat of Russian missiles. Moscow has vowed not to target ships carrying food if it can conduct joint inspections to ensure that the returning ships do not contain weapons.

Prices of wheat, corn and vegetable oils rose in the wake of the Russian invasion of Ukraine in February. But the prospect of reopening the Black Sea corridor, along with fears of a global recession and record crops in Russia, has recently pushed agricultural commodity prices down.

Chicago wheat, the international standard, has fallen below $8 a bushel, or levels prior to the conquest of Moscow. Corn has lost nearly 30 percent from its April high.

However, many vulnerable countries that depend on Ukrainian grain face severe food insecurity. Ukraine accounts for 80 percent of Lebanon’s wheat imports and is a major supplier to countries such as Somalia, Syria and Libya.

Transporting 20 million to 25 million tons of grain sequestered in Ukraine would take at least 371 cargoes of medium-sized vessels that can carry 40,000 to 69,000 dwt – or nearly twice the number of small “Handysize” vessels like the Razoni, Which is set sailing on Monday, according to Bremar.

Kobrakov said he hoped some safe lanes would allow “free markets” to step in and boost exports.

CBOT Wheat Line Chart (in dollars per bushel) showing the return of wheat prices to pre-war levels

A UN official said the world of commercial shipping was “waiting to see” how the first flights went. “That’s why this test ship is so important: to build confidence, and to show that ships can get in and out safely,” she said.

Chris McGill, head of marine freight insurance at insurance company Ascot, said he was “concerned about the accuracy of the safety lanes” because the tides in the Black Sea could move the mines.

Allowing stranded ships to leave is also vital to creating space in Ukrainian ports for their arrival ships, the UN official said. “The ambition here is to get the ships out, to bring in new ones and to have regular traffic.”

The complex logistics of sailing the Black Sea and the Bosporus to sub-Saharan ports, which tend not to be very deep, means that a large number of small ships will be required to transport trapped grain, increasing the odds of waiting in long lines while ships are being checked.

Intercargo, a trade group for dry bulk ship owners, said the industry needed more certainty that merchant ships would not be bombed. Ship owners will also be loath to send their ships to ports if the situation remains volatile.

“I understand that no one can give guarantees,” Kobrakov said, noting that Odessa was bombed by Russian missiles just a week ago. We hope this will not be repeated, but such attacks can cause problems for the future.

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