Has Ukraine’s Grain Export Crisis Eased Nearly a Year Into the War?

In early November, Odesa had not yet been gripped by widespread missile strikes or power cuts, and shops along the streets remained open for business. I met farmer Aleksey at a café in the city centre.

Aleksey’s farm is situated near Odesa. He says it covers 1,000 hectares and includes its own flour mill and bakery. In a country with Ukraine’s vast agricultural plains, that is hardly considered a large operation.

Hardly had we taken our seats when he began complaining that the recently closed Black Sea grain corridor was severely impacting the livelihoods of Ukrainian farmers.

Signed on 22 July and brokered by the United Nations and Turkey, the Black Sea Grain Initiative was designed to enable Ukraine, one of the world’s largest grain exporters, to continue shipping produce through its Black Sea ports, thereby averting food crises in nations that rely on Ukrainian exports—primarily densely populated developing countries.

Late in October, Ukrainian forces used drones and unmanned vessels to attack the Russian Black Sea Fleet stationed in Sevastopol on the Crimean Peninsula. In the aftermath, Russian forces announced on 29 October that they were suspending the grain corridor, which had been operational for just under three months.

● Alexey shows me his grain silo, blown over by a Russian missile.

With his grain going unsold, Alexey had to secure his own buyers, taking on sales alongside production and processing. I met him shortly after his return to Ukraine from grain trading in Bulgaria. Alexey, now in his forties, has three children. He told me that this very circumstance exempted him from Ukraine’s ban on adult men leaving the country (Note: On 24 February 2021, the Ukrainian government announced that men aged 18–60 were prohibited from leaving the country, although fathers of three children were exempt), enabling him to regularly cross borders to manage his grain export business. Ukrainian farmers without three children, by contrast, were not so fortunate.

In the weeks that followed, the Black Sea Grain Initiative was restored following Turkish mediation. However, for Alexey’s farm, the commercial focus had already shifted towards neighbouring countries, including Moldova and Bulgaria. “I am arranging increased exports to Bulgaria; converting some of the wheat into refined flour for sale in Moldova; and turning the remainder into bread to supply Ukraine’s domestic market.”

Under the lingering shadow of war, Ukrainian grain that was once heavily exported to Third World nations is now flooding into Europe.

I. I. Europe as an Alternative?

Before the war, the European Union was not a primary market for Ukrainian agricultural produce.

With lower labour costs and high agricultural yields, Ukrainian produce held a clear price advantage over EU products. For instance, in August 2022, Ukrainian wheat sold at $272 per tonne and maize at $251 per tonne, compared with average prices on the European internal market of $324 and $307 per tonne respectively. Nevertheless, to shield its domestic farming sector, the EU imposed strict quality inspection standards and tariff policies on imported agricultural goods, making it difficult for Ukrainian produce to enter the market.

Consequently, Ukraine’s grain was primarily exported to developing nations further afield. These shipments were largely handled by ocean-going vessels departing from ports in southern Ukraine, with Odesa, Mykolaiv and Bilske all serving as key maritime hubs. Following the outbreak of war, Mykolaiv came under sustained missile strikes and blockade by Russian forces, while Bilske and other locations fell entirely under Russian control. Although Odesa’s port facilities remain operational, the surrounding waters continue to carry a significant threat of naval mines. Local port installations have been classified as strategic assets and cordoned off with multiple layers of barbed wire, preventing ordinary residents from visiting the coast for leisure as they once did.

United Nations statistics show that before the war, between 120 and 160 cargo vessels departed from Ukraine’s ports each week. Following the outbreak of hostilities, this figure dropped to fewer than 40, with only around 20 per cent of them being ocean-going vessels.

● Grain silos at the Odesa port. The site was struck by Russian forces the day after the Black Sea Grain Deal was signed. Photo: DPA

With seaport capacity plummeting, Ukraine has been forced to shift more of its grain exports to rail, road, and inland waterways. Yet each of these alternative routes carries its own set of drawbacks.

Rail transport comes first. Because Ukraine and Europe use different track gauges, direct freight services are impossible, and cargo must be reloaded at the border. Furthermore, Ukraine’s prime farming regions lie in the fertile black-earth belt of the south-east, placing them a considerable distance from the primary export corridors running north-west.

Trucking, meanwhile, is simply ‘too expensive’. Alexey explains that his farm sells Ukrainian wheat exported to Bulgaria for around $220 a tonne, yet haulage costs alone account for roughly $120. In other words, just the road freight charges exceed half the final selling price. On top of that, severe bottlenecks at border crossings make it incredibly difficult to secure lorry hauliers. ‘Sometimes we have to queue for over a week just to get a lorry, so we ended up buying three of our own,’ he adds.

Inland water transport requires the grain to be moved overland first to a handful of river port towns on the Danube in Ukraine’s far south, where it meets the Romanian border: Kiliya, Reni, and Izmail. From there, barges carry it downriver. This method proves marginally cheaper than road haulage. According to Alexey, shipping wheat from Kyiv in north-central Ukraine to Reni on the southern Danube costs roughly $80 a tonne, with the grain fetching around $210 a tonne once it arrives in Reni.

Yet what these three routes have in common is that they divert grain, which would previously have been shipped overseas, into neighbouring EU member states.

II. Protests by Eastern European Farmers

However, Alexey, who exports grain to South-East Europe, has encountered a fresh problem: “Farmers in Bulgaria and Romania are protesting that we are exporting far too much Ukrainian grain, which is flooding their markets.”

The situation he describes extends beyond these two countries. At the end of November, a group of Polish farmers staged protests in the eastern city of Lublin. According to Polish media reports, the demonstration was organised by the agricultural group Agrounia, whose leader told reporters that an oversupply of Ukrainian grain in the Polish market had caused local prices to plummet, threatening farmers’ livelihoods. Polish government figures indicate that Poland imported 640,000 tonnes of Ukrainian grain in the first half of 2022. Over the past few months, however, 450,000 tonnes have been entering the country each month—sixteen times the figure for the same period in 2021, and 1.5 times that of mid-2022. Agrounia maintains that the actual volume is considerably higher than these official statistics suggest.

● Agrounia protests outside the Lublin provincial government building. Photo: PAP

This situation stems from the EU’s ‘solidarity corridors’ policy, introduced on 12 May this year, which grants Ukrainian grain a temporary tariff exemption and permits it to transit through the bloc to ports on the Baltic coast. The arrangement is strictly for transit and onward export, meaning Ukrainian grain is not intended for the European market. Polish Prime Minister Mateusz Morawiecki has repeatedly assured farmers that the grain will not stay in Poland but will merely transit to other export destinations.

The opening of the EU market has provided considerable convenience to independent operators like Alexei. Yet it also means that Ukrainian agricultural goods entering Europe in small, fragmented consignments via producers such as him are difficult to monitor, making it hard to guarantee they will be exported to third countries as originally intended under the ‘solidarity corridors’ scheme.

According to observations made by Michael Scannell, Deputy Director-General of Agriculture and Rural Development at the European Commission, in July 2022, a significant proportion of Ukrainian grain entering the EU via the ‘solidarity corridors’ scheme became ‘stuck’ in the initial transit countries. It frequently failed to reach member states with a greater need for grain, such as Italy and Spain, which are customary importers of Ukrainian maize for animal feed.

Since July 2022, this issue does not appear to have improved. According to an EU report published in November 2022, imports of Ukrainian agricultural products have ‘grown significantly’, extending well beyond grain to include poultry and dairy. This trend has begun to fracture the solidarity underpinning the ‘solidarity corridors’ scheme; to protect the electoral base of their farming constituencies, right-wing conservative parties across the EU are now calling for fresh restrictions on Ukrainian foodstuffs.

III. Starving the Third World?

On 5 December, NASA released its latest remote sensing analysis, estimating Ukraine’s winter wheat harvest (including Russian-occupied territories) at 26.6 million tonnes. Although this falls short of last year’s bumper crop of 33 million tonnes, the outcome is not too bad. The encouraging news is that while the area planted with winter wheat in 2022 has contracted by 6%, 94% of it has still been harvested. This contrasts sharply with earlier forecasts that 20% to 30% of the 2022 crop would go unharvested. Meanwhile, 22% of the wheat is currently being harvested within Russian-occupied areas.

Meanwhile, estimates from Ukraine’s Ministry of Agriculture suggest the country will harvest around 51 million tonnes of grain in 2022. This represents a 40% decline from the 86 million tonnes recorded in 2021, a drop primarily driven by lower yields and the occupation of agricultural land.

● NASA satellite data shows that almost all unharvested wheat fields are located near the front line. Credit: NASA

Meanwhile, the risk of food crises and famine is rising in some low-income nations that depend on Ukrainian grain. An assessment by the International Rescue Committee (IRC) published in mid-December 2022 warned that, as droughts exacerbated by climate change hit in 2023, the hunger crisis in East African countries, particularly Somalia, would be particularly acute.

Prior to the conflict, grain imports for several East African nations, including Somalia, were sourced almost entirely from Ukraine. In Egypt, which relies on foreign imports for half its annual wheat supply, around 15 per cent of that imported wheat originates from Ukraine.

Despite the Black Sea Grain Initiative, the pace of Ukrainian grain exports reaching these nations remains far slower than it was before the war. According to figures released by Turkish Transport Minister Adil Karaismailoglu on 26 December 2022, since August, 15 million tonnes of agricultural commodities, shipped on 585 cargo vessels, had been exported from Ukraine under the initiative. Of that volume, 44 per cent went to Europe, 16 per cent to Turkey, and just 14 per cent to African nations. By contrast, in 2021 alone, Ukrainian wheat shipped to Egypt and Indonesia each accounted for more than 15 per cent of the country’s total exports. Analysts suggest that the Black Sea Grain Deal’s benefit to low-income nations is largely indirect: by expanding overall supply to help stabilise prices, it ultimately makes it easier for poorer countries to source grain on the international market.

The severity of shortages in Third World nations varies considerably. While Somalia faces starvation, Egypt has secured its wheat supply for the period from 2022 to early 2023 through a range of trade agreements. Shortly after the conflict began, Egypt swiftly procured wheat from European nations and India to maintain market availability, particularly to ensure the steady supply of government-subsidised cheap bread and preserve social stability. The Egyptian Ministry of Trade and Supply recently confirmed that the country’s wheat reserves are sufficient for the next five months. The severe grain shortage many feared in early 2022 never materialised. Indeed, it was not until December 2022 that the Egyptian government purchased its first post-war shipment of Ukrainian wheat, totalling 175,000 tonnes. Against Egypt’s annual wheat consumption of roughly 25 million tonnes, this purchase is comparatively modest.

Russia, meanwhile, has seized on the destinations of Ukrainian grain exports as grounds for political attack. President Putin has publicly accused Kyiv of routing the grain to Europe, rather than allowing it to reach the low-income nations that need it most.

Of course, this criticism is somewhat exaggerated. Nevertheless, Ukraine has recognised the need to give greater consideration to the needs of low-income countries—at the very least, to adopt a posture of making every effort to assist. Alongside the United Nations’ scheme, Kyiv has launched its own grain export programme. On 26 November, Zelensky convened a grain summit in Kyiv to discuss Ukrainian grain exports. At the meeting, he announced that Ukraine had secured $150 million in funding from 20 nations to establish a separate “Ukraine Grain Initiative”. This will deliver at least 125,000 tonnes of grain to Asian and African nations in urgent need, with 60 cargo ships dispatched to those regions before next spring. The Ukrainian government’s official statement on the matter reads: “Our goal is to resolve the hunger problem for at least five million people.”

IV. Changes Out of Necessity

But plans are merely plans. In Alexey’s view, the greatest challenge remains transport bottlenecks and shifts in the supply chain.

Previously, Alexey sold his harvest each year to domestic wholesalers, who would decide whether the grain was destined for the local market or shipped by sea from Odesa for export. Since the war began, the entire supply chain has descended into chaos. Grain struggles to reach foreign buyers, while domestic markets face severe surpluses. The mass exodus of Ukrainians, coupled with reduced purchasing power, has driven the local market into sharp decline.

Alexey says that he, along with many others, is weighing whether to scale back operations or adapt his production methods.

He has heard that farmers in northern Ukraine are increasingly reluctant to grow maize, as drying and threshing it requires a substantial amount of natural gas. Since the war, gas prices have soared, accounting for twenty to thirty per cent of the final price of the crop. “More farmers are switching to sunflowers instead, even converting fields previously planted with wheat—sunflowers can fetch $450 a tonne, making them more profitable than wheat.”

With cash flow constrained, Ukrainian farmers are becoming increasingly frugal with fertiliser. “Many are cutting back on fertiliser use, with some reducing it to half of what it used to be, simply to save money. The fertiliser market has shrunk accordingly,” Alexey says, shaking his head.

When I ask him about his plans for the coming year, he pauses to think before replying that he will continue to prioritise selling his products to South-East Europe. “After all, we have a price advantage.”

Ukrainian farmers are striving to carve out new pathways amid the war. After all, as the conflict continues, Ukraine is being drawn ever closer to the European market. The grain markets and security arrangements of the pre-war era are gone for good.

References

Unless otherwise noted, images are by the author.

Author: Aqi

Editor: Wang Hao

I. I. Europe as an Alternative?

II. Protests by Eastern European Farmers

III. Starving the Third World?

IV. Changes Out of Necessity

Published by Foodthink