Nearly a year on: Has Ukraine’s grain export crisis eased?

In early November, Odesa had not yet succumbed to large-scale missile strikes and power outages, and the shops along the streets remained open as usual. Aleksey, a farmer, arranged to meet me at a café in the city centre.

Aleksey’s farm is located near Odesa. He told me it covers 1,000 hectares and includes its own flour and bread mills. In a country with farmland as vast as Ukraine’s, this is not considered a particularly large-scale operation.

As soon as we sat down, he began complaining that the recent closure of the Black Sea grain corridor was severely impacting the livelihoods of Ukrainian farmers.

Signed on 22 July and mediated by the United Nations and Turkey, the Black Sea Grain Initiative was designed to ensure that Ukraine, one of the world’s largest grain exporters, could continue exporting through Black Sea ports. This aimed to prevent food crises in countries reliant on Ukrainian exports—primarily densely populated developing nations.

At the end of October, Ukrainian forces used drones and unmanned surface vessels to attack the Russian Black Sea Fleet in Sevastopol on the Crimean Peninsula. In response, Russia announced on 29 October that it was suspending the grain corridor, which had been operational for less than three months.

● Aleksei showing me his granary, destroyed by Russian missiles.

With grain sales stalling, Alexey was forced to find his own buyers, taking on sales in addition to production and processing. I met him just as he had returned to Ukraine after concluding a grain deal in Bulgaria. Now in his forties and a father of three, Alexey told me that it was precisely because of his children that he was exempt from the ban on adult men leaving Ukraine (Note: on 24 February 2021, the Ukrainian government announced that men aged 18–60 were prohibited from leaving the country, though fathers of three children were exempt), enabling him to travel back and forth across the border to manage his export business. Ukrainian farmers without three children, by contrast, were not so lucky.

In the ensuing weeks, through the mediation of Turkey, the Black Sea Grain Initiative was restored. However, for Alexey’s farm, the focus of sales had already shifted toward neighbouring countries, including Moldova and Bulgaria. “I’m arranging more exports to Bulgaria; I’m turning some of the wheat into refined flour for Moldova, and the rest into bread for the Ukrainian domestic market.”

Under the shadow of war, Ukrainian grain, which was once exported in vast quantities to the developing world, is now flooding into Europe.

I. I. Europe as an alternative?

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

Thanks to cheap labour and high yields, Ukrainian agricultural produce held a price advantage over that of the EU. For example, in August 2022, the price of Ukrainian wheat was $272 per tonne and maize was $251 per tonne, compared to average internal EU market prices of $324 and $307, respectively. However, to protect its own agricultural industry, the EU imposed strict quality control requirements and tariff policies on imported produce, making it difficult for Ukrainian goods to enter the market.

Consequently, Ukraine’s grain was primarily exported to more distant developing nations. These shipments were mainly dispatched via seagoing vessels from ports in the south, with Odessa, Mykolaiv and Berdiansk serving as key maritime hubs. After the outbreak of war, Mykolaiv suffered prolonged missile attacks and blockades by Russian forces, while Berdiansk and other locations fell directly into Russian hands. Although the port facilities in Odessa remain operational, the waters are still fraught with the risk of sea mines. Now designated as strategic sites, the local port facilities have been encircled by layers of barbed wire, meaning civilians can no longer visit the coast as they once did.

UN statistics show that before the war, between 120 and 160 cargo ships departed from all Ukrainian ports every week; after the war began, this number plummeted to below 40, with seagoing vessels accounting for only around 20% of the total.

● Grain silos at the Port of Odesa, which were attacked by Russian forces the day after the Black Sea Grain Initiative was signed. Photo: DPA

The sharp decline in port capacity has forced Ukraine to rely more heavily on rail, road, and inland waterways for its grain exports. However, each of these transport modes comes with its own set of drawbacks.

Firstly, there is the rail network. Because Ukraine and Europe use different track gauges, direct trains cannot run, meaning goods must be transshipped at the border. Furthermore, Ukraine’s primary agricultural heartlands are located in the black soil regions of the southeast, far from the main export routes to the northwest.

Road transport, meanwhile, is “too expensive”. Alexei explained that the selling price for their farm’s wheat exported to Bulgaria is approximately $220 per tonne, yet the cost of trucking it is around $120 per tonne. In other words, transport costs alone account for more than half of the sale price. Moreover, severe congestion at border crossings makes it difficult to source lorries. “Sometimes we have to wait over a week for a lorry to become available, so we ended up buying three of our own.”

Inland waterway transport requires grain to be moved by land first to several small river ports on the banks of the Danube in southernmost Ukraine, bordering Romania: Kiliya, Reni, and Izmail, from where it can then be shipped out. This method is slightly more affordable than road transport. According to Alexei, transporting wheat from Kyiv in the centre-north to Reni on the Danube in the south costs roughly $80 per tonne, while the selling price in Reni is around $210 per tonne.

The common thread among these three routes is that grain which was once exported via ocean-going vessels is now flooding into the neighbouring European Union.

II. Eastern European Farmers’ Protests

However, Alexei, who exports grain to Southeast Europe, has encountered a new problem: “Farmers in Bulgaria and Romania are protesting that too much Ukrainian grain is being exported, which is flooding their markets.”

The situation is not confined to these two countries. At the end of November, a group of Polish farmers protested in the eastern city of Lublin. According to Polish media, the protest was launched by the farmers’ organisation Agrounia, whose leader told the media that the excessive influx of Ukrainian grain into the Polish market has caused local grain prices to plummet, threatening farmers’ livelihoods. According to government statistics, Poland imported 640,000 tonnes of Ukrainian grain in the first half of 2022; however, in recent months, 450,000 tonnes have been entering Poland every month—16 times the volume in the same period in 2021, and 1.5 times that of mid-2022. Agrounia believes the actual figures are significantly higher than these official statistics.

● Agrounia protesting outside the Lublin Voivodeship office. Photo: PAP

This situation arose from the “solidarity corridors” policy introduced by the EU on 12 May this year, which granted temporary tariff exemptions for Ukrainian grain transiting through the EU to ports on the Baltic coast. The policy was intended only to allow Ukrainian grain to pass through for export, preventing it from entering the European market. Polish Prime Minister Mateusz Morawiecki repeatedly assured farmers that Ukrainian grain would not stay in Poland, but would merely be in transit to other export destinations.

The opening of the EU market provided considerable convenience for “small-scale traders” like Alexei. However, this also meant that Ukrainian agricultural products, entering Europe in small, fragmented shipments via small and medium-sized producers like him, made it difficult to ensure they would be exported to third countries as the “solidarity corridors” scheme originally intended.

According to observations made in July 2022 by Michael Scannell, Deputy Secretary-General of the European Commission’s Department of Agriculture and Rural Development, a significant amount of Ukrainian grain entering the EU via the “solidarity corridors” scheme became “stuck” in the first EU countries they entered. Some failed to even reach member states with a greater need for grain, such as Italy and Spain, which typically import Ukrainian maize for animal feed.

Since July 2022, the situation appears not to have improved. According to an EU report from November 2022, it was not just grain; imports of Ukrainian agricultural products, including poultry and dairy, saw “significant growth”. This has caused the “solidarity corridors” to lose their solidarity—in an effort to secure the farmers’ vote, right-wing conservative parties in the EU have begun proposing new restrictions on Ukrainian food imports.

III. Is the Third World Starving?

On 5 December, NASA released its latest remote sensing data analysis, estimating Ukraine’s winter wheat harvest—including Russian-occupied territories—at 26.6 million tonnes. Although down from the previous year’s bumper harvest of 33 million tonnes, the result is not too poor. Encouragingly, the area of winter wheat harvested in 2022 decreased by only 6%, leaving 94% intact, whereas previous forecasts had predicted that 20% to 30% of the crop would be lost. Meanwhile, 22% of the wheat was harvested within Russian-occupied territories.

According to estimates from Ukraine’s Ministry of Agriculture, the country harvested approximately 51 million tonnes of grain in 2022, representing a 40% drop from the 86 million tonnes produced in 2021. This decline was primarily driven by lower yields and the occupation of land.

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

Meanwhile, in several low-income countries reliant on Ukrainian grain, the risk of food crises and famine is mounting. An assessment by the International Rescue Committee (IRC) in mid-December 2022 suggested that hunger will be particularly acute in East African nations, especially Somalia, exacerbated by droughts caused by climate change in 2023.

Before the war, the vast majority of grain imports for some East African countries, including Somalia, came from Ukraine. In Egypt, half of the annual wheat supply was dependent on imports, with approximately 15% of that portion originating in Ukraine.

Despite the ‘Black Sea Grain Initiative’, the pace of Ukrainian grain exports to these countries remains far slower than it was before the war. According to data released on 26 December 2022 by Turkey’s Minister of Transport, Adil Karaismailoğlu, 15 million tonnes of agricultural products were exported from Ukraine via 585 ships under the initiative starting in August. Of these, 44% were destined for Europe, 16% for Turkey, and only 14% for African nations. By comparison, in 2021, Ukrainian wheat exports to Egypt and Indonesia individually accounted for over 15% of total exports. Some analysis suggests that the Black Sea Grain Initiative assists low-income countries more indirectly, primarily by increasing supply to help stabilise prices, thereby making it easier for these nations to procure grain on the international market.

Shortages across developing nations vary. While Somalia faces starvation, Egypt has secured its wheat supply for 2022 through to early 2023 via various trade agreements. Following the outbreak of the war, Egypt moved quickly to source wheat from European nations and India to guarantee market supply—specifically the provision of government-subsidised cheap bread—to maintain social stability. Egypt’s Ministry of Trade and Supply recently stated that its wheat reserves are sufficient for the next five months. The food shortage in Egypt feared by many in early 2022 did not materialise. Indeed, the Egyptian government did not purchase its first post-war shipment of Ukrainian wheat—175,000 tonnes—until December 2022. Compared to Egypt’s average annual consumption of 25 million tonnes, this was a negligible amount.

Russia, however, has weaponised the destinations of Ukrainian grain exports. Putin has stepped forward to allege that the grain ultimately ended up in Europe, rather than reaching the low-income countries where it was most needed.

This criticism is, of course, exaggerated. However, Ukraine has also realised that it must be more attentive to the needs of low-income countries—or, at the very least, appear to be making every effort to help. Beyond UN-led programmes, Ukraine has launched its own grain export initiative. On 26 November, President Zelenskyy led a grain summit in Kyiv to discuss Ukrainian grain exports. At the summit, he stated that Ukraine had secured $150 million in funding from 20 countries to establish a further ‘Ukrainian Grain Initiative’, which will deliver at least 125,000 tonnes of grain to nations in Asia and Africa in urgent need, with 60 shipments to be dispatched by next spring. The Ukrainian government’s official description of the initiative is: ‘Our goal is to alleviate hunger for at least five million people’.

IV. Changes Born of Necessity

Plans are one thing, but for Aleksei, the primary obstacles remain transport bottlenecks and the disruption of supply chains.

Previously, Aleksei had sold his grain annually to domestic wholesalers, who would then decide whether to sell it on the home market or transport it to Odesa for export by sea. Since the start of the war, however, the entire supply chain has fallen into chaos. With exports crippled, grain has piled up within Ukraine, where the domestic market has shrivelled due to the mass exodus of people and a decline in purchasing power.

Aleksei says that many, himself included, are considering whether to scale back production or shift their farming models.

He has heard that farmers in northern Ukraine are increasingly reluctant to grow maize, as the drying and threshing processes require vast amounts of gas. Since the war began, gas prices have soared, now accounting for 20% to 30% of the final cost of maize. “More people have switched to sunflowers, some even converting wheat fields,” he explains. “Sunflowers can fetch $450 a tonne, which is more profitable than wheat.”

Constrained by cash flow, Ukrainian farmers are becoming increasingly frugal with fertilisers. “Many are cutting back, some by as much as half, just to save money; consequently, the fertiliser market has shrunk,” Aleksei says with a shake of his head.

When I ask about his plans for the coming year, he pauses before replying that he will still try to sell as much as possible to Southeast Europe. “After all, we have the advantage on price.”

Ukrainian farmers are fighting to find a way forward amidst the war. As the conflict drags on, Ukraine is being drawn closer to European markets; the grain markets and security frameworks that existed before the war are gone for good.

References

Unless otherwise noted, images are provided by the author

Author: A Qi

Editor: Wang Hao

I. I. Europe as an alternative?

II. Eastern European Farmers’ Protests

III. Is the Third World Starving?

IV. Changes Born of Necessity

Published by Foodthink