16.5 C
London
Friday, October 7, 2022

How do you get 20m tonnes of grain out of Ukraine? | Ukraine

A clock is ticking inside the towering, multistorey warehouses on the quayside at the Black Sea port of Odesa on the Ukrainian coast.

One huge metal structure alone contains a quarter of a million tonnes of grain, yet represents just over 1% of the estimated 20m tonnes trapped in Ukraine since the Russian invasion began in late February.

Hundreds more of these “grain elevators” are scattered across the world’s fifth-biggest wheat exporting country: next to roads, at railway terminals, and at ports. Yet still full of last year’s harvest, these towers are already almost at capacity.

In just over a month the spring harvest gets under way, when farmers begin collecting the winter wheat, which will need to find its way to Ukraine’s grain silos. Meanwhile, inflation is soaring, countries such as India are blocking wheat exports, and the risk of famine is growing.

Pressure is building for an international agreement on a rescue mission for Ukraine’s grain, which is desperately needed to feed the world, and which Kyiv urgently wants to sell to get its hands on vital foreign currency. Ukraine produces as much as half the world’s sunflower seeds, a tenth of its wheat and up to a fifth of barley and rapeseed.

As well as a huge diplomatic effort, rescuing Ukraine’s grain also represents a vexing logistical challenge. Given the vast quantities involved, the majority of Ukrainian grain has always been transported by sea rather than road or rail.

Turkey – which has the authority over sea traffic entering and leaving the Black Sea – is thought to be leading conversations with Russia about proposals to allow grain ships from Ukraine through a naval corridor to the Bosphorus.

However, several problems need to be solved to ensure the safe transport of Ukrainian crops, beyond international agreements, from ship and crew capacity to the availability of insurance.

When Russia launched its full invasion of Ukraine, it blockaded the country’s Black Sea ports including Odesa, preventing any ships from leaving or entering harbours. In addition, the surrounding waters have been filled with floating mines. De-mining the waters would be required for any kind of grain corridor.

Then there is the challenge of finding the armada of vessels to transport the grain. Agricultural goods are moved between continents in bulk cargo vessels, which can hold as much as 50,000 tonnes, poured into several large compartments in the ship’s hold.

If an estimated 20m tonnes of grain were to be transported, as many as 400 suitable ships would be required.

However, shipping analysts say vessel availability should not be a limiting factor, although it would require some time for these bulk carriers to reroute and sail to the Black Sea from their current locations.

“Before the war, more than 90% of all Ukrainian agri-food export was done by sea,” said Mariia Didukh, director of the Ukrainian National Agrarian Forum, which represents the country’s largest food producing organisations.

Export figures underline the scale of the challenge: before the war, between 5m and 6m tonnes of grain were exported each month from Ukraine’s seaports, according to the International Grains Council, an intergovernmental organisation that seeks to promote cooperation in the global grain trade.

Grains of wheat in someone’s hands
In just over a month the spring harvest will get under way in Ukraine. Photograph: Khaled Elfiqi/EPA

According to Didukh, only a fifth of normal monthly export levels has been transported out of the country by alternate means during the first three months of the war, representing just 1.2m tonnes of grains, sunflower oil and all other agricultural exports.

“We have been developing alternative routes for export including railway, trucks, and some Danube ports in Romania,” she said. “By railway or trucks it is more expensive, it is longer and very, very small capacities. It is unreal for us.”

Rail and road are also fraught with logistical challenges. The Ukrainian railway network has, like Russia, a slightly wider gauge, or distance between the two rails of a railway track, than its European neighbours such as Poland or Romania.

This means grain transported by rail has to be unloaded and put on a different train when it reaches Ukraine’s European borders.

The Guardian understands that three Ukrainian ports are being considered for departures of grain ships: not only Odesa but also the neighbouring ports of Yuzhne to the west, and Chornomorsk to the east.

A shipping company source working in Ukraine said much needs to be done to ensure the safety of any transport, once the sea close to the coast has been swept for mines, including the provision of adequate insurance to cover the vessel and the crew.

According to the source, even Russian government assurances to ships using the naval corridor might not persuade all shipowners to undertake a mission.

“There is a lot of money to be made and some companies are more relaxed about taking on more risk,” the source said.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The availability of war insurance, to cover both ship and crew, will also be a determining factor in the success of any grain corridor.

The influential London-based Joint War Committee designated Russian and Ukrainian waters in the Black Sea and the Sea of Azov as “listed areas” in February, meaning that shipowners are required to notify insurance underwriters if they are travelling there. This also means that additional premiums are charged.

Even if suitable “war insurance” could be arranged, some shipping industry representatives are not convinced a grain corridor can be arranged quickly.

“I think it is an unlikely prospect for the time being. You have got to be sure that your ship is not going to be targeted,” said Guy Platten, the secretary general of the International Chamber of Shipping.

“So many things would have to put in place before any shipowner is going to take the charter, and would need so many assurances before ships would move up there.”

He added that about 100 ships, and 2,000 crew with 20 different nationalities were “in the wrong place at the wrong time” when Russia invaded, and have been stuck in Ukraine’s ports ever since. It has taken time but now more than three-quarters of these seafarers have been evacuated to safety, although about 450 remain onboard.

“There are lots of steps that would have to happen before ships were to trade there again, and there are going to be huge premiums in place,” Platten said. “Every shipowner will look at the risk and the reward.”

While international talks continue, the clock is ticking. Ukraine’s agriculture industry and food analysts estimate the world has 10 weeks to find a solution, before the spring harvest will need to take its place in the country’s grain silos.

Discussions about time pressure are likely to dominate at the annual meeting of the International Grains Council, which counts Russia and Ukraine as members, when it meets in London on Tuesday.

A failure to arrange a grain corridor could also have lasting repercussions for countries such as Egypt, who are reliant on Ukrainian imports.

Workers unload wheat at the Banha grain silos, in Qalyubia Governorate, Egypt, in May 2022
Egypt relies on grain supplies from Ukraine. Photograph: Khaled Elfiqi/EPA

“The question will be for harvest ‘23,” said Arnaud Petit, the executive director of the International Grains Council.

“If Ukrainian farmers see that the capacity of export from Ukraine is very limited, they will limit production for harvest ‘23, and that would mean that would mean we are looking at not only one year but two years of market disruptions, that would be the worst-case scenario.”

Latest news

Related news